Moving Back to the UK From Saudi Arabia: Tax Consequences and Strategies

This article provides comprehensive, actionable guidance for individuals moving back to the UK from Saudi Arabia’s tax-advantaged landscape. It addresses the key considerations and practical steps necessary to ensure a smooth financial and administrative transition, while highlighting opportunities to optimise tax outcomes when returning to the UK tax system.

Re-Establishing UK Tax Residency: The Statutory Residence Test (SRT)

Assessing your UK tax residency through the Statutory Residence Test (SRT) is a crucial element of any repatriation plan.

Each tax year is evaluated individually through three categories of tests:

• Automatic UK tests
• Automatic overseas tests
• Sufficient ties tests

Automatic UK Tests

The number of days you spend in the UK during a tax year is the primary factor in determining your tax residency.

You are automatically considered a UK tax resident if you spend 183 days or more in the country during the tax year.

Even if you spend fewer than 183 days in the UK, you may still be considered a resident if you maintain a home in the UK under the following conditions:

• The home is available to you for a minimum of 91 consecutive days.
• You spend at least 30 days in the home during the tax year.
• During the tax year, you either have no overseas home, or if you do have one, you spend fewer than 30 days in each overseas home. This applies only if you also have no other home where you spend 30 days or more.

According to the final test, you may be considered a UK tax resident if you maintain full-time employment in the UK during any 365-day period within the tax year, provided:

• At least 75% of your working days (days with 3+ hours of work) fall in the UK.
• You perform a minimum of three hours of work in the UK on at least one day within both the tax year and the 365-day period.

Automatic Overseas Tests

Automatic overseas tests primarily assess your UK residency in relation to the previous three tax years and your current-year presence. You are considered a non-resident if:

• You resided in the UK for one or more of the preceding three tax years and you spend fewer than 16 days in the UK in the current tax year.
• You did not reside in the UK for the previous three tax years and you spend fewer than 46 days in the UK in the current tax year.

A third overseas test considers your employment abroad. You are not a UK tax resident if you maintain full-time work overseas during the tax year and meet the following conditions:

• Spend fewer than 91 days in the UK.
• Work in the UK for fewer than 31 days (days on which you work more than 3 hours).
• Have no significant breaks in your overseas employment.

Sufficient Ties Tests

If you do not meet any of the automatic tests, the HMRC will assess your ties to the UK to determine your tax residency. For individuals who were UK-resident in any of the previous three tax years, five potential ties may apply; for those who were not, four ties apply.

1. Work tie: UK workdays within the tax year
2. Family tie: Spouse, civil partner, or dependent children in the UK
3. Accommodation tie: Availability of a UK residence
4. 90-day tie: Spending more than 90 days in the UK in either of the previous two tax years
5. Country tie: The UK is the country in which you spend the greatest number of days in the tax year (applies only if you were UK-resident in one of the previous three tax years)

The number of ties required to be considered a UK tax resident depends on whether you were considered a UK tax resident in any of the preceding three tax years, as outlined in the table below:

The SRT contains highly specific rules that can materially affect returning expats, especially those who have spent several years living and working in Saudi Arabia.

Seeking personalised guidance can help ensure that your residency position and tax obligations are assessed correctly.

Tax Implications of Re-Establishing UK Residency After Repatriation From Saudi Arabia

If you re-establish your UK tax residency according to the SRT, you will generally become liable for tax on your worldwide income and gains upon repatriation. This includes any Saudi-sourced income arising after you become UK-resident, such as:

• Salaries
• Business profits
• Interest and dividends
• Capital gains

Worldwide taxation applies from the tax year in which you return to the UK. However, the extent of UK taxation depends on whether you qualify for split-year treatment, whether the temporary non-residence rules apply, and whether you are eligible to claim the UK’s post-April 2025 4-year Foreign Income and Gains (FIG) regime.

