Residence and domicile rules are also important if you are thinking of moving overseas, which may have tax advantages. To apply to become a non-resident for tax purposes, you need to fill in a P85 form. Through this form, HMRC decides if you are eligible for non-resident tax status.

To become a non-resident taxpayer in the UK for income tax purposes, you have to live outside the UK for a full tax year, which runs from 6 April to 5 April the following year. Non-residence is provisional until you have completed one full tax year.

Anybody who leaves the UK to work full-time abroad with a contract of employment is regarded as non-resident from the day following departure, as long as both the absence and the employment last at least one full tax year. Visits back to the UK must also not exceed 182 days in one tax year nor exceed 90 days on average over a four tax year period. UK residence would be acquired again once they return here following the end of their employment.

If you have been settled in the UK for some years and leave, you need to provide evidence to demonstrate that you have changed status from a person normally living in the UK, who is spending temporary periods abroad, to a person whose normal home is abroad and who visits the UK from time to time.

If you are leaving the UK permanently, such as to retire to Spain, you are provisionally treated as non-resident from the day after you leave. You do need to show evidence your emigration is permanent, however, like moving most of your day-to-day life overseas, including potentially the sale of your house in the UK and buying property in your new country.

As long as such evidence is supplied, the provisional non-resident status is confirmed after one full tax year. Without evidence, you can potentially remain UK resident for up to three years.

To retain your non-resident tax status, you have to ensure you do not spend more than 182 days in the UK in any one tax year nor more than 90 days on average over any four consecutive year period.

The residence rules often work in different ways in other countries. You may be considered a tax resident straight away when you arrive or only after 183 days have elapsed. In some cases, residence depends on the “quality” of your presence and not specific periods of time. In most cases, you should not have to worry about being taxed on the same income and capital gains in the UK and your new country as long as there is a double taxation agreement between them.

Even though you may be regarded as non-resident for income tax purposes, you are viewed as only temporarily non-resident in the UK for CGT purposes for five tax years.

If you own investments on which you have lost money, you should consider cashing them in before becoming a non-resident for tax purposes. Losses on these assets can be offset against any tax liability on future gains. This is only possible, however, if the losses are realised while you are liable to CGT as a UK tax resident.

If you cash in investments acquired before departure during the five full tax years after qualifying as a non-resident, any gains realised while abroad will be subject to CGT if you become a UK tax resident again within that five-year period.
 
If you are living abroad when you die, you may not have escaped the clutches of HMRC. This is because you could be non-resident but still UK domiciled for IHT, which would mean your worldwide estate would be liable to IHT.

An individual may only have his or her domicile in one country at a time under English law and cannot ever be without a domicile. As we have seen, it is possible to abandon a domicile of origin and acquire a domicile of choice, although it is difficult and generally requires evidence of cutting ties to the former. It requires physically moving to the new country, making a permanent home there and may also require such things as taking up citizenship as well as employment or starting a business.

Even if you manage to change your legal domicile from the UK, you will be liable for IHT for at least three calendar years (and normally three full tax years) following the alteration because you will still be “deemed domiciled”. This is to prevent people legitimately changing their domicile just before their death.