Moving Abroad to Save Tax: Key Financial Planning Considerations for Entrepreneurs

Late last year, the Telegraph reported that hundreds of UK technology founders are exploring relocation due to increased Capital Gains Tax (CGT) rates and uncertainty over government spending cuts, highlighting how business-friendly regulations and tax incentives abroad are luring top talent away from Britain. According to the Times, 10,800 millionaires left the UK in 2024, citing high taxation as a primary reason.

Unfortunately, UK policy hasn’t helped this talent drain. Changes to the “Business Asset Disposal Relief” over the years for entrepreneurs, on top of increasing CGT rates in 2024 (from 20% to 24%) and employment costs via higher national insurance contributions for employers, means that the burdens are starting to outweigh the incentives for entrepreneurs’ to start-up in the UK.

Starting, managing, scaling and selling businesses in UK has never been more complex.

This article breaks down the key tax, financial and investment planning considerations – and their potential pitfalls if not done effectively – that entrepreneurs need to address when thinking of moving abroad.

1. Tax Considerations

Becoming a non-UK resident

The Statutory Residence Test (SRT) determines whether UK entrepreneurs remain subject to UK taxes after moving abroad. Our recent article outlines how this may affect you, but in addition to this there are a couple of significant areas of the SRT that are more complicated, and we recommend seeking advice on the following:

• The second automatic UK ties test: if you plan to leave the UK, but retain a home here, the date of which you start to have a home overseas will be impact whether this complex test will be triggered.
• Split-year treatment: if you leave part way through a tax year, you need to meet certain tests so that a portion of your income or gains is not taxable in the Non-Resident part of the year.

Exiting the UK Tax System: CGT and Income Tax implications

There is a common misconception that people can move abroad for a couple of years and then return, without consequences. However, the devil is in the detail here.

Temporary Non-Resident Rules are predominantly aimed at UK resident taxpayers trying to take advantage of a short-term period of non-residence to realise capital gains and certain types of income. 

To avoid UK CGT or income tax on certain assets/receipts on a return to the UK, individuals must be non-UK residents for at least five years and one day, which means some people actually need to be non-resident for 6 tax years.  The rules catch a variety of income and gains, potentially including gains or distributions from an entrepreneurs’ company, life insurance chargeable event gains, certain pension income, and more.

For entrepreneurs who are planning to leave for a few years, selling your company or taking distributions from your company abroad may not achieve the outcome you desire. It’s worth seeking tax advice from your destination country that supports tax advice received from leaving the UK. This often means connecting your advisers in each jurisdiction to talk to each other to ensure they provide the best solution.

The New UK Long-Term Residence Regime

The UK government is replacing the concept of domicile with the concept of Long-Term Residence, which significantly affects entrepreneurs planning to leave the UK. Our previous article on domicile and UK IHT here is based on regulation prior to 5^th April 2025.

Under the new system, the key changes to be aware of are:

• IHT Tail: The length of the “tail” will depend on how many years you have been UK resident – the current tail is three years, but this could now potentially be up to 10 years – for those who leave the UK before 6 April 2025 there are transitional rules.

• The remittance basis is being scrapped: instead, individuals who have been a non-UK resident for 10 out of the previous 20 years will have four years where their Foreign Income and Gains (FIG) will be outside of UK tax regardless of whether remitted.  However, for those who have historically claimed the remittance basis, you will still need to trace remittances.

For entrepreneurs, this means planning the timing of their exit carefully, reviewing whether their business structure supports their relocation, and ensuring investments remain tax efficient.

2. Financial Planning Considerations

Financial Goals

Relocation isn’t just about paying less tax – it must fit within your broader financial and lifestyle goals.

Before making the move, start by asking yourself the following question to build out a supportive investment plan:

• Why are you moving abroad? Is it purely for tax efficiency, or are you looking for a better lifestyle, business opportunities, or early retirement?
• How long will you stay? Will you remain in one country, or do you plan to move again?
• Have you sought tax advice from your destination country that supports tax advice received from leaving the UK? You will often need your advisers in each jurisdiction to talk to each other to ensure they provide the best solution.
• Do your investment objectives align with your current stage of life requirements, and have you structured your wealth to adequately support them? This could be funding childrens’ schooling, buying property, planning for retirement, supporting healthcare, etc.

Business Income and Wealth Transfer

Beyond personal lifestyle and financial goals, it’s also important to assess how your move will affect your business income and long-term wealth planning.

Entrepreneurs need to ensure that their business structures remain suitable for their new circumstances and that their wealth transfer strategies align with their relocation plans.

Consider your:

• Income Strategy: Will you draw income from your UK-based business, or will you generate new revenue abroad? Understanding the tax rules on drawing funds and ensuring your current business structure remains suitable is vital.
• Wealth Transfer & Estate Planning: With the UK replacing domicile-based Inheritance Tax (IHT) rules, reviewing estate planning strategies is important.  If there is uncertainty around long-term plans, then life insurance can be an effective tool whilst you consider longer-term solutions.

3. Investment Considerations

Where to Hold Assets

When relocating, structuring investments in a tax-efficient way can help protect and grow wealth. We often recommend entrepreneurs moving to say Dubai or the Middle East to hold their banking and custody accounts in a neutral third country rather than in their new country of residence.

Choosing the Right Investment Structures

Your investment strategy should be tailored to your personal circumstances and individual needs. 

Entrepreneurs’ relocating to other countries should consider exploring the following:

• Business structure – is your business in the most tax-efficient structure to realise liquidity events when you leave the UK?
• International Pensions – Some jurisdictions offer expat-friendly pension schemes with tax advantages.
• Offshore Funds – Investing in offshore funds rather than UK funds directly can have tax benefits.
• Location of custody account – Offshore brokerage accounts can offer tax efficiency and flexibility.

Conclusion

Relocating abroad can create tax-saving opportunities, but this shouldn’t be assessed in isolation. Careful structuring, to avoid unexpected tax liabilities and ensure financial security, is paramount.

Engaging with an advisor, to help develop a personalised relocation plan can help ensure a structured, tax-efficient transition, and ultimately guide you through the complexities of cross-border wealth planning and business structuring.

At Bentley Reid, we offer comprehensive UK tax, financial planning and investment advice and recommend seeking professional legal advice (and external tax advice where required which we can help coordinate) before making any decisions.

Sources:

The Times, “The rich aren’t popular, but it’s better having them inside the tent,” 29 April 2025.

The Telegraph, “Hundreds of entrepreneurs prepare to quit Britain ahead of Budget tax raid,” 27 October 2024.

The Times, “Capital gains tax receipts fall 10% as wealthy exit UK,” 25 April 2025.

Need more advice? Reach out to our experts:

Anna Warren – Tax Director

anna.warren@bentleyreid.com

Mike Winstanley- Director, Wealth Management

mike.winstanley@bentleyreid.com