Moving temporarily to UK from Switzerland and coming back

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1

Hi folks,

I’m married, and my wife may have an opportunity in London for 1-2 years (nothing concrete but better think about it).

In the case we go to UK for ~2 years and come back to Switzerland:

  1. what things should we pay attention to?
  2. How bad/good are the taxes compared to Switzerland?
  3. Bonus point: what about AVH or anything else related to the Swiss system?

In terms of finances, we have 1.3M in VT in IBKR, 200k 2nd pillar, 100k 3rd pillar (viac and finpension), and some real estates in 3 countries (Switzerland, Spain, France).
In terms of job, I’m currently paid 300k+ in Switzerland (including RSU). and should be possible to transfer to London with a paycut of ~30%. However, I would still have a side-hussle job paying 40k/year. My wife would be paid around 50k in UK if the opportunity happens.

I’m aware that UK has capital gain tax. However, I don’t know if this apply if I continue holding stocks as I’m doing (i.e., never selling), and if I can simply continue buying VT. Same with the stocks from my company. Regarding 2-3 pillards, I don’t expect anything special to be done except moving the 2nd pillar to a vested account such as viac.

Thank you for your thoughts!

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Are you and/or your wife Swiss/UK/EU nationals?

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@Dr.PI Both Swiss. We also have each an EU passport (dual nationality) ES/IT - don’t know if this can be used as a trick.

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You should probably plan for permanently staying in UK regarding finances. Just to be safe, in the case you want to stay there.

I‘m not sure what UK does regarding prior owned assets, but in any case: You can just sell your total VT position and then re-buy, therefore resetting the tax basis to 0 gains. Or re-buy an accumulating ucits equivalent, that is probably more tax efficient in the UK.

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I would say the taxes are a bit higher in the UK than in Switzerland, as the thresholds for the 20% and 40% marginal rates of income tax are quite low.

One thing that could be worth checking out is a stocks and and shares ISA. If you open one, you are allowed to contribute 20k a year into it, and once inside, it can compound free of any taxes, and without exit tax.

You can also open a SIPP, which is similar to a Pillar 3, i.e. contributions are effectively made from your tax free income.

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You may consider cashing out your 2nd and 3rd, may save a lot of tax. UK does not tax lump sum payments and you can move it to Kanton Schwyz before leaving, so you will pay only 4-5% tax in Switzerland. When you cash it out later while living in Switzerland you probably pay 2-5 times that.

Bear in mind that you may lose some insurance when cashing out the 2nd. But if you move it to a vested account you lose that insurance anyhow. Move it to a vested account with residence in Kanton Schwyz is a good idea. Here is a table with the relevant tax for the residence of the vested account: Quellensteuern auf Vorsorgebezügen | VZ VermögensZentrum

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That’s a good point. I’m pretty sure that we won’t stay there and it’s only temporary :slight_smile:

Do you know how capital gain tax works in general? What is the baseline? Does it apply to unsold stocks or only when you sell? In the latter case, if you move in to UK, never sell, and move out of UK to Switzerland and sell there, would that be fine?

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That’s a good idea! However, if you come back to Switzerland, aren’t you supposed to pay back the 2nd/3rd pillar?

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Thank you! So I guess if you have an ISA account and SIPP acount, you can cash them out tax-free if coming back to Switzerland?

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Not a tax expert, but I think it is only for realized gains. If you don’t sell you don’t pay.

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No. You are supposed to move the vested account back to the 2nd when you start working again in Switzerland, but this is not enforced. But if you already cashed it out you are not supposed to put it back.

However, I suppose you cannot deduct any buy-ins lower than the amount you took out. Not sure for how long. Otherwise this would be a big tax loophole. I’m not a tax expert, if you plan buy-ins later probably better speak to a tax consultant.

I did cash out my 2nd 11 years ago when living two years abroad, I suppose it still works the same way.

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Normally only when sold and only the gains part of the stock is taxed. And for that part some countries have a fixed rates at which they tax it and some tax it as income. Also often times up to xK €$£ is tax free per year. A quick google search said that for the UK 3000£ profit per year is tax free for example.

Some countries do tax unrealized gains. But the UK is not one of them afaik.

And yes if you never sell and return and then sell here, that‘s fine.

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If you plan to come back in couple of years, I think cashing out 2nd and 3rd pillar might not be good idea.

This provision is for people who are leaving Switzerland for good. You are Swiss and you are definitely not leaving for good. This might create an issue for you later

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