Understanding UK residency and tax rules will reduce unforeseen tax impacts on you and enable you to plan your tax affairs effectively. A UK tax resident is typically liable to tax in the UK on their worldwide income and gains as they arise.
Tax Tip | Non-residents (including trusts and companies) If you are non-resident with a UK source income, UK tax may still be due. This depends on the nature and amount of income.
The rules relating to this involve checking a number of different factors, which hinge on the number of days a person spends in the UK during a tax year. There are three sets of tests to consider:
Tax Tip | Leaving the UKIf you are planning to move to or from the UK, ensure that you are familiar with the rules that trigger residence, and allow sufficient time to undertake necessary planning for different tax regimes.
If you have spent 183 days or more in the UK in any tax year, you are a tax resident in the UK in that year. If not, you must work your way through the tests in order. Once you meet the requirements of a test, you do not need to consider any of the subsequent tests.
Each set of tests has various elements including:
employment/work status (overseas or in the UK).
location of your primary or only home.
Calculations are based on the number of days in the UK in a given tax year (a day in the UK is measured by reference to any day that you were present in the UK at midnight).
The Sufficient Ties test assesses residency based on the number of UK connections or ties an individual has and the number of days spent in the UK – the more ‘ties’ you have to the UK, the fewer days you can spend in the UK without becoming UK tax resident.
Your liability to UK tax can sometimes be impacted by your domicile status. The rules around domicile status are somewhat antiquated. There are four basic concepts:
Domicile of origin – usually this is the same domicile as that of your father at the time you were born.
Domicile of dependence – applies to a person under the age of 16, who takes the domicile of the person upon whom they are legally dependent.
Domicile of choice – although technically very difficult to achieve, you can change your domicile of origin by taking actions to permanently sever your ties with that country.
Deemed domicile – in the UK, you are deemed domiciled in the UK for Income Tax, Capital Gains Tax and Inheritance Tax purposes once you have been UK resident in at least 15 out of the last 20 tax years.
Non-doms may, in certain circumstances, be able to elect for their non-UK income to be taxed on a ‘remittance’ basis rather than on the standard ‘arising’ basis.
If deemed domiciled, you are taxed on your worldwide income and capital gains on an arising basis.
Some protections are provided for trusts set up before an individual becomes deemed domiciled.
UK resident non-domiciles who are not "deemed domiciled" can chose, from one year to the next, whether to be taxed on worldwide income and gains as they arise or to claim the remittance basis of taxation.
Those who qualify for the remittance basis must pay an annual Remittance Basis Charge (RBC). There are two levels of RBC, depending on the length of time you have been UK resident:
Tax Tip | Planning remittancesIf you are thinking about claiming the remittance basis, you need to plan when and how you remit funds to the UK. Ultimately, claiming the remittance basis can result in higher UK tax liabilities.
Tax Tip | Length of time in UKYou may need to plan in advance as you near either of the RBC thresholds or deemed domiciled threshold.
Tax Tip | CryptoassetsIf you are non-domiciled and own crypto assets, it is worth seeking specialist advice on the tax implications as some cryptoassets may be deemed not to be UK assets.
Tax Tip | Loan securityBe careful when using overseas income or gains as security for a loan - this can trigger a taxable remittance to the UK.
There has always been a special rule for days spent in the UK because of exceptional circumstances, which are defined in the Finance Act 2013 as including "national or local emergencies such as war, civil unrest or natural disasters" and "a sudden or life-threatening illness or injury".
For you to benefit from the rule, the exceptional circumstances that prevent you from leaving must be beyond your control and you must make every effort to leave the UK as soon as the circumstances permit.
H M Revenue & Customs published guidance on this matter on 19 March 2020, which outlines their position and is as follows:
The Coronavirus (COVID-19) pandemic may affect your ability to move freely to and from the UK or require you to remain unexpectedly in the UK. Whether days spent in the UK can be disregarded due to exceptional circumstances will always depend on the facts and circumstances of each individual case.
However, the circumstances are considered exceptional if you:
are quarantined or advised by a health professional or public health guidance to self-isolate in the UK as a result of the virus.
find yourself advised by official Government advice not to travel from the UK as a result of the virus.
are unable to leave the UK as a result of the closure of international borders, or
are asked by your employer to return to the UK temporarily as a result of the virus.
In issuing the guidance H M Revenue & Customs has indicated that it will look sympathetically at any individual cases where the virus has caused specific issues or difficulties.
Yes
No
Somewhat
Not applicable
