GM Tax

Non Resident Tax UK

Am I a UK Tax Resident for tax purposes?

To determine your UK tax residency status there are various Statutory Residence Tests to be applied split into the various parts.

If you have been in the United Kingdom for greater than 183 days then you do not need to consider these tests.

You will be resident in the UK for a tax year and at all times in that tax year if:

  • you do not meet any of the automatic overseas tests
  • you meet one of the automatic UK tests or the sufficient ties test
Automatic overseas test
  • There are 3 further tests to consider
There are three automatic overseas tests to consider:
First automatic overseas test
You’ll be non-UK resident for the tax year if you were resident in the UK for one or more of the 3 tax years before the current tax year, and you spend fewer than 16 days in the UK in the tax year.
Second automatic overseas test
You’ll be non-UK resident for the tax year if you were resident in the UK for none of the 3 tax years before the current tax year, and spend fewer than 46 days in the UK in the tax year.
Third automatic overseas test
You’ll be non-UK resident for the tax year if you work full-time overseas over the tax year and:
  • you spend fewer than 91 days in the UK in the tax year
  • the number of days on which you work for more than 3 hours in the UK is less than 31
  • there is no significant break from your overseas work
A significant break is when at least 31 days go by and not one of those days is a day where you:
  • work for more than 3 hours overseas
  • would have worked for more than 3 hours overseas, but you did not do so because you were on annual leave, sick leave or parenting leave
If you have a significant break from overseas work you’ll not qualify for full-time work overseas.
The test:
  • can apply to both employees and the self-employed
  • does not apply to voluntary workers or workers with a job on board a vehicle, aircraft or ship
Automatic overseas test
  • There are 3 further tests to consider
Automatic UK test
There are three automatic UK tests to consider:
First automatic UK test
You’ll be UK resident for the tax year if you spend 183 days or more in the UK in the tax year.
Second automatic UK test
You’ll be UK resident for the tax year if you have, or have had, a home in the UK for all or part of the year and the following all apply:
  • there is or was at least one period of 91 consecutive days when you had a home in the UK
  • at least 30 of these 91 days fall in the tax year when you have a home in the UK and you’ve been present in that home for at least 30 days at any time during the year
  • at that time you had no overseas home, or if you had an overseas home, you were present in it for fewer than 30 days in the tax year
If you have more than one home in the UK you should consider each of those homes separately to see if you meet the test. You need only meet this test in relation to one of your UK homes.
Third automatic UK test
You’ll be UK resident for the tax year if all the following apply:
  • you work full-time in the UK for any period of 365 days, which falls in the tax year
  • more than 75% of the total number of days in the 365 day period when you do more than 3 hours work are days when you do more than 3 hours work in the UK
  • at least one day which has to be both in the 365 day period and the tax year is a day on which you do more than 3 hours work in the UK
Sufficient Ties Test

If you do not meet any of the above tests then you must use the sufficient ties test to work out your UK residence status.

You need to consider your connections to the UK, known as ‘ties’, to determine if your ties, together with the number of days you spend in the UK, will make you resident in the UK. 

If you were not a UK resident in any of the 3 UK tax years before the one you are considering, you’ll need to check if you have any of the following:

  • a family tie
  • an accommodation tie
  • a work tie
  • a 90 day tie
If you were resident in any 1 or more of the 3 tax years then you will need to consider whether you have a,
  • country tie
Split-year treatment
If you are considered to be a tax resident in the UK for the whole of a tax year you may be eligible to split the tax year into 2 parts a UK part and an overseas part.
If you are UK tax resident and have departed from the UK part way through the tax year then you will need to consider whether any of the split year cases 1-3 apply.
If you arrive in the UK part way through the tax year then you will need to consider whether any of the split year cases 4-8 apply.
self-assessment-tax-return

Submitting a Self-Assessment Tax Return

Non-resident Tax filing obligations – you are required to file a UK Tax Return should you have the following income:
  • Salary earned from working abroad
  • Rental income
  • Dividends, interest, and rental income
  • Income & gains from stock option exercises
  • Taxation of investment income and capital gains
  • Disposal of UK property
  • Principle residence gains and losses

Non-resident Tax rates 2022/2023

The rates of UK Tax are the same for non-residents and tax residents of the UK.
Below are the rates of tax you pay after the standard Personal Allowance of £12,570.
You do not get a Personal Allowance on taxable income over £125,140.

Basic Rate               £12,571 to £50,270               20%

Higher Rate             £50,271 to £150,000             40%

Additional Rate      Over £150,000                        45%

uk-non-resident-tax-rates 1

Personal Allowance

You are entitled to a UK Personal Allowance of tax-free UK income each year if any of the following apply to you:

  • you hold a British passport
  • you’re a citizen of a European Economic Area (EEA) country
  • you’ve worked for the UK government at any time during that tax year

You may also qualify as stated in the double-taxation agreement between the UK and the country you live in.

Claiming the Personal Allowance
If you are not a UK tax resident you have to claim the Personal Allowance on your Self Assessment Tax Return at the end of each tax year in which you have UK sourced income.
Other Allowances
You have tax-free allowances for:
  • savings interest up to £5,000 of interest and not have to pay tax on it. This is your starting rate for savings.
The more you earn from other income (for example your wages or pension), the less your starting rate for savings will be.
  • dividends, if you own shares in a company up to £2,000 of dividend income and not have to pay tax on it. This is your dividend allowance.
Working out Tax on Dividends
How much tax you pay on dividends above the dividend allowance depends on your Income Tax band.

