Normally, if you are resident in the UK for any part of a tax year you will be taxed as a UK resident for the whole of the tax year. However, there are special rules (Split Year Treatment) which may apply to you if you move abroad to live or work. These special rules split the tax year into a UK part, when you are taxed as a UK resident, and an overseas part, when you are taxed as a non-UK resident.
Domicile and Country of Tax Residence
There are considered to be two types of domicile status. One is where you have your permanent home. This is different to residency, since that is where you spend your time for tax purposes. The second is your domicile of origin, which is where your father’s permanent home was.
Domicile and residency for a lot of people are the same, but for taxation purposes your particular mix of residency, ordinary residency, domicile and domicile of origin will make a difference to what tax you have to pay.
When living abroad, understanding the differences between your domicile and your residency is imperative. Knowing your resulting obligations is also vital for tax purposes, both in the UK and in your country of residence. Making an assumption about your residency status can have serious financial consequences but understanding whether you are domicile or resident is not straight forward.
It is vital you seek advice about your residency status and following the guidelines from a qualified tax adviser to ensure you are not evading tax – whether accidentally or otherwise.
Split Year Treatment – Your Country of Tax 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 don’t need to claim split-year treatment – it is applied automatically.
You won’t get it if you live abroad for less than a full tax year before returning to the UK. You also need to meet other conditions.
If Your Situation Changes
Your status can change from one tax year to the next. You should seek advice as and when your situation changes, such as:
- 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
Your Country of Tax Residence will normally be established if you are present in a country for 183 days or more in a tax year. This is the case with the United Kingdom, and also in other countries.
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 don’t 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, or domicile, is abroad.
If you go and work abroad for more than one year, you must not be back in the UK for more than 91 days, on average, in any 365-day period, for the duration of your time abroad to ensure that the UK is not your country of tax residence.
If your return home is for an emergency then HMRC may make an exception, providing you can prove that you exceeded the limits through no fault of your own.
The Statutory Residence Test is a series of tests conducted to determine your country of tax residence with respect to the United Kingdom.
To be ordinarily resident, the country has to be your ordinary home, where the definition of ordinary means that you spend the majority of your time there, every year and don’t take major trips abroad.
It is common to be ordinarily resident but not resident and is often where someone travels overseas for a period of time.
More Than One Country of Tax Residence
It is possible for you to be tax resident in more than one country at any given time and it will fully depend on how you have spent your time and what the rules are in each country.
Work Out Your Country of Tax Residence
Whether you are UK resident usually depends on how many days you spend in the UK in the tax year. The UK tax year runs from 6 April to 5 April the following year.
You are 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 are automatically non-resident if either:
- You spent fewer than 16 days in the UK (or 46 days if you haven’t 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
Residence and Capital Gains
You work out your residence status for capital gains 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 residential property
- If they return to the UK
Residence before April 2013
There were different rules for working out your residence status before 6 April 2013.
Come to Us for Advice
If you are living abroad, considering moving abroad, or considering returning to the UK, contact us today for specialist advice on UK tax. Request free tax advice.
Out tax team can offer you a detailed tax planning report which will ultimately provide you with recommendations on how you could reduce your UK tax liabilities.
Our tax advisers are all qualified Chartered Tax Advisers and members of the Chartered Institute of Taxation.
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