Entity Setup | Compliance
Understanding the Temporary Non-Residence Rules under SRT after Finance Act 2026
From 6 April 2026 the rules for distributing profits and dividends while temporarily non-resident changed significantly, particularly for close companies—learn how it works with real-life scenarios.
By NomadicTax Research Team • 5-8 min read • September 3, 2026
## What Are the Temporary Non-Residence Rules?
Under the **Statutory Residence Test (SRT)**, temporary non-residence allows individuals who leave the UK but maintain certain UK connections to return in due course without losing all UK tax liability on gains and distributions.
## Key Change Effective from 6 April 2026
- For **individuals who become UK resident on or after 6 April 2026**, distributions (like dividends) from a UK or overseas **close company** will be charged to UK tax as if they were received in the period of their return—including profits that arose while non-resident. ([gov.uk](https://www.gov.uk/hmrc-internal-manuals/residence-and-fig-regime-manual/rfig21600?utm_source=openai))
- Prior rules allowed attribution only to trade profits; after 6 April 2026, the full amount of the dividend or distribution is captured. Foreign tax paid may be credited. ([gov.uk](https://www.gov.uk/hmrc-internal-manuals/residence-and-fig-regime-manual/rfig21600?utm_source=openai))
## Who Is Affected?
- UK citizens who go abroad for temporary work or lifestyle reasons but return after 6 April 2026 and receive dividends from companies in which they’re materially interested.
- Those impacted include material participators in close companies, and their associates.
- Individuals returning earlier, or non-resident before this date, are subject to the previous rules.
## Practical Scenarios
- **Leah** leaves the UK in 2026, becomes non-resident for 3 years, then returns and receives a large dividend from a company where she’s a shareholder. Entire dividend is taxed, including portions tied to profits accumulated while she was away. If Leah paid tax abroad meanwhile, she can claim a foreign tax credit.
- **Marco**, non-resident since 2025, returns in 2027 to get dividends. Because he became non-resident before 6 April 2026, the former attribution rule applies, so only profits arising after his departure would be taxed in full on return.
## Actionable Advice
- If you plan to be temporarily non-resident—and may receive significant distributions—plan your company ownership and dividend strategies with time periods in mind.
- Ensure robust record keeping for profit accumulation and for foreign tax paid to support credits.
- Use these changes to evaluate whether to repatriate profits sooner or adjust the timing of distributions.
## Interactions with SRT Tests and Other Rules
- The close-company concept, material participation, and associate definitions all feed into this rule. If associations change, so may your liability.
- Also consider split-year treatment under SRT and the Sales of Assets rules.
These changes significantly expand the scope of taxable distributions for those returning to the UK after periods abroad. Accurate forecasting, careful corporate planning, and up-to-date record-keeping are now vital tools for those affected.