Income earned while you were a non-resident living in Saudi Arabia is usually not subject to UK tax. However, certain employment-related payments may still be taxable depending on when the duties were performed and whether temporary non-residence rules apply.

If you repatriate before the end of the tax year, which runs from 6 April to 5 April, you will be taxed progressively according to your income tax bracket:

Expats returning from Saudi Arabia often find themselves subject to higher UK tax rates, which can significantly impact their accumulated wealth. While there is a personal allowance (£12,570) on which no tax is payable, it is gradually tapered for higher earners: for every £2 earned above £100,000, the allowance is reduced by £1, disappearing entirely at an income of £125,140.

Individuals who claim the FIG regime will not be entitled to the personal allowance or the capital gains tax annual exempt amount during relief years.

Tax Treatment of Foreign Pensions, Savings, and Investments Upon Repatriation

While transferring the savings or capital you have accumulated abroad into the UK is not a taxable event on its own, any future income or gains those assets generate will become taxable once you re-establish UK tax residency.

The precise treatment may vary depending on whether you qualify for split-year treatment or the UK’s post-April 2025 4-year Foreign Income and Gains (FIG) regime.

Consequently, it is crucial to consider how each type of asset or income source will be treated upon repatriation:

• Cash savings and interest: Interest earned on overseas bank accounts becomes taxable from the moment you resume UK tax residency. Many returning expats choose to restructure their cash holdings by moving funds into UK tax-efficient accounts such as individual savings accounts (ISAs). You cannot make new ISA subscriptions while non-resident; contributions are only permitted once UK tax residency has been re-established. Interest, capital gains, and investment income generated within an ISA are fully exempt from UK tax.
• Investments (stocks, bonds, funds): Dividends from foreign companies or overseas funds, as well as interest from non-UK bonds, become subject to UK taxation upon repatriation. Although the UK provides a dividend allowance, it is limited to £500, with the excess amounts taxed at graduated rates ranging from 8.75% to 39.35%. Before returning, it is advisable to review your portfolio and consider rebalancing toward more tax-efficient assets. If you qualify for the FIG regime, foreign dividends and gains may be exempt for up to four tax years, although personal allowances and the CGT annual exempt amount are not available in FIG years.
• UK pensions: If you actively contributed to or maintained a UK pension while living overseas, any withdrawals made after your return will be taxed as regular income. The former lifetime allowance has been abolished; instead, tax-free lump sums are subject to the Lump Sum Allowance (LSA), currently capped at £268,275 for most individuals. From April 2027, most unused pension funds and pension death benefits are expected to fall within the scope of UK inheritance tax, which may affect your long-term estate planning.
• End-of-service benefits: Saudi Arabia does not operate a formal pension system that allows tax-free withdrawals. However, many Saudi employers provide an end-of-service gratuity upon termination of employment. Whether the gratuity is taxable in the UK depends on the source of the employment duties rather than simply when it is paid. If the duties were performed wholly in Saudi Arabia during a period of UK non-residence, the payment is often treated as foreign-source employment income and may fall outside UK tax unless the temporary non-residence rules apply. Receiving the payment before returning to the UK may be beneficial, but timing alone does not guarantee exemption.

Tax Optimisation Strategies for Returning UK Expats

You can maximise the income earned in Saudi Arabia and reduce your UK tax exposure by implementing several tax-efficient strategies, including:

1. Utilising the 4-year foreign income and gains relief.
2. Assessing split-year treatment eligibility.
3. Avoiding double taxation through the UK–Saudi Arabia DTA.
4. Timing your repatriation.
5. Restructuring asset ownership and location.

Utilise the 4-Year Foreign Income and Gains Relief

The UK’s post-April 2025 4-year foreign income and gains regime is designed to assist expats in transitioning back into the UK tax system. The relief applies only for individuals who become UK-resident on or after 6 April 2025.

Under the relief, newly resident individuals may claim up to four tax years of exemption on specific types of foreign income and gains, including:

• Profits generated wholly outside the UK.
• Profits from overseas real estate businesses.
• Dividends from non-UK companies.
• Foreign interest income.

