Japan is an attractive destination for British expatriates, whether for work, family, lifestyle or long-term retirement. However, from a tax perspective, it is not always straightforward.

British individuals moving to Japan, or already living there, often retain UK connections: UK property, pensions, investment portfolios, family wealth or potential future inheritance tax exposure. At the same time, Japanese residence can bring local reporting obligations and, over time, a wider exposure to Japanese tax. The result is a two-country tax position that needs careful management.

This article compares the key UK and Japanese tax issues British expatriates should understand: residence, income tax, capital gains tax, tax filing calendars and inheritance tax.

Scope of this article

Expat UK Tax advises on UK tax matters. We do not provide Japanese tax advice. This article is intended to help British expatriates understand the main areas of interaction between the UK and Japanese tax systems and identify points where early advice may be valuable. Where Japanese tax advice is needed, we work with a network of trusted Japanese tax specialists and can make an appropriate referral based on your circumstances.

In May 2026 we partnered with the British Chamber of Commerce in Japan (BCCJ) to present Both Sides of the Tax Equation, a seminar on UK and Japanese tax, where our Tax Director, Stephanie Chan, set out the UK position for people living in Japan alongside Japanese tax specialists covering the Japanese side. You can read the BCCJ's recap of the event here.

UK and Japan tax residence: where does the analysis start?

The first question in both countries is whether you are tax resident. Residence determines the extent to which a country can tax your income, gains and, in some cases, your estate.

UK tax residence

The UK determines residence under the Statutory Residence Test. This is a structured test based on days spent in the UK, automatic residence and non-residence tests, and a series of UK connection factors.

For British expatriates, UK residence is not simply a question of whether you "live abroad". You may still be UK resident if you spend sufficient time in the UK or retain enough UK ties.

From 6 April 2025, the UK's previous remittance basis regime was replaced by the Foreign Income and Gains (FIG) regime. Broadly, qualifying new arrivals to the UK who have been non-UK resident for the previous 10 consecutive tax years may benefit from a four-year period during which foreign income and gains are relieved from UK tax. This is particularly relevant for British expatriates returning from Japan to the UK.

Japanese tax residence

Japan approaches residence differently. Broadly, an individual may be treated as Japanese tax resident if they have a domicile or residence in Japan, with the analysis turning on the facts of their life, work and family position.

Japanese residents are then generally divided into two categories:

Non-permanent residents: broadly, non-Japanese nationals who have been resident in Japan for five years or less within the last ten years. They are generally taxed on Japan-source income and foreign-source income paid in or remitted to Japan.
Permanent residents: broadly, Japanese nationals or individuals who have been resident in Japan for more than five years within the last ten years. They are generally taxed on worldwide income.

There is therefore an important planning window for many British expatriates in Japan. During the non-permanent resident period, the Japanese taxation of foreign income and gains may be more limited. Once that period ends, worldwide taxation becomes more relevant. The position has a clear parallel with the UK's FIG regime: both systems offer a more favourable period for certain new arrivals before full worldwide taxation applies.

Income tax: UK and Japanese rates compared

Both the UK and Japan tax income progressively, but they do so in different ways.

UK income tax

The UK taxes income by reference to UK tax bands and rates. For British expatriates, common UK income sources include:

UK rental income;
UK employment or director's fees;
UK pensions;
UK dividends and investment income; and
UK self-employment income.

UK National Insurance may also need to be considered separately, particularly for individuals working between the UK and Japan.

Japanese income tax

Japan classifies income into different categories and aggregates many types of income for progressive taxation. National income tax rates range from 5% to 45%. In addition, Japan imposes a reconstruction surtax on national income tax, currently at 2.1%, and local inhabitant tax, which is generally around 10%. Some types of income, including certain securities gains, may be taxed separately rather than aggregated.

For British expatriates, the key point is not simply whether the UK or Japan has the higher rate. The more important question is whether the same income is taxable in both countries and, if so, whether double tax relief or foreign tax credits are available.

Capital gains tax: an important difference for expats

Capital gains are often one of the most misunderstood areas for British expatriates in Japan.

UK capital gains tax

The UK may continue to tax certain gains even after an individual has left the UK. This is particularly relevant for:

UK residential property;
UK commercial property;
shares in UK property-rich companies;
temporary non-residence rules; and
assets disposed of shortly after leaving or returning to the UK.

UK capital gains tax rates depend on the nature of the asset and the individual's income position. For many gains, the rates are currently 18% or 24%, with only a modest annual exempt amount (£3,000).

Japanese capital gains tax

Japan taxes capital gains within its own categorised system. Gains on listed securities are generally taxed separately at a combined rate of 20.315%, made up of national tax, local tax and the reconstruction surtax. Real estate gains are subject to their own rules, and the treatment may depend on the type of property, holding period and whether the property is in Japan.

