What are the tax implications of transferring money to the UK?

As a non-domiciled resident in the UK who has recently moved to this country, what are the restrictions and tax rules on transferring money from my overseas accounts? Am I correct to think that the rules change after living in the UK for seven years?

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Iain Tait, partner, London & Capital

Assuming the money is held in straightforward bank accounts, it is likely that initially, when you become resident in the UK, you will only be taxed on what is brought into the country.

So “clean capital” — money earned offshore which has never been invested — can be brought, or “remitted”, to the UK without a tax charge. We usually advise these clients to have separate capital, income and gains accounts to avoid overseas income and gains tainting their capital, as pre-residence capital can be remitted without tax cost.

Any gains or income held offshore and not brought to the UK are ignored for UK tax purposes. However, this changes once you have been a resident in the UK for more than seven out of nine years. At this point, you can elect to continue to be taxed only on what is remitted to the UK by paying an annual fee. This is called the “remittance basis”.

If you decide not to claim remittance, you will be taxed on a so-called “arising basis” on all of your worldwide income and gains.

We suggest clients undertake an annual assessment of their overseas income and gains to compare the tax that would be payable against the remittance basis charge — £30,000 — to see if it is worthwhile claiming.

Once you have been in the UK for more than 12 out of 14 years, the remittance basis charge increases to £50,000. For the 2014-15 tax year, this will increase to £60,000 per year, and a new charge of £90,000 will apply to those who have lived in the UK for 17 out of 20 years.

Alternatively, funds can be moved into an offshore bond, which is a type of insurance-based investment vehicle. An offshore bond allows up to 5 per cent per year of the initial capital to be remitted to the UK with no immediate tax liability. This lasts for 20 years.

However, when surrendering the bond, there will be potential for a tax liability, known as a “chargeable event” if you are still resident in the UK.

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Stuart Hudson, chartered financial planner, Alexander Associates Group

When reviewing your wealth you should also look at where your overseas funds are held and the wrapper in which they are invested.

There are structures that are deemed as “non-income producing” which cannot only be advantageous for when you are here in the UK, but may also be of benefit if you move to another country.

It is often overlooked that if you have money in an offshore savings account earning interest, it would be subject to tax if brought into the UK. Be mindful also that if you pay off a UK credit card via an overseas account, this would also be considered a remittance.

Many clients are unaware of the dangers of domicile mismatch for married couples. If your partner is British, you have a guaranteed exemption of £325,000, on top of your nil-rate band of £325,000, to pass assets to him or her. However, the balance would then be liable for inheritance tax at 40 per cent on death.

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Rupert Clarey, senior associate, Maitland Advisory

One positive aspect of the tax regime is that you can currently elect in and out of the remittance basis. You could therefore elect into the regime in a tax year when you earn a large amount of foreign income, or make a significant disposal, giving rise to a large gain and thereby avoiding the UK tax charge in that year.

There would be no benefit in doing so if you intend to bring that income or gain to the UK in a later tax year, as you would have only postponed the tax charge, rather than avoiding it.

The government announced in the Autumn Statement, however, that it will consult on making the election to pay the remittance basis charge apply for a minimum of three years.

The advice given is specific to the questions posed. Neither the FT nor the contributors accept liability for any direct or indirect loss arising from any reliance placed on replies.

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