The Remittance Basis
If your permanent home is outside the UK, you might be able to use the 'remittance basis' of taxation. It's a special rule that can stop you from paying UK tax on your foreign income, and this guide explains how it works.The remittance basis is a significant advantage for UK residents who are not domiciled here. It allows you to keep your UK and foreign tax affairs separate.
How Does the Remittance Basis Work?
Instead of paying UK tax on your worldwide income and gains, you only pay UK tax on:
- Your income and gains that come from the UK.
- Any foreign income or gains that you bring (or 'remit') to the UK.
Any foreign income you earn and keep outside the UK is not subject to UK tax.
What Counts as 'Remitting' to the UK?
Bringing money or assets to the UK is not just about transferring cash to a UK bank account. You are also 'remitting' if you:
- Use foreign income to pay for goods or services in the UK (e.g., using a foreign credit card here).
- Use foreign income to service a UK loan.
- Bring assets to the UK that were bought with foreign income.
Is There a Cost?
The remittance basis is free for the first 7 years you are a UK resident. After that, you have to pay an annual charge to continue using it:
- £30,000 if you've been a UK resident for at least 7 of the past 9 tax years.
- £60,000 if you've been a UK resident for at least 12 of the past 14 tax years.
Claiming the remittance basis is done via the SA109 supplementary page on your tax return, and deciding if it's right for you depends entirely on your personal circumstances.