British expatriates in Japan should be particularly careful where they hold investment portfolios, UK property or Japanese real estate. A gain that appears straightforward in one country may have a different timing, rate or reporting treatment in the other. There may also be exit tax considerations when leaving Japan, particularly for individuals holding substantial financial assets.

Filing calendars: the UK and Japan do not align

A practical but important issue is that the UK and Japan operate on different tax years.

Japan uses the calendar year, running from 1 January to 31 December. The Japanese income tax return is generally due by 15 March of the following year.
The UK tax year runs from 6 April to 5 April. Online Self Assessment tax returns are generally due by 31 January following the end of the tax year.

For a British expatriate in Japan, the same period of income may therefore need to be analysed across two different tax years. This can make foreign tax credit calculations more complex. Good record-keeping is essential, particularly where income is received in one country, taxed in another, or converted between currencies.

Inheritance tax: the area most often underestimated

Inheritance tax is often the most significant long-term issue for British expatriates in Japan.

UK inheritance tax

The UK charges inheritance tax on the estate of the deceased. The standard rate is 40% above available allowances. The main UK allowances include:

the nil-rate band, currently £325,000; and
the residence nil-rate band, currently up to £175,000 where qualifying conditions are met.

From 6 April 2025, the UK moved from a domicile-based inheritance tax system to a residence-based system. Broadly, individuals who have been UK tax resident for at least 10 of the previous 20 tax years may be treated as Long-Term Residents, bringing worldwide assets within the scope of UK inheritance tax. This is a major change for internationally mobile British families.

Japanese inheritance and gift tax

Japan applies inheritance tax differently from the UK. Rather than taxing the estate as a whole, Japanese inheritance tax is generally imposed on the heirs receiving the assets. Rates are progressive, ranging from 10% to 55%.

Japan also has its own basic exemption, generally calculated as ¥30 million plus ¥6 million per statutory heir.

A key issue for British expatriates is the scope of Japanese inheritance tax. Depending on nationality, visa status and length of residence, a long-term resident of Japan may become exposed to Japanese inheritance tax on worldwide assets, not just Japanese assets. Broadly, individuals who have lived in Japan for more than 10 of the previous 15 years may fall within a wider Japanese inheritance and gift tax net.

This can create a difficult interaction with UK inheritance tax. A British person living in Japan long-term may have UK assets, Japanese assets and other overseas assets potentially exposed to both systems. Double tax relief may be available, but it is not always straightforward. The most effective planning is usually carried out before the wider Japanese inheritance tax exposure arises, not after.

The UK-Japan double tax treaty

The UK and Japan have a double taxation agreement that helps determine taxing rights and provides relief from double taxation on certain income and gains. However, treaty relief is not automatic in every case. It must be analysed and claimed correctly. Particular care is needed with:

employment income;
directors' fees;
pensions;
rental income;
capital gains;
foreign tax credits; and
residence tie-breaker provisions.

UK government and public service pensions may be treated differently from private pensions and should be reviewed separately.

Practical points for British expats in Japan

If you are British and living in Japan, or planning a move there, you should consider the following:

Review your residence position in both countries; do not assume leaving the UK means you are automatically non-UK resident.
Plan before the move, not afterwards; the Japanese non-permanent resident period and the UK FIG regime both reward early planning.
Check UK property and rental income; UK property income may remain UK-taxable even while you live in Japan.
Consider capital gains before selling assets; the timing of disposals can materially affect the result in both countries.
Keep records by both tax years; the calendars do not align, complicating foreign tax credit claims.
Take inheritance tax advice early; long-term residence in Japan can significantly increase exposure.
Coordinate UK and Japanese advice; a two-country position should not be reviewed in isolation.

How Expat UK Tax can help

Expat UK Tax advises British expatriates and internationally mobile individuals on the UK tax implications of living in Japan. We can assist with:

UK residence analysis under the Statutory Residence Test;
split-year treatment when leaving or returning to the UK;
UK Self Assessment tax returns;
UK rental income and non-resident landlord reporting;
UK capital gains tax on property and investments;
UK pension and investment income;
foreign tax credit claims;
UK inheritance tax and Long-Term Resident planning; and
coordination with Japanese tax advisers where local advice is required.

For the Japanese side of your position we work alongside a number of trusted Japanese tax specialists and can introduce you to the right one. For British expatriates in Japan, the UK tax position should be considered alongside the Japanese position, particularly where there are UK assets, cross-border income, investment portfolios or family wealth. Early advice can help avoid unexpected tax exposure and ensure that both UK and Japanese obligations are managed correctly.

This article is general information, not personal tax advice, and does not constitute Japanese tax advice. Japanese tax rules are summarised at a high level and change frequently; outcomes depend on your specific facts and on current law in both countries. Please seek advice tailored to your circumstances, including local Japanese tax advice, which we can help arrange.

Japan vs UK Tax for British Expats: Income, Capital Gains and Inheritance Compared