To qualify for the relief, you must meet two conditions:

1. Become a UK tax resident (which you are likely to do upon repatriation).
2. Have been non-UK resident for at least 10 consecutive tax years immediately before the year of return.

This relief is particularly valuable for long-term expats and can lead to substantial tax savings. If you have not yet met the 10-year non-residency requirement, you may want to consider delaying your return to the UK to ensure you qualify, bearing in mind that claiming FIG relief results in the loss of the UK personal allowance and the capital gains tax annual exempt amount for those tax years.

Assess Split-Year Treatment Eligibility

Under the SRT, you may be treated as either a UK tax resident or non-resident for a given tax year. However, when you move to or from the UK, the tax year can sometimes be “split” into a UK part and an overseas part. In the event of repatriation, the UK part commences on the day you return to the country and lasts until the end of the tax year.

Whether split-year treatment applies is determined through the SRT, which defines eight possible cases, each with its own specific criteria. One of the most relevant for returning expats is Case 6, which relates to the cessation of full-time work overseas. In this scenario, the tax year may be split if you:

• Are UK resident in the tax year of your return.
• Were non-resident in the previous tax year.
• Have been a UK resident for at least one of the four tax years prior to the current one.
• Will be a UK tax resident in the following tax year.
• Satisfy the overseas work conditions as defined by the SRT.

If you qualify for the split-year treatment, you will only be taxed on your foreign income and gains from the UK-resident part of the year onwards. In practice, this means that the timing of your return can significantly impact how much of your Saudi income is subject to UK tax, making careful repatriation timing especially worthwhile for expats with substantial foreign earnings or investments.

Avoid Double Taxation Through the UK–Saudi Arabia DTA

Saudi Arabia and the UK have a double taxation agreement (DTA) that may help you avoid being taxed on the same income in both jurisdictions. While its practical utilisation is limited because Saudi Arabia does not impose personal income tax, the treaty can still provide meaningful relief in specific circumstances.

For instance, Saudi Arabia does levy withholding tax on certain payments to non-residents, such as dividends, interest, or royalties from Saudi sources. When this occurs, the UK will allow you to offset the Saudi withholding tax against any equivalent UK tax on the same income.

Similarly, the DTA allows each country to tax income from real estate located in its territory. If you own a Saudi property that generates rental income, you may be subject to local tax or Zakat. In such cases, the UK may credit eligible Saudi taxes against your UK liability on that same rental income; however, Zakat is generally not creditable. (subject to the UK’s foreign tax credit rules and limitations).

Time Your Repatriation

UK tax rules contain several nuances that can significantly influence the taxation of foreign income depending on when you arrive and return during the tax year. Careful planning of your repatriation helps you avoid unexpected liabilities.

For instance, if you do not meet the criteria for non-residence under the SRT for a full tax year abroad, you are treated as if you never stopped being a UK tax resident and must pay taxes on all foreign income earned for the year. Completing a full tax year abroad is therefore essential for receiving non-resident tax treatment. Beyond the immediate tax reliefs, this also helps you qualify for split-year treatment upon your return.

It is also important to consider the temporary non-residence rule, which was introduced to prevent individuals from using short-term expatriation to shelter income or gains from UK taxation. You are treated as a temporary non-resident if both of the following conditions apply:

1. You repatriate within five years of leaving the UK.
2. You were a UK resident in at least four of the seven tax years prior to the departure.

Temporary non-residents cannot benefit from the same tax exemptions available to long-term non-residents. Instead, repatriation triggers UK tax charges on specific categories of income and gains, including:

• Capital gains.
• Offshore income gains.
• Certain categories of foreign income, including amounts brought into charge under transitional rules for former non-domiciled individuals.
• Certain employment-related lump sums, including some end-of-service or termination payments.

