NON-DOMICILED RESIDENT: The same rule applies to any capital gains made selling shares or a second home.
How to Work Out Domicile
As a rule, there is a basic method for working out your domicile. In most cases, it would be the country that your father considered to be his permanent home at the time you were born.
Note: Your ‘domicile’ might have changed since then. It could happen if you moved overseas and did not intend to return to the United Kingdom.
What if you are still unsure which country is your domiciled residence. You can get professional advice on tax from a monetary adviser. You may also need legal advice about the special rules for domicile and Inheritance Tax rules.
Non-domiciled Taxation
You will not need to pay UK tax on foreign income or gains made abroad if both of these apply to you:
- They total less than £2,000 in the United Kingdom fiscal year (6 April to 5 April).
- You do not bring the funds into the United Kingdom ‘personally’ (e.g. they get transferred to a UK bank account).
Foreign Income over £2,000
The rules change in circumstances where the earnings are more than £2,000. In this case, the law requires you to report the foreign income (or gains). The same law means you must report money that you ‘personally’ bring into the United Kingdom.
Use a Self Assessment tax return for this type of situation. You then choose between paying any charge which is due, or claiming the remittance basis. In some cases you can claim it back if you get taxed twice.
Remittance Basis
By claiming the remittance basis you only pay UK tax on income or gains brought into the United Kingdom. But, it means:
- You lose tax-free allowances for Income Tax and Capital Gains Tax allowances. There are exceptions for some ‘dual residents’ for keeping them.
- You pay an annual charge if after being a resident of the United Kingdom for a certain period of time.
The annual charge you pay would be either:
- £30,000: For those who have been in the UK for at least 7 of the previous 9 tax years.
- £60,000: For those who have been here for at least 12 of the previous 14 tax years.
- £90,000: For those who have been here for at least 17 of the previous 20 tax years.
Note: Claiming the remittance basis is a complex process. You can contact HM Revenue and Customs or employ professional tax help (e.g. a tax adviser).
Seconded to the United Kingdom
What if your employer sends you to work in the United Kingdom on secondment? In this case, you may be able to claim through a process called ‘Overseas Workday Relief‘.
Those who qualify for secondment will pay tax on income based on the number of days worked here. You do not pay for the time that you work abroad (if you do not bring it into this country). Your employer should have more information on getting seconded to the United Kingdom.
Working in the United Kingdom and Abroad
If you work abroad and in the United Kingdom there will be special rules that apply to you. You may qualify for the ‘foreign workers’ exemption.
It means you do not have to make tax payments on your foreign earnings or gains. This includes those which you bring into this country. You will qualify for exemption and do not need to do anything, providing:
- Your income from work overseas is less than £10,000.
- Your other foreign pay is under £100 (e.g. bank interest).
- All your foreign salary got subjected to foreign taxation.
- Your combined earnings from abroad and within the UK is within the basic rate Income Tax band.
- There is no other reason for you to fill in a tax return (check who needs to file a tax return).
ALSO IN THIS SECTION
Tax on Foreign Income: Information explaining the rules of UK taxation on money earned abroad.
Residence Status and Tax: How your status as a resident affects your liabilities for UK taxation.
Paying Tax on Foreign Income: Payment rules for a UK resident with foreign income or capital gains.
Taxed Twice: How the double-taxation agreement affects the tax you pay in the UK and abroad.
Foreign Students: The rules for paying tax on foreign income while studying in the United Kingdom.