Leaving Canada for the UK: What's the Tax Picture?

The same departure tax that applies to any Canadian emigrant applies when you leave for the UK: CRA deems you to have sold every capital asset at fair market value on the day you go. The distinctive feature of the UK corridor is the pension article in the Canada-UK tax treaty (signed September 8, 1978, last amended by Protocol in 2014): Canadian pensions paid to a UK resident are taxable only in the UK, meaning Canada does not withhold a cent. That is more favorable than most of Canada’s other treaties. The three decisions that shape your transition: making a clean break from Canadian residency, what to do with your RRSP and TFSA, and how to time the departure relative to the UK’s Statutory Residence Test.

Who is this page for, exactly?

Canadian tax residents moving to the United Kingdom permanently or long-term: a Skilled Worker visa, Global Talent visa, Ancestry visa, spousal visa, or UK settlement. Not for short business trips or conference travel, and not for Brits moving to Canada. If you are leaving Canada for the US, the treaty is different, so start with the leaving-Canada tax checklist. If you are heading for Australia instead, the pension and capital gains treatment differs, and the comparison is in leaving Canada for Australia.

The decision map: what happens, in what order?

One table covering both sides of the move. The full Canadian-departure process is in the leaving-Canada tax checklist; this is the UK-corridor version.

Step	What happens	Deadline or trigger	Form(s)
1. Sever Canadian residential ties	Sell or vacate your home, cancel provincial health, close the ties CRA weighs	Months before the move	Document everything
2. Pick your departure date and keep proof	The latest of: the day you leave, the day your family leaves, or the day you become UK-resident under the SRT	Moving day	One-way tickets, visa activation, UK tenancy
3. Value everything you own at FMV on departure day	The deemed disposition inventory for the departure tax	Departure date	T1161 (if reportable property exceeds $25,000), T1243
4. File your final Canadian return	Worldwide income up to the departure date, plus the deemed gains	April 30 following departure (June 15 if self-employed)	T1 with departure date, T1161, T1243
5. Register with HMRC and get a National Insurance number	Required for employment, self-assessment, and accessing credits	On arrival	HMRC online, Jobcentre Plus for NI number
6. Notify Canadian payers: no withholding under the treaty	Banks, RRSP custodians, pension plans, Service Canada	After departure confirmed	NR301 (treaty eligibility declaration)
7. Decide on RRSP, TFSA, and rental property	Keep the RRSP (no withholding on periodic payments), collapse the TFSA (UK does not recognize it), NR6 if renting out Canadian property	Before or immediately after departure	NR6 (rental), Section 216 return annually
8. File your first UK Self-Assessment return	Worldwide income from the date you become UK-resident under the SRT	January 31 following the end of the UK tax year (April 5)	SA100 and supplementary pages

What triggers departure tax when you leave for the UK?

Section 128.1 of the Income Tax Act deems you to have disposed of every capital asset at fair market value on the day you stop being a Canadian resident. Investments, rental properties (subject to the principal residence exemption), private corporation shares, everything. The gain is reported on your final Canadian return at your marginal rate. The mechanics are identical regardless of destination: T1161 if reportable property exceeds $25,000, T1243 for the deemed dispositions, both filed with the final T1.

The difference in the UK corridor is what happens on the other side. Unlike the Australia treaty, which includes a step-up clause (Article 13(6)) that rebases your assets at FMV on arrival, the Canada-UK treaty has no equivalent provision. The UK generally uses your original acquisition cost, not FMV at the date you became UK-resident. Relief from double taxation comes through the foreign tax credit mechanism in Article 21 of the treaty: when you eventually sell an asset in the UK, the UK gives credit for the Canadian tax paid on the overlapping portion of the gain. This is messier than an automatic step-up and makes record-keeping critical. For the departure mechanics themselves, see what a deemed disposition is and the PRE on departure.

How does the UK decide you’re a tax resident?

The UK uses the Statutory Residence Test (SRT), a rules-based framework in force since April 6, 2013 (HMRC guidance RDR3). It applies per UK tax year (April 6 to April 5) and runs three stages in order. First, the automatic overseas tests: if you meet any one, you are non-resident. Second, the automatic UK tests: if you meet any one, you are UK-resident. Third, if neither set is decisive, the sufficient ties test weighs your UK connections against the number of days you spent in the country.

The automatic UK test most arrivers trigger is the 183-day rule: spend 183 or more days in the UK in the tax year and you are UK-resident. For someone arriving mid-year on a work visa, the split-year treatment may apply, meaning you are treated as UK-resident only from the date of arrival rather than for the full April-to-April year.

If the timing of your move means both Canada and the UK claim you, the treaty tie-breaker in Article 4(2) resolves it. The Canada-UK version follows the full OECD model with four steps: permanent home, centre of vital interests, habitual abode, and nationality. Once the tie-breaker assigns you to the UK, section 250(5) of the Canadian ITA deems you non-resident in Canada. For more on the Canadian-side analysis, see am I still a Canadian tax resident.

What happens to your RRSP and TFSA in the UK?

The RRSP is where the Canada-UK treaty produces its biggest advantage. Under Article 17, periodic payments from a “superannuation, pension or retirement plan” are taxable only in the residence state. That means periodic RRSP and RRIF withdrawals to a UK resident carry zero Canadian Part XIII withholding. No 25%, no 15%, zero. The UK taxes the withdrawal as pension income at your UK marginal rate. This is materially more favorable than the 15% cap under the Australia treaty or the US-Canada treaty.