If your stay in Saudi Arabia has not yet reached the five-year threshold, it may be worth delaying your return until you exceed it, particularly if you plan to dispose of substantial assets.

Strategically aligning income events with your non-resident period can be an effective way to minimise your UK tax exposure. For instance, bonuses, stock option exercises, or disposals of investments could be timed before you resume UK residency to legally prevent their taxation upon your repatriation.

Restructure Asset Ownership and Location

Reviewing how your assets are held before moving back to the UK is essential to their tax-efficient treatment after repatriation. In some cases, transferring or restructuring assets while you are still abroad can help you avoid unnecessary tax exposure once you re-establish UK residency.

For instance, if your partner will remain a non-resident for longer than you, it may be sensible to hold certain investments in their name. Considering that Saudi Arabia imposes no gift, estate, or inheritance tax, such transfers typically do not create a tax charge during your time abroad.

However, returning expats should be aware that UK inheritance tax is now based on long-term UK residence rather than domicile, and applies to worldwide assets only once the long-term residence criteria are met, which may affect longer-term planning when assets are moved between spouses or partners.

You may also wish to explore tax-advantaged structures such as investment bonds. They allow growth to roll tax-deferred until a chargeable event occurs. In the meantime, you may withdraw up to 5% of original premiums per policy year with tax postponed.

When a bond matures, is surrendered, assigned for value, or otherwise triggers a chargeable event, the resulting chargeable event gain is taxed as savings income. Top slicing relief (TSR) may then be available to spread a significant gain over the years the bond was held and optimise the related tax burden. The availability of TSR depends on your residence position and the specific timing of the chargeable event.

The key limitation of such structures is that they are rarely straightforward. A bond may consist of various underlying policies with different tax profiles, and improper structuring may result in excessive taxation.

Working with an adviser who has extensive experience in the chargeable events regime can help ensure that the planning delivers the intended benefits.

UK Inheritance Tax and Long-Term Residence for Returning Expats

From 6 April 2025, the UK moved from a domicile-based inheritance tax (IHT) system to a predominantly residence-based regime for internationally mobile individuals.

Under the new framework, the key determinant of your worldwide IHT exposure is no longer simply whether you are UK-domiciled, but whether you meet the UK’s long-term residence (LTR) criteria.

Under the rules now in force, individuals who have been a UK tax resident for at least 10 of the previous 20 tax years at the point of a chargeable event (such as death or certain transfers into trust) are treated as long-term UK residents.

Long-term residents are generally subject to UK IHT on their worldwide assets. Those who do not meet the long-term residence threshold typically face UK IHT only on UK-sited assets, subject to a transitional “tail” period during which former long-term residents may continue to be taxed on worldwide assets for a limited number of years after leaving the UK.

Saudi Arabia continues to impose no inheritance, estate, or gift taxes, meaning that transfers between individuals are not taxed locally. However, once you fall within the UK’s long-term residence rules, UK IHT can apply to:

• Lifetime gifts, where the transfer occurs during long-term residence or within the relevant tail period, and death occurs within seven years, provided the gift is not exempt or a PET outside the scope of the tail period rules.
• Transfers into most trusts, which may trigger immediate IHT charges.
• The value of your estate on death, including Saudi bank accounts, investments, property, or other assets.

Because the UK now applies IHT based on long-term residence, any wealth planning carried out while living in Saudi Arabia should be reviewed with these UK rules in mind.

Transactions that create no tax exposure in Saudi may still have implications once you return to the UK or accumulate sufficient years of UK residence to be classed as a long-term resident.

The introduction of this residence-based system also includes transitional protections, including tail-period rules after leaving the UK and specific treatment for trusts established before 6 April 2025, which may continue to qualify as excluded property under certain conditions, including the requirement that no additions are made after 6 April 2025.

Given the complexity of the new regime and the interaction with earlier domicile concepts, a personalised review is strongly recommended to assess your ongoing IHT exposure and to structure your Saudi and UK assets efficiently ahead of returning.