Leaving the UK for India? These 8 NRI tax and money mistakes could cost you

Heading back to India might wrap up your time in the UK, but it doesn’t mean your UK tax obligations are over. Your UK home, rental income, investments, pension, ISA, stock awards and even potential inheritance tax could still be relevant. Meanwhile, once you become a Resident and Ordinarily Resident (ROR) in India, they might start taxing your global income.

Simply flying to India does not make you a non-UK tax resident. HMRC uses the Statutory Residence Test (SRT), which looks at how much time you spend in Britain as well as your continuing connections there. Things like where you live, your family ties, job and past visits all play a role. Remember. immigration status is different from tax residency, so British citizenship, settled status or a work visa does not decide your tax position.

The UK tax year runs from 6 April to 5 April. The year you leave can therefore be especially important. Returning NRIs need to establish their UK residence position and check whether split-year treatment applies. If eligible, this can divide the tax year into UK-resident and non-resident periods. The departure-year Self Assessment return and relevant residence paperwork must properly reflect the position.

Just because you have become a non-UK resident doesn’t mean you are off the hook for UK taxes on some incomes and gains. UK rental income can remain taxable, while gains from UK land and property can also attract UK Capital Gains Tax. A non-resident selling UK property generally needs to report the disposal to HMRC within 60 days. The timing of a property sale can therefore become an important part of the India-UK tax planning exercise.

An Individual Savings Account (ISA) can generally be retained after leaving the UK, but contributions normally cannot continue once you become a non-UK resident. More importantly, the UK tax-free status of an ISA does not automatically apply in India. Once you become an Indian tax resident, income and gains inside the ISA may need to be considered under Indian tax rules.

Returning to India does not necessarily mean you should immediately transfer your UK workplace pension or Self-Invested Personal Pension (SIPP). Experts say it can often be simpler to leave the pension where it is. The bigger issue is taxation when you eventually withdraw the money. The India-UK tax treaty may determine how pension income is taxed and where relief is available.

Once you become Resident and Ordinarily Resident in India, foreign assets and income must be reported. This can include UK bank accounts, ISAs, pensions and other overseas holdings. The Indian return’s Schedule FA is important for foreign-asset disclosure. The source also notes that India taxes worldwide income for RORs, while RNOR status can provide transitional relief for certain foreign income.

Unvested Restricted Stock Units (RSUs) can create a complicated cross-border tax position. The fact that shares vest after you move to India does not automatically mean the entire tax liability belongs to India. The period over which the award was earned and where you performed the relevant work can matter. Keep grant documents, vesting schedules, payroll records and work-location history before leaving the UK.

Inheritance Tax (IHT) is another liability returning NRIs may overlook. From 6 April 2025, UK IHT exposure is linked to long-term UK tax residence rather than domicile or citizenship. A person who was a UK tax resident for at least 10 of the previous 20 tax years can qualify as a Long-Term Resident, potentially keeping worldwide assets within the UK IHT net for a period after departure.

Before leaving the UK, first establish your SRT residence position and check split-year treatment. Then document your departure date, make an inventory of UK assets, update banks, pension providers and other institutions, and plan major transactions such as property sales, RSU vesting and pension decisions. Keep tax returns, P45/P60s, investment records, property documents and pension statements safely for future reporting needs.