Moving to Ireland from the UK brings up special tax implications that need thoughtful consideration. There are many factors involved, such as double-taxation agreements and local taxes on income and capital gains - all of which should be taken into account when planning your relocation.
Are you an Irish tax resident?
Ireland has specific criteria for determining residency - one must have a physical presence in the country to be considered a resident. Individuals are typically expected:
- to stay at least 183 days during an applicable tax year,
- or aggregate 280 over any two consecutive years with 30+ days spent within that second period.
Residency is determined by even partial days present; just being physically present in Ireland on part of that day counts towards their total.
After living in Ireland for three consecutive years, an individual may become classified as 'ordinarily resident' from the Irish tax point of view. 2020 marks special importance to this concept since it will determine your income tax and capital gains liability upon leaving the country. This distinct legal definition helps distinguish between residency status under Irish law compared with other countries worldwide.
Where are you Domiciled?
For those looking to establish Ireland as their long-term home, the concept of domicile is important. While residence requires a more temporary commitment from an individual's stay in any country, establishing one's domicile can be viewed as much longer and involves significantly breaking ties with previous countries of residency. UK expatriates who choose this path should bear in mind that determining if they are still deemed to be "domiciled" for Inheritance tax purposes by HMRC may require proof depending on how soon after leaving the UK such individuals acquired a new status.
Capital Gains Tax (CGT) implications of moving to Ireland?
UK non-residents must remain outside the country for 5 complete tax years to avoid Capital Gains Tax (CGT) on asset disposals. Failure to do this will result in CGT liability based upon rules and rates applicable at the time of return. Exceptions are made when it comes to residential property; any gains realised from disposal after 6 April 2015 are subject to UK capital gains tax, with those prior untouched by taxation provisions so long as a valuation is obtained reflecting their worth before that date.
With the remittance basis, you can pay less tax on your foreign investments. However, it's important to be aware that this option is not available for all types of funds or currency-exchange gains. Take care in choosing how and where to invest so that any profits remain eligible under the remittance basis rules when residing and domiciled in Ireland - otherwise you could face taxation against global capital returns.
UK income tax
Expatriates living in the UK can often generate income from their investments both at home and abroad, but it's important to remember that as a tax resident here, you are subject to global taxation. Thankfully though any taxes paid overseas could be offset against your British liabilities.
Being a tax resident in Ireland but having domicile status from the UK adds an extra layer of complexity to your income taxes. Fortunately, unlike capital gains rules, overseas earnings on incomes sourced within Ireland are only taxed based upon what you remit into the country - so effective management is key for ensuring that one isn't paying too much.
UK assets and Irish inheritance tax?
Inheritance planning can be a difficult and sensitive subject, but if you are resident of Ireland for more than five years, it is essential that the proper steps are taken to protect you under Irish inheritance law. The Capital Acquisitions Tax (CAT) applies to estates of deceased individuals as well as lifetime gifts throughout Ireland - with exemptions available up to €310k per child transfer recipient. Maximising these allowances should always be done with careful consideration and expert advice at an early stage so your heirs don’t face any unexpected liabilities when they come into their inheritance.
Individuals non-domiciled in the UK may be surprised to discover that certain assets, such as real estate and land, can still incur inheritance tax. Know your financial obligations so you can properly plan for any potential taxes owed.