Split Year Treatment For Expats Explained

Lisa Smith, BA (Hons), CeFA
By

Split Year Treatment is a tax rule for expats leaving or returning to the UK during the tax year.

The rule divides the year into two parts – for one part the expat is non-resident and for the other, UK resident.

The rule also applies to a partner or spouse entering or leaving the UK to live during the tax year.

Split Year Treatment is important to expats coming or going to a country with lower tax rates than the UK. Rather than paying income tax at UK rates for all the year, Split Year Treatment reduces the amount due to just part of the year. 

Like the Statutory Residence Test, expats cannot choose to apply Split Year Treatment, the rules are automatically set in motion when they arrive or leave the UK.

Working through the Split Year Treatment is fiendishly complicated and best left to a tax professional.

This article offers comprehensive guidance but can’t replace professional advice tailored to your personal circumstances.

Split Year Treatment And Expat Tax

The Statutory Residence Test (SRT) offers no leeway in applying residency rules.

Expats are either UK resident for all a tax year or not.

But thousands of expats leave or return to the UK each tax year. Applying SRT to their residency status when they are only in the UK for part of the year could mean they pay more tax than they should on income and gains.

So, Split Year Treatment is an attempt to level the playing field by accepting that some expats are non-resident for part of a tax year when they first depart the UK or return to live permanently after a stint overseas.

Split Year Treatment does what it says – divides the tax year into two parts:

  • One is a UK resident part when expats will pay UK tax on earnings, gains and investments
  • A non-UK part classing an expat non-resident for UK tax

Expats cannot choose to apply Split Year Treatment to their finances – the process is triggered automatically when they leave or return to the UK.

Different split year rules can apply to an expat’s personal circumstances, and if they are put into more than one category, the rules are applied by priority, not by choice.

Split Year Treatment only applies to expats who have UK residency for part of the tax year in question.

Applying Split Year Treatment

Split Year Treatment breaks down to eight sets of rules – three sets for expats leaving the UK part way through a tax year and five for those returning.

The sets of rules are called Cases – Cases 1 to 3 cover the year an expat leaves, while Cases 4 to 8 are applied in the tax year when they return to the UK.

If expats leaving the UK match more than one Case, a priority system applies:

  • Case 1 comes before Case 2 and 3
  • Case 2 comes before Case 3

For expats leaving, Case priority is applied like this: 

First case applyingSecond case applyingCase priority
Case 6Case 5Case with earliest split year date, otherwise Case 6
Case 7 (but not Case 6)Case 5Case with earliest split year date, otherwise Case 7
Two of all of Cases 4, 5 and 8 (but not cases 6 or 7)Case or cases with the same (or earliest) split year date
Source: HMRC

For Cases 4-8, the split year date is the final day of the overseas part of the year. 

Unlocking Split Year Cases

Split Year Treatment will fit expats into one of eight sets or cases according to their personal circumstances. 

Here’s a detailed look of the conditions that apply to each case:

Case 1: Starting full-time work overseas

To come under Case 1, which applies in the year an expat starts working full-time overseas, they must be:

  • UK resident during the tax year
  • UK resident for the tax year coming before the year in question
  • Non-UK resident in the following tax year, because they meet the Statutory Resident Test third automatic non-residence test 
  • Meet the relevant period overseas work rules

Overseas work rules

Someone works overseas if they:

  • Have a full-time overseas job during a relevant period
  • Have no significant break from overseas work during the relevant period
  • Don’t work for more than 3 hours in the UK on more than the allowed number of days during the relevant period
  • Spend only the allowed number of days in the UK during the relevant period

Working out if you work enough full-time hours overseas

HMRC will view an expat scoring more than 35 on the sufficient hours test as working full time overseas.

Scoring the Sufficient Hours Test

The sufficient hours test is a five-step calculation to find out if an expat works full time overseas.

