Non-residents only pay tax on their UK income -they don’t pay UK tax on their foreign income.
Residents normally pay UK tax on all their income, whether it’s from the UK or abroad. But there are special rules for UK residents whose permanent home (domicile) is abroad.
Whether you’re UK resident usually depends on how many days you spend in the UK in the tax year (6 April to 5 April the following year).
You’re automatically resident if either:
- You spent 183 or more days in the UK in the tax year
- Your only home was in the UK - you must have owned, rented or lived in it for at least 91 days in total - and you spent at least 30 days there in the tax year
You’re automatically non-resident if either:
- You spent less than 16 days in the UK (or 46 days if you haven’t been classed as UK resident for the 3 previous tax years)
- You work abroad full-time (averaging at least 35 hours a week) and spent less than 91 days in the UK, of which less than 31 days were spent working.
If your situation’s more complicated or you need to confirm your status, you can:
- Use HM Revenue and Customs’ (HMRC) Tax Residence Indicator
- Read our guidance on the Statutory Residency Test - you will need to consider the “sufficient ties” rules which establish whether you have firm connections with the UK in conjunction with the number of days you remain in the UK- in effect, these act as “tiebreakers” ;
- Speak to one of our tax advisers to discuss matters.
UK residents who have their permanent home (‘domicile’) outside the UK may not have to pay UK tax on foreign income.
The same rules apply if you make any foreign capital gains e.g. you sell shares or a second home.
Working out your domicile
Your domicile’s usually the country your father considered his permanent home when you were born. It may have changed if you moved abroad and you don’t intend to return.
Tax if you’re non-domiciled
You don’t pay UK tax on your foreign income or gains if both:
- They’re less than £2,000 in the tax year
- You don’t bring them into the UK, e.g. transfer them to a UK bank account
If this applies to you, you don’t need to do anything.
If your income is £2,000 or more
You must report foreign income or gains of £2,000 or more, or any money that you bring to the UK, in a Self- Assessment Return:
- Pay UK tax on them - you may able to claim it back
- Claim the ‘remittance basis’
Claiming the remittance basis means you only pay UK tax on the income or gains you bring to the UK, but you:
- Lose tax-free allowances for income tax and capital gains tax.
- Pay an annual charge of £30,000 if you’ve been resident of the UK for at least 7 of the previous 9 tax years (this rises to £50,000 once you’ve been here 12 of the previous 14 years).
Claiming the remittance basis is complicated and if you require further advice, speak to one of our tax advisers to discuss matters.
Leaving the UK and working overseas
When you leave the UK, either to start full time work overseas, if you are the partner of someone who starts full-time work overseas or you leave the UK to live abroad, the tax year is usually split into 2 - a non-resident part and a resident part. This means you only pay UK tax on foreign income based on the time you were living here. This is called ‘split-year treatment’.
You don’t need to claim split-year treatment - it’s applied automatically.
You won’t get it if you live abroad for less than a full tax year before returning to the UK.
However, any return visits you make to the UK total should be less than 183 days in any tax-year and if you are working full time overseas, less than 91 days a tax year.
It is important that you keep record of your days present in the UK- the days you arrive In the UK and the days you leave the UK are included in the calculation.
Provided you meet the above conditions you will be treated as not resident for tax purposes from the date of departure. At the end of the contract you will be treated as coming to the UK permanently and become resident from the day you return to the UK.
If there is a change in your contract resulting in a break, even a short one, and you return to the UK, your non-resident status will be reviewed by HMRC.
Working through your company
In most circumstances, we would not advise working through your company overseas without taking advice from our overseas tax specialists, as there may be legislation in place preventing you from doing so and strict penalties for non- compliance in certain countries. We suggest that you speak to one of our tax advisers for further information.
Temporary non residence
You may have to pay tax on your foreign income or gains brought into the UK while you were non-resident. This doesn’t include wages or other employment income.
Bringing to the UK includes transferring income or gains into a UK bank account. These rules (called ‘temporary non-residence’) apply if both:
- You return to the UK within 5 years of moving abroad (or 5 full tax years if you left the UK before 6 April 2013)
- You were a UK resident in at least 4 of the 7 tax years before you moved abroad.
Forms to be completed on leaving /arriving in the UK
Leaving the UK: We advise that you record the date of leaving the UK on your self-assessment return and also write a letter to HMRC confirming this date at the date of departure.
This ensures that there is no ambiguity with regards the date of leaving if there are any residency issues.
Arriving in the UK: You are obliged to register for self- assessment if you returning to work on a self- employed basis or have any other income. If you are arriving in the UK to take up an employed position, then you would provide your new employer with a P46.