What tax benefits are you eligible for as a non-resident of the UK? Is tax reduction a goal? You can reduce your taxes as a non-resident of the UK. Read on for an overview of the tax benefits available to non-residents of the UK.
You may be surprised to learn that Britain’s tax rules can help non-residents with corporate and personal taxation. As a non-resident of the UK, UK domestic law can lend a hand in protecting assets.
At Nomad Capitalist, we help entrepreneurs and investors minimize their taxable income, as part of a complex, holistic plan, in the UK and abroad. Become a client today and we’ll help you optimize your taxes and maximize your investments.
Country overview United Kingdom
The United Kingdom consists of England, Scotland, Northern Ireland and Wales. The UK population is 67.8 million. London is the capital and largest city of the United Kingdom, with a population of 7.6 million.
UK tax incentives for non-residents
For non-UK residents, your worldwide income is not subject to UK tax. However, it is essential to understand the tax laws in the country where you currently reside.
As a non-resident HRMC (Her Majesty’s Revenue and Customs) only taxes you on your UK income. A double tax treaty can also have consequences for your taxable income.
Suppose you are sent to work in the UK for up to two years. In that case, you may be able to deduct a portion of the income tax for travel and basic living expenses, such as lodging, utilities and food, associated with your assignment.
Income tax requirements for non-residents in the UK
Your UK residence status determines whether you have to pay UK tax on your worldwide income and profits. Whether you are a UK resident depends on how many days you spend in the UK tax year which runs from 6 April to 5 April of the following year. You are only resident in the UK if both of the following apply:
You pass one or more of the automatic UK tests or the pass tire test. You fail one of the automatic overseas tests.
The three automatic tests to determine UK resident for tax purposes check whether you:
spend 183 days or more in a tax year in the UK live in the UK all or part of the year and meet certain requirements to work full time from home for 365 days in the UK and meet specific requirements
If you fail the automated tests, you will be treated as a non-resident of the UK for tax purposes and will then be required to complete a self-assessment form.
You are regarded as a non-resident for tax purposes if you:
spent less than 16 days in the UK (or 46 days if you have not been a UK resident in the last three tax years) worked full-time abroad (at least 35 hours a week on average, and less than 91 days in the UK spent), of which you worked up to 30.)
When you move in or out of the UK, the UK tax year is usually split in two, creating a non-resident part and a resident part. This means you only pay UK tax on worldwide income based on your time in the UK. This is called “split-year treatment”.
You only get split-year treatment if you live abroad for a full tax year before returning to the UK, and you must declare this on your self-assessment tax return.
The UK Taxation Sufficient Ties test
If you were not a UK resident in any of the three years prior to the relevant UK tax year, you should consider the following ties:
a family bond a housing bond a working bond a 90-day bond
Tax rules to avoid double taxation
You may be entitled to a double tax deduction so that, thanks to international tax arrangements, you are not taxed via foreign taxes on the same income. Suppose you are a non-resident of the UK. In that case, you can reduce your foreign tax liability by being a resident of the following jurisdictions with which the UK has tax treaties with more than 120 countries, including the US, Canada, Australia, China, most of its European neighbors plus other countries throughout Africa, Asia and Latin America.
Personal savings allowance for non-residents in the UK
A UK double taxation agreement could allow specific categories of people to benefit from personal savings deductions. If you are not a UK resident, in addition to any double taxation treaty related measures, you may be entitled to the same UK tax relief as a UK resident if you meet any of the following conditions at any time during the tax year: satisfies:
You are a British citizen or a citizen of another member state of the European Economic Area (EEA), such as in Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy , Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Slovenia, Spain or Sweden You are a resident of the Isle of Man or the Channel Islands You have previously lived in the United Kingdom and you live in the abroad because of your health, or the health of a family member who lives with you. You are or were employed by the British government. You are employed in the service of any territory under the protection of His Majesty You are employed in the service of a mission organization You are a widow, widower or surviving civil partner whose deceased husband, wife or civil partner was employed by the British Government.
Conclusion UK income tax incentives for non-residents
In summary, your UK residence status is the factor that determines whether you have to pay UK tax on your foreign income.
Non-UK residents must pay income tax on UK income, but are not required to pay UK tax on their worldwide income.
In general, residents pay UK tax on all their income, whether from the UK or abroad. But there are special rules for UK residents living permanently or living abroad.
To be considered a UK tax resident you must pass either the automatic UK tests or the pass tire test.
Don’t forget that you must declare the taxable income in your income tax return.
FAQs on tax incentives for non-residents in the UK
Do non-residents of the UK get a tax-free personal savings deduction?
Yes. As a non-resident, you must claim the personal savings deduction at the end of each tax year in which you have UK income. You can complete HM Revenue and Customs Form R43.
What income is taxable in the UK for non-residents?
Your UK living situation is key to determining your UK tax status. Whether you have to pay tax in the UK on your foreign income depends on whether you are a tax resident. Non-residents only pay tax on their UK income. They do not have to pay UK tax on their foreign income. On the other hand, residents will have to pay UK tax on all their income, whether from UK source or from abroad.
Do I have to pay UK taxes if I live in the US?
No. Suppose you are not a resident of the UK. You don’t have to worry about your US income for UK tax purposes. That’s because you are not required to pay UK income tax on your foreign income. You must pay tax on your foreign income if you are a UK tax resident. But you may not need to do this if you are a person not living in the UK.
Can I get an income tax credit if I leave the UK?
Yes. You are eligible for UK tax credit or tax refund if you are no longer in the UK.
If you are not a resident, we can help you with much more than your UK tax liability. Our holistic plans cover everything from foreign tax to offshore income.
Become a Nomad Capitalist client today and we will create a tailored action plan covering everything from taxation to obtaining residency visas to find the best solution for your needs.
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