Tax Reporting Rules for Expats in the UK
03.10.2024
The tax system in the United Kingdom can be complex; it is important to understand your tax residency status and how this affects your tax obligations. In this guide, we will explore the tax reporting rules for expats in the UK, helping you understand whether you are considered a UK tax resident, what taxes you are required to pay, and other important considerations.
Understanding UK Resident Status
One of the most important factors in determining your tax obligations as an expat is whether you are considered a UK resident. The UK government has set specific rules and criteria to determine residency, which are outlined in the Statutory Residence Test (SRT).
You will generally be considered a non-resident if you:
– Spend less than 16 days in the UK in a tax year.
– Spend less than 46 days in the UK if you were not a UK resident for the previous three tax years.
– Work abroad full-time (at least 35 hours a week) and spend less than 91 days in the UK.
Tax Obligations for Non-Residents
Even if you are considered a non-resident for tax purposes, you are still required to pay taxes on income arising from UK sources. This includes income from property, profits from a trade or business conducted in the UK, employment income related to UK duties, and pensions from UK-based schemes.
Non-resident landlords must file tax returns for rental income earned in the UK. The Non-Resident Landlord Scheme allows HMRC to deduct tax on rental income at the source.
The Personal Tax Allowance for Expats
For the tax year 2023/24, the personal tax allowance for UK citizens, including expats, is £12,570. This means that you can earn up to this amount from UK income sources without paying tax. However, if you earn more than £125,000, you will not be eligible for any personal allowance.
Capital Gains Tax for Expats
Non-residents are generally exempt from paying Capital Gains Tax (CGT) on most UK assets, such as shares in UK companies. However, expats are required to pay CGT on property and land in the UK. If you return to the UK within five years of leaving, you may also be liable for CGT on other assets.
Double Taxation Treaties
Many countries have double taxation treaties (DTTs) with the UK to prevent individuals from being taxed on the same income in two countries. These treaties outline which country has the right to tax different types of income. Expats living in countries such as the US, Australia, and Canada can benefit from these agreements.
Filing a UK Tax Return as an Expat
If you receive income from UK sources that has not had tax deducted at the source, you are required to file an annual tax return. This includes income from savings, investments, and freelance work. Non-resident landlords are also required to submit tax returns for rental income.
Expats who work full-time abroad or earn over £100,000 may also be required to file a tax return, even if they are not currently living in the UK.
Understanding your tax obligations is key for staying compliant with HMRC and avoiding potential penalties.
Track your tax residency days with Tax Resident app.
