Mistake 1: Assuming that UK income is only taxable in the UK
A common and costly misconception is that UK income is only taxable in the UK.
If you are a South African tax resident and continue to receive UK rental income, UK employment income, dividends, interest or pension income, that income may need to be declared in South Africa.
UK-SA helps determine which country has primary tax rights and how double taxation relief applies. However, DTA does not generally mean that income can be easily disregarded in South Africa.
Mistake 2: Thinking that “double tax agreement” means “no tax”
Double tax agreements are often misunderstood and misapplied. Their purpose is to prevent equal income from happening taxed twice Without relief, foreign income cannot be tax-free.
Where a double tax treaty applies, the first step is to consider the specific treaty article relating to that income, for example, employment income, rental income, pensions, dividends or interest. The agreement will determine whether the income is taxable only in one country, or whether one country has the right to impose primary tax while the other must provide relief.
For South African returnees, this means that UK income may still need to be disclosed to SARS, even where the UK has already taxed it.
The correct treatment involves applying the UK-South Africa Agreement to determine taxing rights and whether any South African tax is payable. In some cases, no additional South African tax may be payable, but this does not eliminate the reporting obligation.
Mistake 3: Holding a UK ISA without understanding the South African tax treatment
UK Individual Savings Accounts are tax-efficient in the UK, but they do not retain the same status once you become a South African tax resident.
Many returning South Africans assume that because an ISA is tax-free in the UK, it is tax-free everywhere else. South African tax rules do not treat UK ISAs as tax-free accounts in the same way. Income and capital gains within an ISA may therefore need to be reported to SARS once residence resumes.
This does not automatically mean that the ISA should be cashed out before returning to South Africa, but it should be reviewed from a South African tax, investment and reporting perspective to avoid unexpected tax risks.
Mistake 4: Not obtaining valuation of offshore assets upon return
Planning is one of the most important and often overlooked areas for return migrants.
When you resume South African tax residence, your offshore assets are generally re-based for South African CGT purposes. In simple terms, the market value of the asset on the day you become a South African tax resident again becomes the base cost for future CGT calculations.
A costly mistake many people make is failing to get a proper valuation at the time of return. Years later, when the property or investment is sold, it may be difficult to prove the true basis cost to SARS, potentially increasing your tax liability.
Mistake 5: Failing to report offshore investment income
Another common mistake is to assume that income repaid abroad does not need to be reported in South Africa.
If you are a South African tax resident, foreign dividends, offshore interest, foreign rental income and other offshore investment income may need to be declared in your South African tax return, even if the money was not remitted to South Africa.
This is particularly relevant where clients maintain UK platforms, UK bank accounts, ISAs, general investment accounts, offshore bonds, foreign shares or foreign discretionary portfolios after moving back to South Africa.
Mistake 6: Not understanding how UK pensions are taxed
UK pensions require careful review before returning to South Africa to avoid unintended tax consequences.
South Africans returning home are not required to withdraw cash from a UK pension when leaving the UK, although some providers may restrict access or functionality to non-UK residents.
UK-SA treaty treatment of pensions may depend on the pension type. HMRC guidance states that, except for government pensions, annuities paid to a resident of South Africa or the UK are generally taxable only in that country of residence under Article 17.
The main mistake is to make pension decisions such as lump sum withdrawals, drawdowns or transfers without understanding the UK and South African tax consequences.
Mistake 7: Forgetting about UK rental property reporting
Many returning South Africans hold UK property as investments. This may make sense, but it adds ongoing tax and reporting complexity.
UK rental income generally remains taxable in the UK, but if you are a South African tax resident, it may also need to be declared to SARS to claim relief for UK tax paid where applicable.
UK property may also create a CGT program in the future. The combination of UK tax, South African tax, exchange rates, base cost calculations, foreign tax credits and reporting obligations means that UK rental property must be reviewed before it is returned, not just when it is ultimately sold.