Everything You Need to Know About UK Non-Resident Tax
If you're reading this, then there's a good chance you either own property in the UK, work for a UK company abroad, or have some kind of income from the UK. In that case, you need to know about your UK tax obligations.
We often hear people asking, as a non-resident, do I need to file a UK tax return? How do you pay your taxes, and what deadlines do you need to be aware of? This guide will walk you through everything you need to know about paying UK tax as a non-resident.
Definition of Non-Resident for Tax Purposes
As a non-resident, you'll only pay UK tax on your UK-sourced income. For instance, this includes UK rental property income or workdays in the UK. To qualify as a non-resident, there are some tests known as the statutory residence tests. Essentially, it depends on how many days, workdays, and ties you have with the UK. To determine your residency status, use this calculator .
If you rent out UK property, you'll need to register for self-assessment and file a tax return reporting this income. The good news is you can deduct allowable expenses like repairs, insurance, and management fees.
If you're self-employed in the UK, you must pay both income tax and National Insurance on your profits. In the UK, you do not pay tax when selling shares in a company unless it falls under the temporary non-residence rules.
Dividend and interest income are typically treated as disregarded income in the UK, meaning there is usually no tax owed. However, in rare cases, if it is deemed appropriate, you can claim to have it considered and pay UK tax on it. You can claim the tax back on pensions if it was withheld by the UK.
With some planning, you can minimise your UK taxes. But failing to pay what you owe can lead to penalties and interest charges. You can get in touch with Taxd to assist you throughout the process.
Who Is Considered a Non-Resident for UK Tax Purposes?
You qualify as a non-resident for UK tax purposes when:
- You work full-time (i.e., at least 35 hours per week) and were in the UK for less than 91 days, of which no more than 30 were spent working in the UK.
- You spend less than 16 days in the UK in a tax year (or 46 days if you were not considered a UK resident for the three previous tax years).
As an expat, investor, or nomad, the key is ensuring you understand how the SRT applies to your unique situation. But as a general rule, limiting the number of ties you have to the UK and the time you spend there is the safest approach to qualify as non-resident.
Tax Requirements for Non-Residents With UK Income
As a non-resident with income from the UK, your tax requirements are:
The deadlines to file a UK tax return for the year 2022/23 are the same as for UK residents - 31 October if filing with paper, or 31 January if filing digitally, following the tax year-end. You cannot file online using the HMRC website, as residence adds additional complexities. You can use an accountant (expensive) or HMRC-recognised software, like @Taxd.
Any tax due must be paid on the normal payment dates of January 31st and July 31st. As a non-resident, HMRC will not automatically deduct tax from your UK income, so you must pay any tax due yourself via the HMRC website, phone, or bank transfer. Full details: https://www.gov.uk/pay-self-assessment-tax-bill
Make sure you keep records of all your UK income and expenses to report on your tax return and calculate your tax bill accurately. Records should be kept for at least seven years.
Using a Tax Advisor / Tax Software
As a non-resident taxpayer, the UK tax rules can be complicated. It is a good idea to use a tax advisor or software like @Taxd tailored to expat and non-resident taxation. They can help ensure you meet all your UK tax obligations and pay the correct amount of tax.
Tax Rates and Allowances for Non-Resident Landlords
The rates and allowances that apply to you depend on whether you’re a UK citizen living abroad or a foreign national.
UK Citizens Living Abroad
If you’re a UK citizen living abroad, you’ll pay UK income tax on your UK rental profits at the same rates as residents. The current basic rate is 20% on profits between £12,571 to £50,270, the higher rate is 40% on profits between £50,271 to £125,140, and the additional rate is 45% on profits over £125,140. As a UK citizen/national, you’re also entitled to the same personal allowance, currently £12,570, which is tax-free.
As a foreign national, you won’t qualify for the UK personal allowance, unless:
- You are an EEA state national.
- The country you are resident/national in allows for a personal allowance in the UK. To check whether your country allows for a personal allowance in the UK, click here.
- You live in the Channel Islands or the Isle of Man.
- You have worked for the Crown, either as a civil servant, diplomat, or member of the UK military forces, or you presently do.
- You're part of a missionary organisation.
- You were a resident of the UK before relocating overseas for medical reasons.
As a non-resident, there are a few key rules you need to know about paying tax in the UK.
If you spend too much time in the UK, you risk becoming a resident and paying taxes on your worldwide income.
For some UK income like rent, tax is deducted at the basic rate of 20% before you receive the funds. This is known as withholding tax. You can then claim back any overpayment or pay any underpayment when filing your tax return.
Double taxation treaties
The UK has treaties with many countries to avoid double taxation. Check if a treaty exists between the UK and your country of residence. It may exempt certain types of income from UK tax or provide tax credits for taxes paid in your country of residence.
Reporting Non-Resident Income and Capital Gains Tax
You must report your income and capital gains each tax year (6 April to 5 April) by completing the appropriate self-assessment tax returns. The main forms are the SA100 for income tax and SA108 for capital gains tax.
HMRC receives information from banks, letting agents, and tenants about non-resident landlords’ UK rental income and property sales, so make sure you declare everything. The UK does have ‘anti-avoidance’ rules to prevent people artificially diverting UK-source income abroad to avoid tax.
Claiming Non-Resident Tax Relief and Repayments
Tax relief can reduce your UK tax bill and may even entitle you to tax repayments. You can use a tax calculator to figure out how much tax you owe as per the time you spent in the UK. Foreign Tax Credit which can be claimed to avoid being double-taxed on the same income. However, the exact amount you can claim depends on how much tax is paid in the other country you reside in.
To claim non-resident tax relief or apply for tax repayments, you’ll need to provide details about your income, the dates you entered and left the UK, and the country you now reside in. If you meet all the conditions, claiming non-resident tax relief and any tax repayments you’re owed can help reduce your UK tax liability.
So there you have it, a quick guide to paying UK non-resident tax. While the rules can seem complicated, the key is keeping good records of your income and expenses to make sure you’re paying what you owe but not a penny more. If you do find yourself confused by the UK tax, get in touch with Taxd to help you navigate the system. We can save you time, money, and headaches in the long run.
The most important thing to remember is that even if you don’t live in the UK full-time, you still need to pay your fair share to keep services up and running for when you do visit. Pay your taxes, stay out of trouble, and enjoy your time in the UK!
Frequently Asked Questions
1. What does "UK Non-Resident Tax" refer to?
UK non-resident tax is the tax imposed on individuals who are not considered residents of the United Kingdom for tax purposes. It applies to their UK-sourced income and gains.
2. What is the Non-Resident Personal Allowance in the UK?
The UK has a tax-free allowance of £12,570, this is available for non-residents too. Provided they are a British/EEA National or the allowance is provided as part of the Double Tax Agreement between the UK and the country they reside in.
3. What's the process for filing an online UK tax return as a non-resident?
To file your UK Tax return online, you need to register for the UK Tax Self Assessment. HMRC will provide you with a UTR (Unique Taxpayer Reference), complete the online questionnaire, and report your relevant income.
4. What types of income are typically non-taxable in the UK for non-residents?
Non-taxable income UK for non-residents includes income like dividends, and interest, which are treated as disregarded. Also, any non-UK sourced income, e.g. working overseas, will not be taxable in the UK.
5. Can you highlight some of the essential UK non-resident tax rules?
Key UK non-resident tax rules include understanding the tax of capital gains and inheritance, reporting worldwide income, and the implications of various tax treaties with other countries. It's crucial to stay informed about these rules to ensure compliance and manage your tax liability effectively.
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