It’s important to know if you’re a UK resident or not. This may affect:
Your UK tax liability
Your entitlement to Income Tax allowances and exemptions
UK residence – Tax liability
When you’re UK resident you’re normally taxed on the arising basis of taxation. This means that all your worldwide income and gains will be taxable in the UK. Therefore, even if your foreign income and gains have already been taxed in another country, they will still be taxable in the UK, and you must declare all of your foreign income and gains on your tax return.
In many cases, relief is given in the UK for foreign tax paid on foreign income and gains under the provisions of the relevant Double Taxation Agreements (DTAs) or via unilateral relief.
UK domicile – Tax liability
If you’re UK resident but not domiciled in the UK, there are special rules which might apply to your foreign income and gains. In these circumstances you’ve a choice of whether to use the arising basis of taxation or the remittance basis of taxation. If you choose to use the remittance basis for a tax year you will pay UK tax on:.
Any of your income and gains which arise/accrue in the UK.
Any of your foreign income and gains that you, or another relevant person, brings (or remits) to the UK, even if that remittance occurs in a later tax year.
If you’re a long-term UK resident and you choose to be taxed on the remittance basis, you may also be liable to pay the Remittance Basis charge.
Tax if you’re non-domiciled.
You do not pay UK tax on your foreign income or gains if both the following apply:
They’re less than £2,000 in the tax year.
You do not bring them into the UK, for example by transferring them to a UK bank account.
If this applies to you, you do not 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 tax return.
You can either:
Pay UK tax on them – you may be 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 (some ‘dual residents’ may keep them)
Pay an annual charge if you’ve been resident of the UK for a certain amount of time.
The remittance basis charge
From 6 April 2017 the remittance basis charge changed to 2 levels of charge:
£30,000 for non-domiciled individuals who have been resident in the UK for at least 7 of the previous 9 tax years immediately before the relevant tax year.
£60,000 for non-domiciled individuals who have been resident in the UK for at least 12 of the previous 14 tax years immediately before the relevant tax year.