What UK tax will you pay if you move to Australia?

What's not to love about Australia? The seemingly continuous warm, sunny weather means people can enjoy their lives in the great outdoors for most of the year. Australia's cities are ultra-modern, and the natural environment is stunning, especially the beaches, which attract huge numbers (85% of Australia's population live within 30 miles of the coast).

Brits love the land Down Under. There are no language barriers, Aussies are a friendly, informal bunch, their culture is similar and many Brits have relatives and friends already in Australia. Reportedly, the number of UK citizens moving to Australia is at its highest level since 2012. Moving there allows Brits to leave behind the UK gloom, start a new life and enjoy better opportunities.

Moving to Australia can enable you to work fewer hours, earn more money and buy a nice house or flat, which isn't possible for many young people in the UK. Australia is a great country to work, rest and play, which explains why more than 1.1 million UK-born people now call Australia home. That's 15% of Australia's overseas-born population and about 5% of its total population. If you're thinking about moving to Australia, you'll probably have many basic questions and want to know whether you'll pay any UK tax.

Telling HMRC that you' re moving to Australia

You'll need to tell HMRC, the UK tax authority, if you're leaving to go and live in Australia permanently or if you're going to work there full-time for at least one full tax year (ie 6 April to 5 April).

• If you don't usually complete a self assessment tax return and you're already living in Australia, you need to fill in form P85 online. If you're still in the UK, fill in form P85 offline and include Parts 2 and 3 of your P45 form (your employer should have these).
• If you normally complete a self assessment tax return, because you're self-employed, a landlord or report other taxable income, you must also complete the resident supplementary page (form SA109) to report your residence and domicile status, if you're now living in Australia.
• You must use commercial filing software for all forms, you won't be able to do it online via the GOV.UK website (it's not available to those who live beyond the UK). Your other option is to pay a UK accountant to do it for you, but doing it yourself is simple and much cheaper. HMRC will let you know if you're owed a tax refund.
• If you don't normally submit a tax return, you'll need to register for self assessment by 5 October following the tax year in which you had taxable UK income, otherwise, HMRC could charge you a penalty.

Top tip!

You must also tell your local council of your plans to leave the UK to live in Australia, so that you're not charged Council Tax. Your UK citizenship will not be affected, and you can usually vote in UK elections.

Paying tax if you're non-resident

If you're "non-resident" in the UK for tax purposes, no UK tax is payable on any income or gains that you earn or make in Australia.

• For UK tax purposes, you're normally non-resident if you: spent less than 16 days in the UK within a tax year (or 46 days if you have not been a UK resident for the three previous tax years); worked abroad full-time (averaging at least 35 hours a week) and spent fewer than 91 days in the UK and no more than 30 of them were spent working.

Double taxation agreement

If you're a non-resident in the UK for tax because you've moved to Australia, check out the double taxation agreement (DTA), because UK tax may still be payable on UK income. Look at the DTA between Australia and the UK:

• Pension payments are covered in Article 17 and are usually only taxable where you are resident.
• Rental income is covered in Article 6 and may be taxed in both countries.
• Savings interest is covered in Article 11 and may be taxed in both countries.
• Wages from UK employment are covered in Article 14 and are usually only taxable where you're resident unless you exercise your duties in that other country or employment is in government service.

Need to know!

Seek professional guidance if you do not understand how to apply the DTA correctly. Articles, although they may seem simple, can be superseded by a later article, making your situation more complicated.

How much UK income tax will you pay?

If you're eligible for the tax-free Personal Allowance (you don't get it if your taxable income is more than £125,140 a year), you won't pay tax on your total UK taxable income until it goes over £12,570 in a tax year (2024/25 figure).

Need to know!

Non-resident British nationals are entitled to a personal allowance, when completing their tax return, by ticking Box 16 on form SA109.

You pay tax on your profit, which is the amount of UK income that remains once tax expenses or allowances have been deducted. If you rent out more than one UK property, the profits or losses from them all are added together and you will be taxed on the total.

The income tax band into which your total UK taxable income falls determines how much UK income tax you pay (2024/25 for all figures quoted).

• The basic rate (20%) is payable on yearly UK taxable income between £12,571 and £50,270.
• The higher rate (40%) is payable on yearly UK taxable income of between £50,271 to £125,140.
• The additional rate (45%) is payable on yearly UK taxable income over £125,140.
•  Income tax bands in Scotland are slightly different.

To help reduce your tax bill, you can claim tax reliefs and allowances. Income tax is no longer automatically taken from interest on savings and investments, while non-residents do not usually pay UK tax on the UK State Pension or interest from UK government securities.

Australian income tax rates for 2024/ 25 (residents)

• 0% Australian income tax is payable on income of AUS$0-$18,200.
• 16% Australian income tax is payable on income of AUS$18,201-$45,000.
• 30% Australian income tax is payable on income of AUS$45,001-$135,000.
• 37% Australian income tax is payable on income of AUS$135,001-$190,000.
• 45% Australian income tax is payable on income of AUS$190,001 and over.
• AUS$2 is currently worth about £1 sterling.
• In addition, you'll pay the Medicare levy, which helps to fund Australia's public health system (called Medicare). The Medicare levy is 2% of your taxable income.

How to report your taxable UK income from Australia

If you live in Australia and have taxable UK income to report to HMRC, you must fill out and file a self assessment tax return (SA100), as well as the resident supplementary page (the SA109 form) to report your residence and domicile status.

• If you earn UK taxable rental income, you'll also need to complete and file the SA105 form.
• If you have taxable UK income from self-employment, you'll also need to fill out and file the SA103 form.
• You may have to file other supplementary pages, depending on your taxable income sources.

Need to know!

You cannot use HMRC's online services to file your self assessment tax return and any supplementary pages if you're in Australia. You can either fill out your forms by hand and send them by post, pay a UK-based accountant to do it online for you or use commercial self assessment filing software, which is cheaper and simple.

• The UK tax year runs from 6 April until the following 5 April.
• If you use filing software and choose to file online, the deadline is midnight on 31 January following the end of the tax year to which the tax return refers.

More on paying UK tax on UK rental income

If you earn more than £1,000 from renting out property in the UK, it can be subject to Income Tax, once your taxable income goes over the Personal Allowance (£12,570 a year in 2024/25). Capital Gains Tax can also be payable if you make a "chargeable gain" (ie you get more than the amount you paid for the property or land after selling it).

If you live outside of the UK for six months or more a year, HMRC classes you as a "non-resident landlord". You can get the full amount of rent from your tenant(s) and pay tax on it via self assessment. If so, you must apply by filling out the NRL1i form and sending it to HMRC.

Alternatively, the tax you owe can be deducted by your letting agent or tenant, who must pay it to HMRC. They will deduct the basic rate of tax from the monthly rent (minus their expenses if an agency) and give you a certificate at the end of the tax year showing the tax that they've deducted.

You must keep accurate records of your rental income and tax expenses because HMRC can ask for proof of the tax figures you report. You must keep your income and expense records for at least five years after the filing deadline for each tax year.

Need to know!

As a landlord, you can claim "allowable expenses" to cover things you pay for to rent out your property. This can reduce your UK tax bill significantly. Visit GOV.UK for official guidance on paying UK tax on UK property rental income.

More information about moving to Australia

• For more advice on moving to Australia to live and work, including information on visas – which are essential – visit the website of the Australian government's Department of Home Affairs.
• UK government website GOV.UK also features a comprehensive guide for people in the UK who want to move to live and work in Australia.

Copyright 2024. Sponsored post by Mike Parkes of GoSimpleTax - tax return software that can help you manage your self assessment.