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If you live in the UK and have an income coming from a foreign country, you will have to pay tax to HMRC. You'll generally do this by filing a self assessment tax return. There are rules on the types of income that count, and a lot depends on your status as a UK resident. Here's what you need to know.
Your foreign income might include things like:
In most cases, your foreign income will be taxed in the same way as your UK money. However, there are special rules for pensions, property rental and jobs like working on a ship or for the government. Talk to RIFT to be sure of what you need to pay.
You generally only pay UK tax on foreign income if HMRC considers you a UK resident. That basically means you either:
If your residence status changes during the tax year you might be able to get "split-year treatment". This means you'll only pay tax on the money you made as a UK resident. There are a few conditions to meet, though. If you come back after living abroad for under a tax year, you won't get split-year treatment.
Whether or not you count as a tax resident in the UK is decided through HMRC’s Statutory Residence Test. This will include:
It’s absolutely essential to have your tax residency sorted out correctly. It’s possible to end up being taxed on the same income in more than one country, and getting these details right is the key to claiming the right kinds of tax relief to fix the problem.
In simple terms, your “domicile” is usually where you have your permanent home. You can only ever have one domicile at a time, which you’re assigned when you’re born. The rules around this can be complicated, but it’s generally determined by the domicile of your parents.
Your domicile is different from your tax residence status (which largely depends on where you spend your time during the year), but it can still affect the kinds of tax you pay.
So, confusing as it sounds, it's perfectly possible to be a UK resident whose permanent home is abroad. This is called being "non-domiciled". If you count as non-domiciled, but you’re still a UK tax resident, you won’t pay UK tax on up to £2,000 of your overseas income per year, providing you keep it abroad.
You'll need to file a self-assessment tax return in order to let HMRC know about your foreign income. Don't worry though, if you're not keen on doing it yourself RIFT is here to help you. We can answer any questions and solve all your tax problems. We've been taking the stress, confusion and pain out of UK tax since 1999. Read more about self assessment for expats, or get in touch to see how we can help.
18th November 2024
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