If you intend to leave the UK to work abroad you may save a lot of tax and hassle with a little forward planning before you go.

Departure date
UK income tax will not apply to your foreign earnings if you live outside the UK for a complete tax year, and so qualify as ‘non-resident’ in the eyes of the UK tax authority. For a two year contract abroad, you will start your tax free year period much earlier if you leave the UK just before the start of the new tax year on 6th April than if you depart on a later date. This does not mean that you will also escape income tax in your new country of course. The information required by the Inland Revenue to decide your ‘residence’ status is detailed on the form P85 that you will be required to complete before leaving the UK.

Tax refunds
Under the PAYE system your tax-free personal allowance is spread equally over the tax year, so when you leave part way through the year you will have some unused allowance. This can be reallocated against your total UK income for the year creating a tax refund. The refund will need to be reclaimed from the Inland Revenue not your previous employer.

Social Security contributions
When you work in an EU country you normally only pay social security contributions to the country you are living in. If you work outside the EU, but your employer has a base in the UK you may have to pay UK social security contributions in the form of national insurance for the first 12 months of your contract.

Consultancy work
Your private UK practice is likely to cease when you go abroad, and you need to roughly calculate how much tax will be due so you are not surprised by an unexpected tax demand. This calculation can be tricky, as the date of the cessation will affect the timing and the size of your final tax liability. A cessation late in the tax year can mean you will have to pay the tax due out of your net salary from your new job, unless you have carefully reserved the amount due.

Property in the UK
If you are going to let your home or another property in the UK while you are abroad that rental income is still caught by the UK tax system. Your letting agent or tenant is obliged to deduct UK tax at 22% from the rents before paying over the net amount. The agent must pay the tax collected to the Inland Revenue once per quarter, and complete an annual return form as well as prepare a tax deduction certificate for you.

This administrative burden can be avoided if you complete the Inland Revenue form NRL1, to request approval for your rent to be paid without deduction of tax. When you receive the rent without tax deducted, you will need to account for any tax due through the UK self-assessment system even though you are resident abroad.

Savings
Any tax-free savings plans such as PEPs or ISAs you hold in the UK will continue to be free of UK tax after you leave but they will not be exempt from tax in your new country. So it may be worthwhile cashing in your UK plans and moving your savings to another form before you leave.

Capital gains tax
If you plan to stay abroad for five years or more you can use this period to avoid potentially large capital gains tax bills. Any UK asset you sell while abroad will not be subject to UK capital gains tax as long as you remain outside the UK for at least five complete tax years. If you return to live in the UK within that period any capital gains you make while living abroad will be taxed on your return to the UK.