1. Count your ‘disregarded days’

These are the days when an expat works for three or more hours in the UK, including days when working overseas on the same day

2. Count the hours worked overseas

Take any days worked either for an employer or as self-employed and count the number of hours worked in the tax year. Count hours at work, not contracted hours while ignoring hours worked on any disregard days

The result is the number of ‘net overseas hours’

3. Calculate the relevant period

Under Split Year Treatment, the relevant period is a period of at least one day that:

  • Starts on a day falling in the tax year
  • Is a day when an expat carries out three or more hours work overseas
  • Ends on April 5 following the start day

The relevant period is substituted for the Statutory Resident Test reference period in this step.

4. Work out the number of sufficient hours

Working out the number of sufficient hours is a two-step calculation:

  • Divide the relevant period by 7

If the result is more than 1 but not a whole number, round down to the nearest whole number, but if less than one, round up to 1

For example, if the result is 32.65, round down to 32, or round up 0.66 to 1

5. Calculate he final score

  • Divide the net overseas hours worked out in step 2 by the number from the last calculation.

If the result is 35 or more, then the expat has passed the sufficient hour test, while a result of less than 35 fails the test.

Gaps in Employment

Split Year Treatment rules recognise that someone may spend time unemployed during a tax year.

The three accepted scenarios are:

Changing employers during the tax year or split year relevant period 

  • If there is a gap spent unemployed
  • The employee does not work during the job gap
  • Any days spent not working are deducted from the relevant period 

This rule does not apply to the self-employed.

The 15-day and 30-day limits under the Statutory Residence Test are disregarded. Instead, the gap days are capped according to the table:

DateDays expats allowed to spend in UKDays expats can work more than three hours and gap day limit
6 – 30 Apr9030
1 – 31 May8227
1 – 30 Jun7525
1 – 31 Jul6722
1 – 31 Aug6020
1 – 30 Sep5217
1 – 31 Oct4515
1 – 30 Nov3712
1 – 31 Dec3010
1 – 31 Jan227
1 – 29 Feb155
1 – 31 Mar72
1 – 5 Apr
Source: HMRC

HMRC worked example of Case 1 Split Year Treatment

Case 2: Expat partner starting full-time work overseas

This set of rules apply when the partner of someone working full-time overseas leaves the UK to be with them.

To qualify as Case 2, the expat partner must be:

  • UK resident during the Split Year Treatment tax year
  • UK resident in the tax year before the Split Year Treatment year
  • Non-UK resident for the tax year following the Split Year Treatment year
  • The partner of someone who meets Split Year Case 1 rules in the Split Year Treatment year or preceding tax year
  • Living with their expat partner in the UK in the Split Year Treatment year or preceding tax year
  • Moving overseas to with a partner who is working overseas

Lastly, between the day the leave the UK (deemed departure date) and the end of the Split Year Treatment year, the partner cannot:

  • Have a home in the UK
  • If they have a UK and overseas home, they must spend longer living abroad than in the UK
  • Spend no more days in the UK than allowed in the Case 1 table above

A partner for this case is a spouse or civil partner or an unmarried couple living together as spouses or civil partners.

Deemed departure day

The deemed departure day is the latest of:

  • The day someone joins their partner to live together overseas

Or

  • The first day of the overseas part of the year under Split Year Treatment Case1 for their partner

HMRC worked example of Case 2 Split Year Treatment

Case 3: No Home In The UK

These Split Year Treatment rules apply to expats who have left the UK and no longer have a home in the country.

The rules are expats must be:

  • Non-UK resident for the tax year following the split year
  • Have one or more homes in the UK at the start of the tax year, but during the year stopped having a home in the UK for the rest of the tax year.

From the time an expat stops having a home in the UK they must:

  • Stay in the UK for less than 16 days
  • Become resident in another country within six months

Or

  • Stay overnight in that country at the end of each day for six months

Or

  • Have their only home or all their homes if they have more than one, in that country within six months

Case 4: Coming Back To A Home In The UK

Expats returning to the UK only meet Case 4 rules if they had no UK home by passing the accommodation conditions of the Statutory Residence Test Sufficient Ties Test.

