Split year treatment is a special set of rules when you move from one tax jurisdiction to another.

Technically speaking you are either tax resident or non-resident. However the UK have a special set of rules which come into play when you become a tax resident in another country.

Split year treatment allows you to be taxed in one country for the part of the year you were there, and in another country for the part of the year you were there.

Example

You are a UK tax resident and move to Cyprus on 10 August 2021. The UK tax year covering 10 August is between 6 April 2021 & 5 April 2022. Therefore you can apply split year treatment to movable income (such as employment & self-employment income, pensions, dividends, interest & royalties).

This means that you will be taxed in the UK on your income between 6 April 2021 to 9 August 2021, and in Cyprus between 10 August 2021 to 5 April 2022.

2 tax years for the price of one.

The benefit of this is that you get to enjoy the benefits of 2 countries tax allowances. In this example the £12,570 tax free allowance and the Cypriot €19,500 tax free allowance.

This means that if you earn £25,000 and would normally pay tax in the UK on this income at 20% over £12,570, you could apportion £10k to the UK and pay no tax, and other £15k to Cyprus and pay no tax effectively giving you a tax free year, saving you thousands.

Using split year rules to save tax when relocating abroad

We recently did a webinar on how to use split year rules to save tax, you can watch read and listen here.

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