Split Year Treatment UK: The Definitive 2026/27 Guide

Determining tax residency for individuals moving into or out of the UK during a tax year requires precise application of the Statutory Residence Test (SRT). Governed by Schedule 45 to the Finance Act 2013, the SRT strictly dictates when an individual is resident or non-resident.  Fortunately, the legislation provides “split year treatment” to prevent expatriates from facing UK taxation on their worldwide income for the entire tax year of their arrival or departure.

When an individual satisfies the conditions for split year treatment, the tax year is legally divided into a “UK part” and an “overseas part.  The legislation dictates separate tax treatments for income and capital gains falling into each respective period.

The 8 Statutory Cases

The SRT outlines eight specific “Cases” that trigger split year treatment. Cases 1 to 3 apply to individuals leaving the UK, while Cases 4 to 8 apply to those arriving.

If multiple cases apply to an arriving individual, HMRC enforces priority rules. For example, Case 6 has priority over Case 5 if it results in an earlier split date.

Taxation of Income During a Split Year

Section 15 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) sets out the charging provisions for general earnings in a split year. The statute explicitly excludes earnings attributable to the overseas part of the year from UK taxable earnings, provided those earnings do not relate to duties actually performed in the UK.

“Section 15(1A) then sets out when general earnings are excluded, and this is if earnings are attributable to the overseas part of the split year and are not general earnings in respect of duties performed in the UK.”

Capital Gains Tax (CGT) in a Split Year

Section 1G of the Taxation of Chargeable Gains Act 1992 (TCGA 1992) modifies the standard CGT charge for individuals qualifying for split year treatment.

Gains accruing to the individual in the overseas part of the tax year are generally entirely exempt from UK Capital Gains Tax.  However, the legislation preserves the UK’s taxing rights over specific assets. Gains realised during the overseas part remain chargeable if they arise from the disposal of UK residential property or assets connected to a UK branch or agency.

“(2) Gains accruing to the individual in the overseas part of the tax year are chargeable to capital gains tax only if they accrue on the disposal of assets within section 1A(3).”

The 2026/27 Landscape: Split Years and the FIG Regime

For expatriates arriving in the UK, the tax landscape shifted dramatically following the Finance Act 2025. Effective from 6 April 2025, the government abolished the remittance basis of taxation, replacing it with a new residence-based Foreign Income and Gains (FIG) regime.

If an expat arriving under a split year qualifies for the new FIG relief (having been non-UK resident for the prior 10 consecutive years), they receive 100% relief on their foreign income and gains for their first four years of UK residence.  This relief applies seamlessly to the UK part of their split year, allowing them to bring foreign income into the UK entirely tax-free. However, claiming this FIG relief under the 2026/27 rules generally results in the automatic loss of the individual’s Personal Allowance.

Consider researching how the Temporary Non-Residence (TNR) rules interact with the overseas part of a split year when an individual departs the UK but returns within a five-year period.