Overview
You may need to pay UK Income Tax on your foreign income, such as:
- wages if you work abroad
- foreign investment income, for example dividends and savings interest
- rental income on overseas property
- income from pensions held overseas
Foreign income is anything from outside England, Scotland, Wales and Northern Ireland. The Channel Islands and the Isle of Man are classed as foreign.
Working out if you need to pay
Whether you need to pay depends on if you’re classed as ‘resident’ in the UK for tax.
If you’re not UK resident, you will not have to pay UK tax on your foreign income.
If you’re UK resident, you’ll normally pay tax on your foreign income. But you may not have to if your permanent home (‘domicile’) is abroad.
Reporting foreign income
If you need to pay tax, you usually report your foreign income in a Self Assessment tax return. But there’s some foreign income that’s taxed differently.
If your income is taxed in more than one country
You may be able to claim tax relief if you’re taxed in more than one country.
If you’ve not yet paid tax on the foreign income, you may need to apply for a certificate of residence to prove you’re eligible for relief.
UK residence and tax
Your UK residence status affects whether you need to pay tax in the UK on your foreign income.
Non-residents only pay tax on their UK income – they do not 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.
Work out your residence status
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 fewer than 16 days in the UK (or 46 days if you have not 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 fewer than 91 days in the UK, of which no more than 30 were spent working
Get help
If your situation’s more complicated or you need to confirm your status, you can:
- read HMRC’s guidance on the Statutory Residence Test
- get professional tax help
Your residence status when you move
When you move in or out of the UK, 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 will not get split-year treatment if you live abroad for less than a full tax year before returning to the UK. You also need to meet other conditions.
To find out if you qualify and see which split-year treatment ‘case’ you’ll need to mention on your Self Assessment tax return, you can:
- read chapter 5 of HMRC’s guidance note on the Statutory Residence Test
- contact HMRC
If your situation changes
Your status can change from one tax year to the next. Check your status if your situation changes, for example:
- you spend more or less time in the UK
- you buy or sell a home in the UK
- you change your job
- your family moves in or out of the UK, or you get married, separate or have children
Residence and capital gains
You work out your residence status for capital gains (for example, when you sell shares or a second home) the same way as you do for income.
UK residents have to pay tax on their UK and foreign gains. Non-residents have to pay tax on income, but only pay Capital Gains Tax either:
- on UK property or land
- if they return to the UK
Residence before April 2013
There were different rules for working out your residence status before 6 April 2013.
For further information, please contact your usual Beavis Morgan Partner or email info@beavismorgan.com.