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How Do I Know if I’m a UK Tax Resident?

Does some, or all of your income come from overseas, but you still have connections to the UK?  

Not sure if you should be paying tax here in the UK, or whatever country your income is accumulating from? 

The Statutory Residence Test helps to determine an individual’s tax resident status if they have connections to the UK. The Statutory Residence Test is important for understanding if you are obligated to pay your annual taxes within the UK or not.  

Having a UK tax resident status simply means that you are legally required to pay your taxes to the UK government.  

If you are considered as a UK tax resident and fail to declare and pay your income tax, it could result to monetary fines and penalties. In order to avoid any consequential actions, we advise that you seek professional advice from a tax expert to determine your residential status and tax situation. 

woman next to a globe
Tax residency affects how much you need to pay!

Who qualifies as a UK tax resident?

In usual circumstances, if you are/have been physically present in the UK for over 183 days in a 12-month tax annum (6th April – 5th of April every year), you are considered a tax resident in the UK for that specific tax year.  

HMRC will also consider you as a UK tax resident if you own or rent your only home (you don’t own or rent elsewhere) for over 91 days in the UK, and spent the last 30 days physically inside of the UK’s boarders.  

As a UK tax resident, you’ll have to pay: 

  • Income tax 
  • National Insurance 
  • Inheritance tax 
  • Other capital gains’ tax (savings, shares, cryptocurrencies, etc.) 

In other words, it simply means you will be taxed on your worldwide income (UK and abroad).  

If your permanent home is outside of the UK, then you may not be a UK tax resident. Therefore, if you are not deemed as a UK tax resident by The Statutory Residence Test, then you do not pay UK tax (tax to HMRC) on your foreign income.  

Your tax residence may change year to year, so it’s important to re-evaluate your residency situation regularly, especially if your circumstances are likely to change from time to time. 

What if I’ve paid my tax abroad already? 

Each country has their own taxation laws. If you are considered as a UK tax resident then you may find that you are liable to be taxed on the same income in both countries (UK and abroad). Otherwise known as “double-taxation”.  

If the UK has a set up a double-tax agreement (also known as ‘double tax treaties’ or ‘double tax conventions’) with the country your income comes from, you shouldn’t have to pay tax twice, and you should only pay tax in one of the countries, conditional to what agreements have been made between countries

In order to avoid double taxation or to claim back any double tax you’ve already paid; you can claim Foreign Tax Credit relief when you complete your Self-Assessment tax return to HMRC and report any income from outside of the UK. 

You can apply for either: 

  1. Partial or full relief before you’ve been taxed 
  1. A refund after you’ve been taxed 

If there is a double-tax agreement between the two countries, it’ll be stated which country has the right to collect tax on various type of income (income tax, corporation tax, capital gains tax, etc.) 

For example, if you are a UK tax resident and your income is generated in Portugal, you will pay the following to the UK government: 

  • Income tax; 
  • Capital Gains Tax; and 
  • Corporation tax,  

However, Portugal can claim on any of the following tax accumulated in their country: 

  • Property tax; 
  • Agricultural tax; 
  • Industrial tax; 
  • Professional tax; etc. 

To find out more about the double-tax agreement between the UK and Portugal, click here.

What if my income country doesn’t have a double-tax agreement with the UK?

Most countries do have a double-tax agreement with the UK. However, if the country where your income has arisen from is one of the few without a double-tax agreement between them and the UK, you could find that as a UK tax resident, you’re obliged to pay your tax in both countries

However, regardless of having to pay tax in both countries, you may still be able to claim unilateral tax relief for the foreign tax you have already paid.  

For example, if your income has arisen from a country with a tax rate of 15%, then you would be required to pay the full tax rate to the country your income has derived from. As the UK’s tax rate is currently 20%, you would effectively only have to pay 5% of your income tax to the UK. 

You would likely be given unilateral tax relief (also known as foreign tax credit) for the 15% overseas tax you’ve already paid, so that you don’t end up being taxed as much by both countries. 

If one country’s tax rate is higher than the other, you will be required to pay the higher tax rate amount on your foreign income. 

For the government official current tax treaties between UK and other countries, click here

Still unsure? 

If you’re still feeling confused or unsure of how to understand your foreign income’s tax situation regarding your residency status, contact one our taxation experts here at Count.  

We help break down all of the essential information you need to know in order to work out your tax residence status, as well as, help you to apply for tax relief and make your self-assessment process hassle-free. 

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