Expats must be:

  • UK resident for part of the tax year
  • Non-UK resident in the previous tax year 
  • The Case 4 accommodation tie applies to someone who does not have somewhere to live in the UK  at the start of the split year, but finds a home during the year and meets the following conditions until the end of the split year:
  • The accommodation is available for them to live in for 91 days or more during the tax year

And

  • They spend one or more nights there during the year
  • They stay at the home of a close relative for 16 or more nights during the year

Close relatives are parents, grandparents, brothers, sisters, or grandchildren aged 18 or over. The definition includes full and half-blood relatives and adopted children.

Gaps in availability of 16 days or less count as available accommodation.

Expats only meet the accommodation tie if they have one home and that home is in the UK or, if they have more than one home, all their homes are in the UK.

  • Fail the sufficient ties test for the part of the split year before the day that they met the accommodation tie. 

When working out if they have sufficient UK ties in this part of the year, they should reduce the day count limits in the sufficient ties tables with the values from the table below.

Days v Ties if UK resident in one or more of the three earlier tax years

Days spent in the UK in the tax year under considerationUK ties needed
16 – 45At least 4
46 – 90At least 3
91 – 120At least 2
Over 120At least 1
Source: HMRC

Days v Ties if non-resident in the three earlier tax years

Days spent in the UK in the tax year under considerationUK ties needed
46 – 90All 4
91 – 120At least 3
Over 120At least 2
Source: HMRC

Case 4 Days v Ties Split Year Treatment adjustment table

DatesFor 15 substituteFor 45 substituteFor 90 substituteFor 120 substitute
6 – 30 Apr14710
1 – 31 May271520
1 – 30 Jun4112230
1 – 31 Jul5153040
1 – 31 Aug6193750
1 – 30 Sep7224560
1 -31 Oct9265270
1 – 30 Nov10306080
1 – 31 Dec11346790
1- 31 Jan123775100
1 – 29 Feb144182110
1 Mar to 5 Apr154590120
Source: HMRC

For case four, the overseas part of the split year starts on April 6 and ends the day before the first day the expat meets the accommodation tie.

The UK part of the tax year is the period from the end of the overseas part until the end of the tax year.

HMRC worked example of Case 4 Split Year Treatment

Case 5: Starting full-time work in the UK

An expat may receive Split Year Treatment for a tax year if they start working full-time in the UK, and they meet the Statutory Residence Test third automatic UK test for 365 days in a row. 

If the rules are met in two or more periods, then the UK part of the split year will run from the start of the first period.

Returning expats must be:

  • UK resident in the tax year
  • Non-UK resident for the previous tax year
  • Not pass the Statutory Residence Test sufficient ties test for the part of the tax year before the day they meet the third automatic UK test, when they are considering whether they have sufficient UK ties.

For this part of the year, they should change day count limits in the sufficient UK ties tables with the Case 4 Days v Ties Split Year Treatment adjustment table above

For case five, the overseas part of the tax year starts on April 6 and ends when the expat first meets the Statutory Residence Test third automatic UK test by working full-time in the UK.

The UK part of the tax year runs from the end of the overseas part of the split year until the following April 5.

HMRC worked example of Case 4 Split Year Treatment 

Case 6: Leaving Full-Time Work Overseas

This split year case applies to expats who were non-resident in the tax year before the one in question because they worked full-time overseas and stopped working full-time overseas in the split year.

