From London to Barbados (or back to Italy): what happens to your UK tax position when you move abroad as a sole director?
By Angelo Chirulli – CEO, Vectigalis Tax
Mario had lived in the UK for over a decade.
Originally from Italy, he had built a comfortable life in London — running his own limited company, investing in UK shares and ETFs, and renting out a one-bedroom flat in Shoreditch.
Life was good, but something was calling him back. After two long winters, Mario found himself wondering whether it was time to return to his roots in Puglia — or take a bolder step and relocate to Barbados for a few years.
One thing was certain: he wasn’t ready to retire. He wanted to keep the business running, continue drawing income from his investments, and maybe visit London now and then.
What he didn’t fully expect, however, was how complex things would get from a tax perspective.
Moving abroad when you’re a UK resident director, shareholder, landlord, and investor doesn’t mean cutting all ties — and HMRC may not be done with you just yet.
Step one: are you still UK tax resident?
Mario’s first task was to check whether he’d still be considered UK tax resident under the Statutory Residence Test (SRT). The answer depends on things like:
- how many days he spends in the UK each tax year,
- whether he keeps a home in the UK,
- and how many “ties” he maintains (e.g. business, accommodation, family)
If Mario moved to Barbados or Italy full-time and kept his UK visits under the relevant thresholds (e.g. under 45 days with limited ties), he could become non-resident for UK tax purposes from the following tax year.
But if he kept visiting London for board meetings, stayed in his Shoreditch flat, or spent significant time working for UK clients, he risked remaining UK tax resident — and therefore taxable on his worldwide income.
The UK limited company: who’s really in control?
Mario was the sole director and shareholder of his company. Even abroad, he could still run things — but where he did it from mattered.
The tax issue? Corporate residency.
If Mario moved to Italy and managed the company entirely from there, the Italian tax authority could argue that the company was now Italian tax resident, because its “place of effective management” had shifted.
That could trigger dual residency, with the UK and Italy both seeking to tax the same profits. Though the UK-Italy tax treaty helps resolve conflicts, it often means extra paperwork, potential disputes, and local compliance.
In contrast, Barbados applies a territorial system — so it wouldn’t usually tax a UK company’s foreign income unless local activity occurred. That made it more tax-neutral, though Mario would still need to ensure the UK remained the true “centre of management and control” to preserve its UK tax residency.
Drawing money: salary, dividends and local tax rules
Once abroad, Mario needed to understand how his salary and dividends would be taxed locally:
- In Italy, salary from a UK company would be taxed as ordinary employment income and subject to INPS (social contributions). Dividends from the UK would also be taxed at a flat 26%.
- In Barbados, salary may be taxed depending on whether he becomes tax resident, but foreign-source dividends might escape tax altogether — particularly if they are not remitted or deemed locally sourced.
However, by becoming non-UK resident, Mario would lose access to the UK personal allowance (unless the double tax treaty applies) and his tax-free dividend allowance (£500 from April 2024).
The London flat: still taxable in the UK
Mario’s Shoreditch flat, which he rented out through an agency, remains UK property income — so it stays taxable in the UK, no matter where he lives.
He would need to:
- register under the non-resident landlord scheme (NRLS),
- file a UK self-assessment return, and
- possibly declare the rental income in Italy too, if he chose to move there.
Italy, unlike Barbados, taxes worldwide income, and Mario would be eligible to claim a foreign tax credit for any UK tax already paid on the rental profits. In Barbados, the income may be ignored entirely if it isn’t remitted — a notable advantage for cash-flow planning.
Shares and Etfs: when you sell matters
UK capital gains tax (CGT) generally doesn’t apply to non-residents on the sale of listed shares and ETFs (as long as they’re not part of a UK trade). So if Mario sold his ETFs after becoming non-UK tax resident, those gains would escape UK tax — but might be taxable in Italy.
Italy applies a 26% flat rate on capital gains from foreign securities. Barbados does not tax capital gains at all — a potential win for Mario if he plans to restructure or liquidate his portfolio.
Timing here is crucial. Selling before leaving the UK could trigger unnecessary tax — while waiting after formal loss of residency opens up opportunities for tax-free growth in some cases.
One final twist: inheritance tax and domicile
Though Mario had lived in the UK for more than a decade, he remained Italian domiciled — an important distinction.
That meant his exposure to UK inheritance tax (IHT) was mostly limited to UK situs assets (like his London flat and UK shares), not his worldwide estate. However, if he stayed much longer, he risked acquiring deemed UK domicile (after 15 out of 20 tax years), which would bring his entire estate into UK IHT — even after moving abroad.
By leaving sooner rather than later, Mario could avoid this trap — and start thinking about longer-term estate planning using Italian or Barbadian structures.
Mario’s takeaway: plan your exit, or risk surprises
Moving abroad is exciting — but for people like Mario, it’s also a trigger for fundamental tax changes. Residency, corporate control, local tax exposure, and even your future estate need to be re-mapped.
At Vectigalis Tax, we specialise in helping business owners, professionals, and globally mobile individuals plan their departure from the UK — making sure every tie, asset, and income stream is managed in the most efficient way.
📧 Thinking of doing what Mario did? Reach out to Angelo at angelo@vectigalistax.co.uk for a personalised exit plan tailored to your business and new life abroad.