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UK Residence Status for Tax Purposes

Your status as a resident affects your liabilities for taxation. There may be an obligation to pay tax in the UK on income gained overseas.

RESIDENCE STATUS: Non-residents pay tax on UK income when living abroad. They do not pay UK tax on their sources of foreign income.

As a rule, residents are liable for paying United Kingdom taxes on all their income. That applies whether the money comes from the United Kingdom or overseas.

There are some special exceptions to this rule. They apply if the location of your ‘domicile‘ (permanent home) is not in the United Kingdom.

Working Out Residence Status

A tax year in the United Kingdom runs from the 6th of April to the 5th of April in the following year. The number of days you spend in the UK during a tax year determines whether you are a UK resident or not.

Thus, you will get classified as a United Kingdom resident if:

  • You spent at least 183 days living in the United Kingdom during the tax year.
  • Your only home for that year was in the UK and you spent a minimum of 30 days living there. You must have owned it, rented it out to someone, or lived in it for at least 91 days in total.

You will get an automatic classification as a non-resident if:

  • The time you spent living in the United Kingdom was less than 16 days. That changes to 46 days if you did not get classed as resident for the previous three (3) tax years.
  • You work an average of at least 35 hours a week overseas full-time (and spend less than 31 days working and less than 91 days in total in the UK).

Note: Some situations are more complicated when you need to confirm your residence status. Read HM Revenue and Customs ‘RDR3: Statutory Residence Test‘ or check the tax help section for more guidance.

Split Year Treatment Residence

Split-year treatment gets applied as an automatic process. It relates to anyone who moves into (or out of) the United Kingdom during the tax year. The split year treatment has a resident part and a non-resident part. Thus, residence status is usually split into two when you move in or out.

There is no need to claim split-year treatment. You only pay tax on foreign income based on the actual time you live in the UK. Even so, you will not qualify if you live abroad for less than a full tax year before returning to the United Kingdom.

If Your Status Changes

You should contact HM Revenue and Customs any time your status or situation changes. Typical examples of a status change would be if:

  • You sell or buy a property in the United Kingdom.
  • You change your occupation.
  • Your time spent in the UK becomes more (or less) than usual.
  • You get married, become separated, have children, or your family moves in or out of the UK.

How Residence affects Capital Gains

Capital gains can occur when you sell a second home or sell shares, for example. Residence status for any capital gains gets calculated the same as for income.

Thus, UK residents must pay tax on all their UK and their foreign gains. Non-residents will also pay Income Tax on earnings. But, they will only pay Capital Gains Tax on UK residential property or if they return to the United Kingdom.

Note: The United Kingdom rules for working out resident status were different up to 5th of April 2013.

ALSO IN THIS SECTION

Tax on Foreign Income: Information explaining the rules of UK taxation on money earned abroad.
Non-domiciled Resident: Check the tax rules for a UK resident with a ‘domicile’ outside the UK.
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.

Your Residence Status and Tax in the United Kingdom