While the move has generated a lot of media buzz, it has also prompted conversations amongst tax specialists regarding their new and old tax responsibilities. For internationally mobile families, relocating is rarely as simple as changing address. Tax residence, overseas income, capital gains, property taxes and ongoing overseas filing obligations can all come into play.
The test of tax residence
In the UK, tax residence is determined by the Statutory Residence Test (SRT), which weighs days spent in the country against homes, work and family connections.
Tax residence in the UK normally applies for the whole tax year unless there is an arrival into the UK part-way through the tax year and particular conditions are satisfied. Then, split-year treatment can apply.
Harry and Meghan may qualify for split-year treatment for the year ending 5 April 2027 which means that they may be able to divide the year into an overseas period and a UK resident period. Should this be the case they will be treated as non-UK resident for the period before they arrive (with UK tax generally applying only to relevant UK-source income) and UK resident for the period they return. For this period, their worldwide income and gains will fall within the UK’s tax regime.
To obtain split-year treatment on arrival, they must satisfy one of the specific statutory cases under the SRT. The cases include starting to have a home in the UK, starting full-time work in the UK or ceasing full-time work overseas.
Since April 2025, qualifying arrivals can potentially benefit from the Foreign Income and Gains (FIG) regime and claim relief on eligible overseas income and gains during their first four tax years of UK residence. Access to the FIG regime generally requires an individual to have been non-UK resident for at least ten consecutive tax years before becoming UK resident. Based on the publicly available timeline, Harry appears unlikely to satisfy that condition, and Meghan’s position would need to be considered separately.
Moving from the US also introduces complex dual filing requirements that must be managed carefully. The UK tax year ends on 5 April while the US tax year finishes on 31 December, meaning tax obligations may need to be managed across two different reporting calendars. As a US citizen, Meghan generally remains subject to US income tax and reporting obligations on her worldwide income irrespective of residence, although relief from double taxation may be available through US domestic provisions and the UK-US treaty.
The temporary non-residence trap
One issue that may be particularly relevant for Harry and Meghan returning to the UK after a period abroad is the temporary non-residence regime.
These rules are intended to prevent taxpayers from leaving the UK, realising gains whilst non-resident and then returning having avoided UK capital gains tax.
Broadly, where an individual was UK resident for at least four of the seven tax years before departure and remains non-resident for fewer than five full tax years, certain gains realised during the period of non-residence can become taxable in the year UK residence resumes.
For someone with Harry’s long history of UK residence before leaving the country, the rules illustrate how a return to the UK can sometimes have consequences that extend beyond future income and gains. Where investments, shareholdings or other chargeable assets have been disposed of during his period of non-residence, it may be necessary to review whether any gains fall within the temporary non-residence provisions.
The position can become particularly significant if Harry has undertaken larger transactions whilst abroad, such as selling a business interest, disposing of a substantial investment portfolio or realising significant capital gains. What appeared to be outside the scope of UK tax at the time may, in certain circumstances, be brought back into charge following a return to the UK. This is one reason why suggestions of a perfectly timed return for tax purposes can be misleading. In some cases, returning to the UK can actually reopen historic transactions for UK tax purposes and create unexpected liabilities.
Inheritance tax (IHT) must also be considered. Since April 2025, the UK’s inheritance tax regime has largely moved to a residence-based system. Broadly speaking, individuals who have been UK resident in at least 10 of the previous 20 tax years can become subject to UK IHT on worldwide assets under the long-term residence rules. Harry and Meghan may therefore have very different inheritance tax positions given Harry’s much longer history of UK residence. Each spouse’s IHT position must also be considered separately, and Meghan could become subject to UK IHT on worldwide assets if she herself becomes a long-term UK resident under the post-April 2025 rules.
The cost of coming home
Returning to the UK may create tax issues for the couple even before any income or gains are realised.
If Harry and Meghan decide to purchase a new home while retaining properties overseas, Stamp Duty Land Tax (SDLT) will apply to the purchase of any home they decide to buy in England. Given they already likely own other residential properties, the higher rates for additional dwellings will also likely apply.
On a high-value acquisition, SDLT liabilities can quickly become substantial. For example, a £10 million residential property purchase could give rise to an SDLT bill in excess of £1.6 million if the additional property surcharge applies.
For many returning expatriates, tax residence and income tax often receive the most attention, but transaction taxes such as SDLT can represent one of the largest immediate costs of relocating to the UK.
Back to school
The opportunity for the Sussex children to be educated in the UK has been cited in the media as a major factor in the family’s decision to return.
As the children are attending independent schools, it is worth remembering that VAT has been charged at the standard rate on most private school tuition and boarding fees from January 2025.
Some schools have also lost charitable business rates relief and have had to pass the benefits lost as a result of this onto parents. The overall cost of private education for parents such as Harry and Meghan has therefore increased significantly compared to the position when they left the UK.
While Harry and Meghan’s return has generated a considerable amount of media speculation and column inches, the complexities, caveats and costs involved in a high-value international relocation remain very real. Tax residence, split-year treatment, ongoing US tax obligations, inheritance tax exposure, Stamp Duty Land Tax and the temporary non-residence rules all require careful consideration.
Careful planning and specialist cross-border advice remain essential, as the cost of getting the timing wrong can be significant.