The catch is the word “periodic.” A lump-sum collapse of the RRSP, described in the treaty as “a payment under a superannuation, pension or retirement plan in settlement of all future entitlements under such a plan,” is explicitly excluded from the pension definition (Article 17(3)). A lump sum falls outside Article 17 and may attract the full 25% Part XIII withholding under Canadian domestic law. The planning consequence: draw down the RRSP in periodic installments, not one hit. For more on the mechanics, see RRSP for non-residents after leaving Canada.

The TFSA problem is the same as in any non-US, non-treaty-protected corridor. The UK does not recognize the TFSA as a tax-sheltered vehicle. HMRC taxes the investment income and gains inside it as they accrue. The CRA stops allowing new contributions once you are non-resident and penalizes any made while non-resident at 1% per month. Collapse it before or shortly after departure. For context on Part XIII withholding mechanics generally, the linked guide covers the rates by income type.

How are Canadian pensions taxed in the UK?

Canadian pension income paid to a UK resident is taxable only in the UK under Article 17(1) of the treaty. That includes CPP, OAS, employer pensions, and periodic RRSP/RRIF payments. Article 17(3) specifically includes “any payment made under the social security legislation in a Contracting State” in the definition of pension. The result: Service Canada pays your CPP and OAS in full (no withholding), HMRC taxes them as pension income on your UK Self-Assessment return, and you owe nothing to Canada.

OAS portability still applies: Service Canada pays OAS to UK residents the same as to anyone else. The recovery tax (the “clawback” under ITA 180.2) applies if your worldwide net income exceeds the threshold ($93,454 for 2025, indexed annually). This is a Canadian tax, not a withholding, and it applies whether you live in Canada or not.

The Section 217 election, which lets non-residents file a Canadian return to be taxed at graduated rates instead of flat withholding, is irrelevant in the UK corridor: there is no Canadian withholding to optimize against. Section 217 matters in corridors with treaties that allow source-state taxation (Australia, for example), but not here.

Canada and the UK have a social security agreement (Convention on Social Security, in force since April 1, 1998), but it is limited. It coordinates coverage only (preventing dual CPP/NI contributions for temporary workers), not benefit eligibility. Unlike the US or Australian agreements, UK residence periods do not count toward CPP or OAS eligibility in Canada. If you have not accumulated enough Canadian contributory years for CPP or residence years for OAS, moving to the UK does not help fill the gap.

Does the UK tax worldwide gains from day one?

Yes, once you satisfy the Statutory Residence Test, the UK taxes worldwide income and capital gains. The UK tax year runs April 6 to April 5, and the split-year treatment can limit your first year’s exposure to only the post-arrival portion. UK capital gains tax rates for individuals are 18% (basic rate) or 24% (higher rate) on most assets, with an annual exempt amount (currently £3,000).

The important structural point: the Canada-UK treaty does not include a step-up on emigration (unlike the Australia treaty’s Article 13(6)). The UK computes your gain from original acquisition cost. When you sell, the treaty’s foreign tax credit article (Article 21) prevents double taxation on the portion Canada already taxed at departure, but you need the records to prove the overlap. Keep your Canadian departure-year assessment notice and T1243 permanently.

Article 13(8) of the treaty says gains on most property (other than real property, business assets of a PE, ships/aircraft, and certain resource rights) are “taxable only in the Contracting State of which the alienator is a resident.” But Article 13(9) carves out an exception: the departure country can still tax gains if the alienator was a national or resident of that country for 15 years or more before the sale, or was resident at any time in the five years immediately preceding the sale. Since Canada’s departure tax deems the disposition to occur while you are still technically a Canadian resident, Article 13(9) confirms Canada’s right to tax the departure-day gains.

What does this cost, honestly?

The departure tax hits at your marginal rate on gains deemed realized. Zero unrealized gains means zero departure tax. The compliance cost sits on top: a final Canadian return with T1161 and T1243, plus your first UK Self-Assessment with worldwide income, foreign tax credits, and careful tracking of every asset’s cost basis in both currencies. The UK side is slightly more complex than other corridors because of the foreign tax credit approach to capital gains (rather than a clean step-up) and because the UK tax year runs April to April rather than calendar year.

The order of operations, condensed?

The sequence mirrors any Canadian departure, with UK-specific items slotted in. The full version is in the leaving-Canada tax checklist; here is the short form for the UK corridor.

1. Months before: inventory residential ties, plan how each one ends, decide on the home (sell, rent with NR6, or keep vacant).
2. Weeks before: collapse the TFSA, notify CPP/OAS of the address change, cancel provincial health, organize records of every asset’s adjusted cost base (you will need these for the UK foreign tax credit, permanently).
3. Departure day: note the date, keep proof (one-way ticket, visa activation, UK tenancy agreement). The SRT split-year clock starts here.
4. Arrival in the UK: apply for a National Insurance number, register for a GP (NHS is free for residents), open a UK bank account.
5. Notify Canadian payers: NR301 declaration to stop Part XIII withholding on pension payments (the treaty exempts them entirely).
6. April 30 following departure: file the final Canadian T1 with T1161 and T1243.
7. January 31 after the first UK tax year ends (April 5): file the first UK Self-Assessment return with worldwide income and foreign tax credits.
8. Ongoing: RRSP/RRIF periodic withdrawals taxed only in the UK (no Canadian withholding), annual OAS income declaration, UK Self-Assessment each year.

This guide is general information, not tax advice for your specific situation. Which points apply, and how, depends on your facts.