An accountant contacted ETC after hearing from a former client who was planning to return permanently to the UK after 12 years living and working overseas.
The client had originally left the UK for employment purposes but, during their time abroad, had built up a significant portfolio of overseas assets.
These included:
The investment portfolio was also generating approximately £35,000 a year in dividends and other investment income.
In total, the client potentially had more than £75,000 of annual foreign income, as well as substantial unrealised gains within their overseas investments.
The client planned to return to the UK permanently during the 2026/27 tax year.
They approached their former accountant and asked what initially sounded like a relatively straightforward question:
“Is there anything I need to do about my overseas investments when I move back?”
The accountant recognised that the answer could have significant tax implications and contacted ETC before advising the client.
The first question was whether the client would become UK resident immediately on their return and whether split-year treatment could apply.
However, residence was only part of the picture.
Since 6 April 2025, the taxation of foreign income and gains for qualifying new UK residents has changed significantly.
The accountant therefore needed to establish whether the client could qualify for the four-year Foreign Income and Gains (FIG) regime.
Broadly, eligibility required looking at whether the individual had been non-UK resident for the necessary period before becoming UK resident.
With the client having spent 12 years overseas, there was potentially an opportunity to benefit from the FIG regime following their return.
But there were several further questions.
Would the client’s overseas rental profits fall within the regime?
What about the £35,000 of annual overseas investment income?
How would future gains on the £1.2 million investment portfolio be treated?
Would selling overseas investments before returning produce a different result from selling them afterwards?
And importantly, when exactly would the client’s four-year FIG window begin and end?
The accountant wanted to give the client a clear plan before they returned to the UK, rather than waiting until the first UK Self Assessment return was due.
ETC worked alongside the accountant to review the client’s residence history and overseas assets.
Step 1 – Reconstructing the Residence Position
We first reviewed the client’s UK residence position for the years before their return.
Rather than relying simply on the statement that the client had “lived abroad for 12 years”, we considered their circumstances under the relevant residence rules.
This included their time spent in the UK, accommodation, work patterns and other relevant connections.
This was important because FIG eligibility depends on the individual’s UK tax residence history, not simply where they regarded themselves as living.
Having established the residence history, we could consider whether the client met the conditions for the four-year FIG regime.
Step 2 – Establishing the Return Date
We then considered the client’s proposed return during 2026/27.
The accountant initially expected the client simply to become UK resident for the whole tax year.
However, we considered whether the circumstances could satisfy one of the statutory split-year cases.
Where split-year treatment applies, the tax year is divided into a UK and overseas part for certain purposes.
This allowed the accountant and client to understand precisely when the UK tax position would change.
It was also important to establish that a split year can still count as a year of UK residence for the four-year FIG period.
The client therefore couldn’t assume that a partial first year in the UK would give them four additional complete tax years of FIG treatment.
Step 3 – Reviewing the £2 Million+ Overseas Asset Portfolio
We then reviewed the client’s overseas assets individually rather than treating everything held abroad in the same way.
The portfolio included approximately:
£1.2 million – investments
£650,000 – overseas property
£300,000 – cash
This gave the client overseas assets worth approximately £2.15 million.
We considered the nature of the income and potential gains arising from each asset and how these could be treated once the client became a UK resident.
This was particularly important because the client was expecting approximately:
£35,000 – investment income
£30,000 – gross overseas rents
£12,000 – overseas interest
That represented around £77,000 of gross foreign income each year before considering any investment disposals or capital gains.
Step 4 – Looking at Unrealised Gains
One of the most important areas was the client’s investment portfolio.
Several investments had been acquired many years earlier and had increased substantially in value.
For example, one overseas shareholding had originally cost approximately £150,000 but was now worth around £400,000.
That represented an unrealised gain of approximately £250,000.
The client had been considering selling the shares but hadn’t decided whether to do so before or after returning to the UK.
ETC helped the accountant understand how the timing of disposals could interact with the client’s UK residence and potential FIG position.
Rather than making investment decisions purely on commercial grounds without considering UK tax, the client could now factor the tax consequences into their decision-making.
Step 5 – Creating a Four-Year Tax Roadmap
Having established that the client could potentially qualify for the FIG regime, we helped the accountant map out the client’s first four UK-resident tax years.
The purpose wasn’t simply to minimise the client’s tax in year one.
We wanted the accountant and client to understand what happened throughout the entire FIG period and, importantly, what would happen when it ended.
With more than £2 million of overseas assets, planning for year five could be just as important as planning for year one.
The roadmap therefore considered the expected foreign income, potential investment disposals and the future treatment of the overseas property.
This gave the accountant a framework they could use when advising the client each year.
Instead of returning to the UK and addressing the tax consequences afterwards, the client had a clearer picture of their position before the move took place.
The accountant understood:
The client could therefore make decisions about their £2.15 million overseas portfolio with a better understanding of the potential UK tax consequences.
The client had spent more than a decade building wealth overseas and was returning to the UK with substantially more complex affairs than when they left.
What could easily have become a tax compliance exercise after their return instead became a pre-arrival tax planning exercise.
By taking advice before moving, the client had time to consider the timing of investment disposals, understand the treatment of their foreign income and plan for the transition into the UK tax system.
For the accountant, the case demonstrated that they didn’t need to refer away a long-standing client simply because their affairs had become internationally complex.
They retained the overall client relationship and continued to deal with the client’s ongoing accounts and tax compliance.
ETC was brought in specifically to provide the specialist UK tax residency advice needed to support them.
The accountant therefore had access to specialist expertise when they needed it, while remaining the client’s primary adviser.
Do you have a client returning to the UK after several years overseas?
The earlier their residence, foreign income and overseas assets are considered, the more opportunity there may be to plan before their UK tax position changes. Get in touch with ETC Tax.
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