Basic Rate            8.75%

Higher Rate        33.75%

Additional Rate  39.35%

You may also have tax-free allowances (subject to your eligibility) for:
  • your first £1,000 of income from self-employment – this is called your ‘trading allowance’
  • your first £1,000 of income from property you rent (unless you are using the Rent a Room Scheme)
You pay tax on any interest, dividends or income over your allowances.
tax-allowances

Paying less Income Tax claiming Tax Relief

You may be able to claim Income Tax relief for pension contributions and charitable donations made should you be eligible.
It also applies to work or business expenses if you either:
  • have incurred specific cost of running your business if you are self employed.
  • If you are employed and have used your own money and incurred expenses for travel and other items that you must acquire for you to do your job.
If you are married or in a civil partnership
You may be able to claim the Marriage Allowance to reduce your partner’s tax if your income is less than the standard Personal Allowance.
If you do not claim Marriage Allowance and you or your partner were born before 6 April 1935, you may be able to claim Married Couple’s Allowance.

When you can get tax relief

You can claim tax relief on private pension contributions worth up to 100% of your annual earnings.
Tax relief is automatically given if your:
  • employer takes workplace pension contributions out of your pay before deducting Income Tax
  • rate of Income Tax is 20% – your pension provider will claim it as tax relief and add it to your pension pot (‘relief at source’)
UK tax relief is also available on contributions made to certain types of overseas pension schemes up to the value of your earnings that are subject to UK Income Tax.
You’ll still have to pay tax charges if you exceed the annual or lifetime allowance.

Limits to your Tax-Free Contributions

You usually pay tax if savings in your pension pots go above:
  • 100% of your earnings in a year – this is the limit on tax relief you get
  • £40,000 a year – ‘annual allowance’ 2022/2023
  • £1,073,100 in your lifetime – this is the lifetime allowance up to 2025/2026
Migrant Member Relief
You can get migrant member relief on contributions to an overseas pension scheme if you have moved to the UK and:
  • were paying into the scheme before you moved to the UK
  • were receiving tax relief on those contributions
  • the pension scheme is a qualifying overseas pension scheme (QOPS)
You need to tell the overseas scheme manager that you are to claim migrant member relief.
Migrant Member Relief
You can get double taxation relief on contributions to an overseas pension scheme if:
  • you were paying into the scheme before you moved to the UK
  • you were receiving tax relief on those contributions
  • contributions to the scheme are covered by a double taxation agreement
You need to check the UK’s tax treaty with the country where your pension is based to see what relief you can get under the double taxation agreement.
Transitional corresponding relief
You can continue to get corresponding relief if you received it on contributions to your overseas pension between 6 April 2005 and 5 April 2006. Contributions must be made to the same overseas pension scheme to get tax relief.
Your overseas scheme manager will need to report benefit crystallisation events to HMRC for you to get tax relief.

UK non-resident tax return services

We at GM Tax can assist with the the preparation and electronic lodgment of the following tax returns;
  • A Non-Resident Tax Return
  • A Capital Gains Tax Return

Organising your income when leaving the UK

It is important to obtain pre departure income and capital gains tax advice and guidance when considering leaving the UK to ensure that you are fully aware of your tax position.
Your tax residency is fundamental as this determines how your worldwide income is taxed and reported. When leaving the UK it is important to know the effective date that you ceased to be a UK tax resident for tax purposes as this date should not be mixed up with the date of departure.

Returning to the UK

It is important to obtain arrival income and capital gains tax advice and guidance when considering arriving in the UK to ensure that you are fully aware of your tax position.
Your tax residency is fundamental as this determines how your worldwide income is taxed and reported. When arriving to the UK it is important to know the effective date that you commenced to be a UK tax resident for tax purposes as this date should not be mixed up with the date of arrival.

Penalties for non-compliance

Failure to lodge your tax return can result in penalties of up to £1,300.
Failure to your taxes on time will result in interest from being charged from the due date of payment.
HMRC will charge daily interest for fines exceeding three months.

The penalty rates are available through the HMRC website.

Yes, if you are in receipt of UK sourced income.

You can either use an accountant like GM Tax to assist you or you can prepare a paper tax return and post it to HMRC by 31st October.

To file a UK Tax Return you will need a UTR number.

You can arrange to buy via bank transfer or you can pay online via HMRC website. Full details on how to make payment can be found on the HMRC website.

No, you will pay tax in the country to which you are a tax resident with a foreign tax credit claimed for tax paid in the country to which you are a non resident by virtue of the double taxation agreement between each of the countries, commonly referred to as the double tax treaty

Yes, if you have departed the UK partway through the tax year or you have simply overpaid tax.

Yes, by completing the non residency schedules that accompany the UK Self Assessment Tax Return.

The HMRC website is not suitable for non-residents. Instead, you should fill out the Self Assessment Tax return and submit the SA109 form via the mail, or use an accountant like GM Tax who can assist you.

We at GM Tax provide fixed fee quotes for advisory work and tax returns.

 

If you are leaving the UK and would like a fixed fee proposal from a firm of UK & Australian tax advisors that understands the issues affecting individuals leaving the UK please complete our online enquiry via our contact us button or by calling a GM Tax office closest to you. 

GM Tax also offers the following services:

  • Tax planning advice and guidance with regards to your residency status in Australia and the UK, eligibility for split year treatment and also domicile status in the context of Inheritance Tax (IHT) planning.
  • Preparation of UK tax returns, with all returns submitted to HM Revenue electronically where possible.
  • Advice on the tax position where a property in the UK is being let while a taxpayer is living overseas.
  • Preparation of Australian tax returns, with all returns submitted to the ATO electronically where possible.
  • Assistance to ensure UK or overseas sourced income of those who are non-residents of the UK is properly taxed and is not taxed twice, or double taxed.
  • This last point is particularly relevant to those who have UK or overseas sourced income or capital gains which may also be subject to tax in the country in which the taxpayer is now resident.