As a UK-Resident you will be liable to tax assessment on your worldwide income. If you are thinking of leaving the UK to live or work overseas, it is likely that you will no longer be taxed as a UK resident. Meeting criteria to be taxed as a Non-Resident can have many tax advantages from the UK tax perspective. Often specific income sources, such as pensions for example, can become exempt from UK tax once you become Non-Resident. Furthermore, depending on your destination country, you may find that the same income source is entirely exempt tax overseas.
Residency is a very complex area of tax, and no two set of circumstances are identical. We can consult on your specific personal circumstances to advise on the tax parameters so that you can understand at what point you will become either UK tax resident or Non-Resident, and how your UK or Worldwide income will be treated for tax going forward. If you are planning any significant life changes that might involve moving to the UK or overseas, it is of vital importance to consider your tax position before making any big decisions such as selling property or other investments.
UK Residency and Non-Residency is an area of tax in which we specialise. It is always best that you look to seek information from a specialist tax consultancy and not a standard accountancy practice as many accountants only have a very basic awareness of the complex non-residency issues.
If you are sent to the UK to work or sent overseas by your employer, your residency status will most likely change. There are often work-related expenses that you will incur which can be claimed to help reduce your UK tax position.
Tax Free Allowances
As a UK Resident you will have enjoyed a personal tax-free allowance all the time that you were resident here, regardless of your nationality. Once you leave the UK this could change, depending upon your nationalities held and your new chosen country of residency. Please speak to us today to find out if you will still be entitled to the UK tax free allowances.
Split Year Treatment
It is possible to have the tax year split into the UK part of the year, and the non-UK part of the year if you meet specific criteria when either you first arrive or when you leave the UK. If you meet any of the relevant criteria, then declaring split year treatment to HMRC is not optional. It will clearly define the date when you either became or finished as a UK resident and will determine the tax treatment of your worldwide income.
If you successfully do become non-UK resident and then return to the UK after only a short period, you can find that you may be classed as only temporarily non-resident. If you do leave the UK temporarily, then you will undoubtably need to look at your tax position carefully as you may find that some of your previously exempt income and gains become taxable in the UK on the date of your return to the UK.
Double-Taxation Agreements (DT)
The UK is in a unique position whereby it has more Double-Taxation agreements in place that any other country worldwide – 149 at the last count. A DT agreement between two countries effectively sets out the tax treatment for different sources of income and stipulates in which country the income is taxed, or if this income is to be assessed twice. When a DT agreement exists between two countries then you can usually apply for a tax credit against your income so effectively you are not paying the same tax twice. However, sometimes the rate at which you can claim the tax credit is restricted. A DT agreement is a specialist piece of tax legislation that will dictate the exact treatment of taxation across a wide range of issues.
UK Tax Returns assist clients with complex residency issues daily. We are fully versed on a wide range of tax issues that you may be considering ahead of any move either to or from the UK – speak to us today for an initial, no obligation consultation to see how we can assist you further.
Domicile is a peculiar quirk to the UK tax system which is a uniquely British concept – there is no exact equivalent in any other country’s income tax system. Domicile is another complex area of tax that isn’t actually defined by tax law, but is however a concept within general UK law. It refers to the country where you are considered to have your ‘roots’ or natural and permanent home. It is not necessarily the same as either your nationality or your residency status.
Therefore, even if you are a UK tax resident, you can still be classed as Non-UK Domiciled. Being a Non-Dom is only really applicable if you have overseas foreign earnings and assets that you also keep offshore, and do not want the income to be assessed for tax in the UK.
Being non-domiciled will mainly apply to those who are born overseas, or whose parents were born overseas, although your original domicile can also change throughout your life should you leave the UK and settle permanently abroad.
When you are UK Resident then you will usually be taxed on your Worldwide income, however, if you are also non-domiciled then you can claim to leave your foreign income and gains offshore and not pay tax in the UK. This ability does erode over time, and once you have spent significant time in the UK then it will not always be possible to protect your worldwide income from HMRC in the future. Once you have been a UK resident for at least 7 of the 9 previous tax years, you will need to start paying an annual charge to HMRC to continue to exempt your overseas income from UK tax assessment. However, everyone who is Non-Dom can always continue to have £1,999 of income left overseas and exempt from UK taxation.
IF THIS MAY BE RELEVANT TO YOU OR IF YOU’D LIKE TO UNDERSTAND MORE ABOUT THIS STRANGE ODDITY WITHIN UK TAX, THEN PLEASE SPEAK TO ONE OF OUR TAX CONSULTANTS TODAY.
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