tax
Do I have to pay for UK tax?
As a general rule, if you are Resident in the UK in a tax year, you have to pay for tax on your worldwide income and capital gains arising in that year. On the other hand, for Non UK Resident, you pay for tax only on UK income & gains. It’s therefore important to determine your ‘Tax Resident Status’ correctly under Statutory Resident Test.
What is Statutory Resident Test (SRT)?
We determine your tax resident using following 3 tests in order – Automatic Overseas Test (AOT), Automatic Resident Test (ART) and Sufficient Tie Test (STT) under Statutory Resident Test.
Automatic Overseas Test (AOT):
You are not UK resident for a tax year if you meet any of these:
- You were resident in the UK in one or more of the previous three tax years and you are present in the UK for fewer than 16 days in the current tax year or.
- You were not resident in the UK in all of the previous three tax years and you are present in the UK for fewer than 46 days in the current tax year or.
- You meet the “work abroad” condition (work for 35 hours per week abroad, present in UK for fewer than 91 days and working in UK for fewer than 31 days in the tax year).
Automatic Residence Test (ART):
You are resident in the UK for the tax year if you meet any of these:
- You are present in the UK for 183 days or more in a tax year or
- You have a “home” in the UK for all or part of the tax year, present for 30 separate days, and during the consecutive 91 days, no home overseas or one or more overseas home but stay there for few than 30 separate days during the tax year. or
- You carry out “full-time work” in the UK for a period of at least 365 days ie 75% of work in the UK and one working day in the tax year in the UK.
Sufficient Ties Test (STT):
Where your UK presence is between 46 to182 days, then we test your resident under Sufficient Ties Tests with combination of UK present days and following “ties” ie depending on days of UK present and number of ties:
1. Family
• Your spouse/civil partner is resident in the UK or
• Your minor child (under 18) is resident in the UK and you see that child at least 61 days in the tax year.
2. Accommodation
• You have a place to live in the UK which is available for a continuous period of at least 91 days; and
• You spend at least one night there during the tax year (or 16 nights in a close relative’s).
3. Work
You work for 40 days or more in the UK in the tax year.
4. UK presence
You spent more than 90 days in the UK in either of the previous two tax years.
5. Country
You spend more days in the UK in the tax year than in any other single country.
Split Year Treatment
During a tax year you either start to live or work abroad or come from abroad to live or work in the UK, you are tax resident in two parts “UK part” & “overseas part” ie you pay for tax on only “UK part”.
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UK Tax for UK Domiciled and Non-UK Domiciled?
Every individual has only one domicile and in general, UK domiciled pays for tax on foreign income and foreign capital gains whilst UK Resident but Non-UK Domiciled pays for tax on remittance of the foreign income/gain or on arising basis.
Taxation of UK on foreign income:
UK Resident and UK Domiciled pays for tax on UK and foreign income whilst UK Resident and Non-UK Domiciled pays for tax on UK income but, for foreign income, you can elect for “Remittance Basis” ie pay for tax on only remitted income to UK. However, Non-UK Resident does NOT pay for tax on foreign income.
Election for Remittance Basis for Non-UK Domiciled
You must make a claim it every year via self-assessment return and if you elect for “Remittance Basis“, you will lose Personal Allowance and Capital Gain Tax annual allowance. However, where you have “unremitted foreign income and gain ” less than £2K, Remittance Basis applies automatically without losing Personal and capital gains tax annual allowance.
Who are UK Deemed Domiciled (DD)?
From 6 April 2017, you are deemed to be UK domiciled for UK tax purpose for particular tax year if you are non-UK domiciled under general law and either “Formerly Domiciled Residents” (FDRs) or “Long-Term Residents”:
Who are Formerly Domiciled Residents?
If you were born in the UK, had a domicile of origin in the UK and you are resident in the UK for the tax year. your are Formerly Domiciled Resident. You cannot elect for “Remittance Basis”.
Long-Term Residents
From 6 April 2017, if you are Non-UK domiciled but have been UK resident for 15 out of 20 years, you are deemed to be UK domiciled for all tax purposes under “15/20 rule”. You need 6 tax years of non-UK resident period to break the status.