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’re automatically non-resident if either:
If your situation’s more complicated or you need to confirm your status, you can:
UK residents who have their permanent home (‘domicile’) outside the UK may not have to pay UK tax on foreign income and if you are not UK domiciled you may have legitimately excluded foreign income and gains from your UK tax returns. But the non-domicile rules are changing from 6th April 2017, such that anyone who has been resident in the UK for more than 15 out of out of the last 20 years will be deemed UK domiciled for all tax purposes.
Those affected by this rule change will have to declare all their worldwide income and gains on their 2017/18 and future tax returns.
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:
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:
Claiming the remittance basis means you only pay UK tax on the income or gains you bring to the UK, but you:
Claiming the remittance basis is complicated and if you require further advice, speak to one of our tax advisers to discuss matters.
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.
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.
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:
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.
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