Image by TeroVesalainen, Pixabay 

Brexit encouraged many foreigners to think about going back to their home-countries or to look for another country to move to. If you are one of them, probably you have quite a few things to think about. The most common questions that we receive are about what must be done before leaving the UK, what happens to National Insurance contributions, State and other pension. We’ll answer these questions in this article and if you would like to discuss your situation, remember that Right Accounts is only one call away!

Who to inform?

Inform HMRC

First thing you must do if you decide to leave the UK for good or to work abroad full-time for at least one full tax year, is to inform HMRC.

Important! You must inform the HMRC that you are leaving the UK by sending the tax return by post or using commercial software. You cannot do it online! If you need help, you can always seek help from us.

To inform HMRC you will have to:

• Fill in form P85 and send it to HMRC. Get Part 2 and Part 3 of your P45 form from your employer
• If you usually complete a Self-Assessment tax return (e.g. you’re self-employed), then send it for the last time
• If you’re going to be working full-time for a UK-based employer for at least one full tax year, then you need to send a P85 and a tax return

Keep in mind that if you fail to send your Tax return on time – that is 31 October when sending by posts -  you’ll be charged a penalty.

After receiving your documents, HMRC will work out if you’re owed a refund for the tax year you’re leaving the UK.

Inform other institutions

Don’t forget to also inform other institutions that have to know that you’re leaving the UK. For example if you forget to inform your local council, you might have to continue paying Council Tax.

National Insurance contributions

Can I claim back what I payed?

There has been a lot of speculation about what happens to National Insurance contributions when you leave the UK. Contrary to some information that has been spread around online, the general rule is that  you cannot claim back National Insurance when you leave.

Which country to pay when I move away?

• If you move away and start working for an employer in the EEA, you’ll normally have to pay social security contributions in the EEA country you work in instead of paying National Insurance to HMRC. Keep in mind that this means that your entitlement to the UK’s State Pension can be affected as there will be gaps in your National Insurance contributions.
• If you work in another EEA country but for the UK employer, you might be able to continue paying National Insurance when you’re abroad for up to 2 years and thus you won’t have to pay social security contributions abroad.
• If you’re self-employed in EEA country, you might be able to continue paying National Insurance if you’re usually self-employed in the UK or working abroad temporarily (for up to 2 years). In these cases you won’t have to pay social security contributions in the country where you’re working.
• If you work in 2 or more EEA countries, you might be able to carry on paying National Insurance if you’re employed or self-employed in 2 or more EEA countries (including the UK and another EEA country). How and in which country you have to pay taxes depends on where you live. If you live in the UK, you have to fill in form CA8421i, in the EEA – you will have to check with the country’s social security authority.
• If you are planning to move in a country that has a bilateral Social Security agreement with the UK or any other country, different rules might apply.

National Insurance: is it worth continue paying it when I move away?

In some cases, it’s worth continuing paying National Insurance contributions when you move abroad. This would help you to:

• protect your State Pension and entitlement to other benefits and allowances.
• would be useful if you are planning to come to the UK.
• claim benefits in the country you’re moving to if it has a social security agreement with the UK.

Voluntary National Insurance contributions

If you’re eligible, you can pay voluntary National Insurance contributions that go towards your State Pension.

• You can usually only pay for gaps in your National Insurance record from the past 6 years.
• You can sometimes pay for gaps from more than 6 years ago depending on your age.

Which class of NI contributions you are eligible to pay, depends on your situation:

• If you are living and working abroad, you are eligible to pay Class 2 National Insurance contributions, but only if you worked in the UK immediately before leaving, and you’ve previously lived in the UK for 3 years in a row and paid 3 years of contributions
• If you are Living abroad but not working, you are eligible to pay Class 3 National Insurance contributions, but only if at some point you’ve lived in the UK continuously for 3 years and paid 3 years of contributions.

Pensions

If you decide to leave the UK, you should think wat you would like to do with your pension. Above we covered what happens to State Pension and now let’s see what options you have for your defined contribution pensions.

The main options that you have when leaving the UK is:

• leave your pension with the UK pension provider that you have been using. You will be able to access your pension as cash from the age of 55 (25% of the value as a lump sum and use the remained to provide a pension for your lifetime) or claim your pension from your normal pension date.
• move your pension pot abroad. However, if you want to do this, make sure that the country you’re planning to move to has pensions schemes that are on a qualifying recognized overseas pensions scheme list. Otherwise, you might be charged, and tax charges are usually very high.
• mix these options, e.g. leave one pension in the UK and move another abroad.

Keep in mind! UK pension providers don’t usually pay the money from your pension straight into overseas bank accounts. If they do, usually it is very costly.

If you need help with your situation before leaving the UK, remember that Right Accounts is only one call away.