The Hidden Tax Cost of Returning to the UK

The five-year rule remains a blind spot for many individuals relocating from the United States. Under current UK regulations, if a person was a resident for four of the seven tax years preceding their departure and returns within five years, authorities can tax income and gains realized during the period of non-residence as if they arose upon return. Having left in 2020, the Sussexes now face these potential liabilities.

Beyond the five-year threshold, the introduction of a new four-year Foreign Income and Gains (FIG) regime in April 2025 further complicates planning. To qualify for this relief, an individual typically requires ten consecutive years of non-residence. Rebeccah Fontaine, a senior manager at EisnerAmper, warns that many clients—and even the banks facilitating these moves—frequently overlook these time-sensitive traps. For those failing to hit the ten-year mark, the tax burden upon re-entry can be significantly higher than anticipated.