Middle East Conflict: The importance of tax planning for those returning to the UK.

The ongoing conflict in the Middle East has compelled many British nationals and individuals with connections to the United Kingdom to reconsider their living arrangements and, in some cases, to return to the UK sooner than anticipated. For those who have been resident abroad, whether in the UAE, Qatar, the Gulf States or elsewhere in the region – returning to the UK can carry significant tax implications that require careful planning.

What measures should individuals take before returning to the UK and are there alternative jurisdictions that might offer a more favourable tax position?

UK tax residence

Individuals contemplating a return to the UK should be aware of the Statutory Residence Test (SRT) which determines UK tax residence status for income tax, capital gains tax, and inheritance tax purposes.

Under the SRT, an individual will be treated as UK resident for an entire tax year if they meet any of the automatic UK tests - such as spending 183 days or more in the UK - or if they satisfy the sufficient ties test.  For those who have been non-UK resident, the number of days spent in the UK and the strength of their connections to the UK (including family, accommodation, and work ties) will be critical factors.

The SRT's "exceptional circumstances" provisions may be relevant when counting UK days i.e. enabling some days in the UK to be ignored. Whilst this concession typically applies where an individual is prevented from leaving the UK, HMRC guidance confirms it can also apply where an individual returns to the UK following FCDO advice to avoid all travel to the relevant country. Notably, as at today’s date, FCDO is advising against all travel to Israel. However, the advice is against all but essential travel to UAE and Qatar, meaning at present, those returning from the UAE and Qatar may not be able to disregard their days in the UK for the purposes of the SRT. HMRC may of course provide some specific guidance at some point.

Those considering relocating back to the UK should carefully assess how and when their return might trigger UK residence, particularly given that split year treatment may be available to limit their UK tax exposure to the portion of the tax year following their arrival.

Tax issues for former UK residents

Importantly, individuals who were previously UK resident and return within five years of departure may be caught by the temporary non-residence rules, potentially bringing certain income and gains that arose during the period of absence into charge upon their return.

This will be particularly relevant for:

• Those who have received certain types of pension income after leaving the UK
• Those who realised chargeable gains from life assurance policies whilst abroad
• Those who received dividends from close companies after their departure
• Business owners who sold shares after leaving the UK

The temporary non-residence rules can prove punitive in practice, resulting in multiple years of income and gains being taxed in a single tax year. It is therefore essential that individuals who have been UK resident at any point during the preceding five years obtain professional advice before returning to the United Kingdom, in order to avoid inadvertently triggering these provisions.

The inheritance tax (IHT) tail and the risks of returning

Individuals who have left the UK in response to the inheritance tax changes from 6 April 2025 will be cautious about returning. Under the new rules, a person becomes subject to UK IHT on worldwide assets once resident for at least 10 out of the previous 20 tax years. The "IHT tail" keeps individuals within the scope of IHT even after leaving – the IHT tail ranging from 3 years up to 10 years. Returning during this period could have significant IHT consequences.

Crucially, if an individual becomes UK resident again during their tail period, they re-enter the long-term residence framework and begin accumulating residence years afresh – potentially extending rather than shortening their IHT exposure. For example, someone who left after 15 years would ordinarily remain in scope for 5 years, but returning after only 2 years would restart the clock. The protection of the tail period would be lost, requiring a much longer period of non-residence to escape IHT entirely.

Those who have left will need to weigh the benefits of returning against the risk of resetting their progress towards escaping the UK IHT net. For those with substantial non-UK assets, the risk of resetting their progress is likely to be a significant deterrent to returning.

Relocation strategies

When individuals wish to circumvent the temporary non-residence rules or maintain non-UK tax resident status entirely, they could relocate to another low tax territory rather than to the UK.

Within Europe, Malta, Greece and Italy each offer investor residency programmes coupled with favourable non-dom tax regimes – generally taxing only local-source income or income remitted to the jurisdiction, with residency obtainable through property investments typically ranging from €250,000 to €300,000.  Malta’s Permanent Residence Programme can be processed in as little as four to six months, with applicants able to obtain a temporary one-year residence permit shortly after submission whilst the main application is being reviewed. Italy’s Golden Visa (officially the Investor Visa) is similarly efficient, with the Nulla Osta (certificate of no impediment) generally taking 30 to 90 days and the overall process, from initial application to residence permit, often completed in three to six months.

Closer to home, the Channel Islands i.e. Jersey and Guernsey, offer attractive options for those wishing to remain within the British Crown's orbit whilst benefiting from favourable tax treatment. For example, Jersey's High-Value Residency programme requires a minimum annual tax contribution of £250,000, calculated at 20% on the first £1.25 million of worldwide income and 1% thereafter, with no capital gains, inheritance, or wealth taxes. Residency can sometimes be approved within weeks and entitles holders to purchase open market property.

The importance of early planning

For those who have concluded that a return to the UK or elsewhere in Europe is necessary or desirable, early and comprehensive tax planning is essential. Such planning might include, for example, delaying the return beyond the five-year temporary non-residence threshold where feasible, or timing one's arrival to access split-year treatment.

Those non-UK resident for at least ten consecutive years may also benefit from the four-year FIG (foreign income and gains) regime, which provides relief on qualifying foreign income and gains when coming to the UK.

Whether a return to the UK is voluntary or compelled by circumstances, the UK tax landscape has changed significantly, and careful planning is more important than ever.

 

This article is intended to provide general guidance on UK tax planning considerations for individuals returning to the United Kingdom. It does not constitute legal, tax, or immigration advice tailored to any individual's specific circumstances.

Whilst we have outlined certain visa and residency programmes, we do not specialise in immigration law and readers should seek independent specialist immigration advice before considering relocation.

The application of HMRC's "exceptional circumstances" provisions is highly fact-specific and subject to HMRC's discretion, which may evolve over time. Individuals seeking to rely on these provisions should obtain tailored advice.

Nothing in this article should be relied upon as a substitute for professional advice specific to your personal situation. We strongly recommend that anyone affected by the matters discussed herein consults with qualified tax, legal, and immigration professionals before making any decisions regarding their residence or tax affairs.