They must be:

  • UK resident for the tax year in question
  • Non-UK resident for the tax year before the tax year in question because they either:
  • Satisfied the third automatic overseas test for that year

Or

– if in 2012-2013, worked full-time overseas for the entire tax year under rules in force before the Statutory Residence Test

  • UK resident for at least one of the four tax years before the year in which they were non-resident under the old rules. 
  • UK resident in the tax year following the year in question
  • Meet the overseas work rules for a relevant period

Case 6: Calculating if an expat has worked full-time overseas in the relevant period

The individual needs to apply the sufficient hours overseas calculation to the relevant period, but the maximum number of days for subtraction from the reference period for gaps between jobs reduces from 30 days to the limit laid out in the following table:

Split year Case 6 adjustment table

DateDays when expats can work more than 3 hours in the overseas part of the split yearLimit on days an expat can spend in the UK in the overseas part of the split year
6 – 30 Apr27
1 – 31 May515
1 – 30 Jun722
1 – 31 Jul1030
1 – 31 Aug1237
1 – 30 Sep1545
1 – 31 Oct1752
1 – 30 Nov2060
1 – 31 Dec2267
1 – 31 Jan2575
1 – 29 Feb2782
1 Mar – 6 Apr3090
Source: HMRC

HMRC worked example of Case 6 Split Year Treatment

Case 7: Split year treatment for partners of expats giving up full-time work overseas

If an expat stops working full-time overseas and returns to the UK, their partner may qualify for Case 7 Split Year Treatment.

They must be:

  • UK resident for the tax year
  • Non-UK resident in the previous tax year
  • The partner of an expat who qualifies for Case 6 Split Year Treatment in the tax year in question or the previous tax year
  • Moving to the UK so they can live together with their partner on their return to the UK
  • UK resident in the year following the split year
  • In the part-year before their deemed arrival either:
  • Not have had a home in the UK

Or

  • If they have had homes in the UK and overseas, they spend the greater part of the time living in the overseas home
  • Not spend more than the allowed number of days in the UK during the overseas part of the split year

Deemed arrival day

The deemed arrival day is the later of:

  • The first day of the UK part of the year for the individual’s partner under Case 6
  • the date when the partner moves to the UK so that they can live together in the UK with the other expat

HMRC worked example of Case 7 Split Year Treatment

Case 8: Starting To Have A Home In The UK

If an expat has no UK home but during a tax year set up a home in the country, they may qualify for split year treatment under Case 8 rules.

To do so, they must be:

  • UK resident in the tax year
  • Non-UK resident for the previous tax year
  • UK resident for the following tax year but this must not be a split year
  • Not have a home in the UK on April 6 in the year in question, but move to a UK home during the tax year and continue to have a UK home for the rest of the tax year and the following tax year
  • Tied to the UK so they are UK from April 6 to when they have a UK home – but they should reduce the day count limits in the sufficient ties tables by substituting values from the Case 4 adjustment table 

HMRC worked example of Case 8 Split Year Treatment

Split Year Treatment for Expats FAQ

Figuring tax residence and domicile is a tough problem for expats used to moving place to place.

It doesn’t help that the UK tax year starts and ends in April when the tax year for most countries runs from January 1. 

Working out Split Year Treatment involves checking at least eight different sets of rules to see which affect you.

Here are the answers to some popular questions asked by expats about Split Year Treatment.

How does Split Year Treatment work for expats?

Instead of applying the Statutory Residence Test which rigidly applies residence rules for a tax year, Split Year Treatment covers expats who leave or return to the UK part way through a tax year. So, the split is when someone is UK resident for some of the year and non-resident for the rest.

How do expats claim split year treatment?

They don’t. Split Year Treatment applies automatically for the tax year they leave the UK and the one when they return.

Do split year rules apply to capital gains tax?

There are rules for capital gains tax that apply to assets in the UK owned by non-residents

How does split year treatment impact double taxation treaties?

Split year treatment has no affect on double taxation treaties, which continue to apply as usual to expats and non-residents.

Will I get split year tax benefits by popping overseas for a few months?

No. Split year treatment only applies once a UK resident has left the country for at least one full tax year. That means unless you leave at midnight on April 5, you must stay out of the UK for at least two tax years to qualify for split year tax treatment.

Leave a Comment