Top 10 Tax Tips for Brits in New Zealand

Figuring out a whole new tax system is unlikely to be at the top of your list as you settle in New Zealand, but good tax planning can make quite a difference.

It is important to recognise that even if you have never had the need for tax advice before it is highly likely that you will need some advice when moving to New Zealand.  Having to deal with the H M Revenue and Customs (HMRC) in the UK and also the New Zealand Inland Revenue (IRD) can often be quite a challenge and whilst the tax systems appear similar in some ways they can also be very different and it is dangerous to assume that the rules in New Zealand will be the same as those in the UK.

Martin Riley of Sterling Tax Services (our preferred tax services provider) suggests that UK emigrants should bear in mind the following points when preparing to move to New Zealand:

01Make sure that HMRC know that you have left the UK – complete Form P85 before or very soon after leaving the UK. If you are an employee and have left part way through a tax year this will normally result in a tax repayment.

02Obtain an IRD number as soon as you arrive in New Zealand. This will avoid having to pay tax at higher rates simply because you don’t have an IRD number. Whilst any such overpayment can always be recovered at a later date this may be an unnecessary hassle.

03Don't feel that you must sell all your UK assets. It may be more tax efficient to retain UK income producing assets as there is a 4 year temporary exemption from New Zealand tax for most overseas income of new immigrants.

04If you have UK stocks and shares then consider holding onto these – they can be subject to favourable tax treatment beyond the 4 year temporary exemption referred to above.

05 If you are renting out a UK property join the Non-Resident Landlords Scheme (NRLS) - Otherwise any letting agent will be obliged to deduct 20% tax at source.  By joining the NRLS you can receive rental income without deduction of tax - but if any UK tax is owing you will need to complete a self-assessment tax return each year.

06If you are renting out a UK property which is subject to a mortgage then after the 4 year exemption for Transitional Residents you are likely to be subject to tax in New Zealand on the mortgage interest that you are paying. Hard to believe but it's true - not many accountants are even aware of this!

07If you have UK personal pensions think twice before making additional contributions after leaving the UK. If you simply continue to contribute to the fund you will run the risk of the fund income becoming taxable in New Zealand.

08Consider setting up a family trust. New Zealand has a favourable tax regime for family trusts. If you are arriving in New Zealand with substantial assets then you should consider setting up a trust – possibly before you arrive in New Zealand.

09Don’t rely on advice from the Inland Revenue (either in the UK or New Zealand). We have seen many instances of ‘bad advice’ having been given. In fairness to both HMRC and IRD it is not their job to give advice but they do try to assist taxpayers when they can. However, when it comes to dealing with tax issues across international borders many so-called tax experts are simply not aware of the complexity involved – and this often includes other accountants who do not normally advise on such issues.

10Don’t leave to UK just to escape the Taxman. There’s a Taxman here in New Zealand and the overall tax burden in New Zealand has actually been slightly higher than in the UK in recent years – even though there is no capital gains tax and the top rate of income tax is lower at 38%.

If your financial affairs are reasonably straightforward then you may be able to deal with HMRC and IRD yourself but unless you are selling all of your UK assets and taking up employment in New Zealand then there are likely to be issues that will need looking at. If your financial affairs are more complex then it is essential that you seek professional advice – possibly before you leave the UK.

Sterling Tax Services will be happy to help you to avoid some of the mistakes that other immigrants have made in the past and to advise on any tax planning opportunities that might exist. If your affairs are reasonably straightforward it may be that you will only require advice during the transitional period and you may be able to look after your own tax affairs once things have settled down after the move.  

These points are generic points and Sterling Tax Services accepts no responsibility or liability to any person acting or refraining from acting on the basis of the information set out here. You should always obtain specific advice based on the full facts and which takes into account both UK and New Zealand tax law.

Don't hesitate to contact us if you have any questions about your tax position as a UK migrant to New Zealand or a Kiwi returning from the UK.