Expat taxes in the United Kingdom


Posted: June 16th, 2014 View from The Shard londonView from The Shard london

An individual is deemed to be tax resident when he or she spends a total of more than 183 days of the tax year in the UK; this period includes days travelling to or from the UK. An individual who visits the UK on a regular basis and spends an average of 91 days per year in the UK, calculated over a four-year period, is also deemed to be resident in the UK for tax purposes. Further, close ties to the UK, such as a permanent home there, or where a person’s lifestyle indicates, for example, business, family and/or social connections with the UK, can also be taken into account when deciding his or her tax residence status (referred to as “ordinary residence”).



A person’s domicile may also affect tax liability where he or she receives foreign-source income or gains. The rules are complex, however. Double tax agreements between the UK and a non-UK domiciled individual’s country of origin will help reduce or remove tax liability.

Individuals who are non-domiciled or non-ordinarily resident in the UK can opt to be taxed under the remittance basis, whereby only foreign income and gains remitted to the UK are liable for UK taxation.

Long-term resident non-domiciles are subject to an annual levy of GBP30,000 if they have resided in the UK for more than seven years. However, at Budget 2011 the government proposed that it would reform the taxation of non-domiciled individuals by increasing the annual charge to GBP50,000 for non-domiciles who claim remittance basis in a tax year and who have been UK resident for 12 or more of the 14 years prior to the year of claim. Under these reforms, non-domiciles would be able to remit overseas income and capital gains tax-free to the UK for the purpose of commercial investment in UK businesses. These changes were included in the 2012 Finance Bill, which as of February 2012 is progressing through parliament.
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There are also plans for a shake-up of the UK’s residency rule which aims to bring much-needed clarity to the current situation, in the form of a statutory residency test (SRT). Under the current regime, there is no full legal definition of tax residence, which makes the rules unclear, complicated and subjective, and creates uncertainty for individuals about their residence status, thus deterring businesses and individuals considering investing in the UK. A proposed framework for the SRT has been set out, under which both the amount of time the individual spends in the UK and the other connections they have with the UK would be taken into account. This was initially to be in place from April 2012, but has been postponed by one year.