Understanding Double Taxation Relief for UK Expats

This guide explains double taxation agreements (DTAs) for expats and how they affect your taxes. It covers tax residency, dual residency issues, and changes in tax treaties, helping you understand the expat tax filing process.

What does double taxation relief mean?

If a person has income or gains from a source in one country and is resident in another, that same income or gain can suffer tax twice. Double Taxation Relief (DTR) is designed to remove this double charge on the same source of income or gain.

Applying for double taxation relief UK

• Identify applicable treaties: Expatriates must first identify if there is an existing double taxation relief between the UK and their host country. The UK has one of the largest networks of tax treaties globally.

• Know the terms: Each DTA has specific rules. Fully understanding these details will help you determine how to apply them to your income and tax situation.

• Claim relief: Taxpayers can claim relief either through exemption in one country or through tax credits in their country of residence. This process typically requires declaring foreign income on tax returns and providing documentation to prove tax payments abroad.

Types of double taxation relief UK

The UK offers three ways to avoid double taxation: two use tax credits—one under UK law (unilateral relief) and one through double tax treaties with other countries—and the third is a deduction from business profits.

You may not have to pay twice if the country you’re resident in has a ‘double-taxation agreement’ with the UK. Depending on the agreement, you can apply for either:

• partial or full relief before you’ve been taxed
• a refund after you’ve been taxed

Each double-taxation agreement sets out:

• the country you pay tax in
• the country you apply for relief in
• how much tax relief you get

If the tax rates in the two countries are different, you’ll pay the higher rate of tax. The tax year may start on different days in different countries.

Double taxation agreements do not apply to tax on gains from selling UK residential property.

What income can you claim for

You can claim for income including:

• most pensions - most UK government (such as civil service) pensions are only taxed in the UK
• wages and other pay (including self-employment)
• bank interest
• dividends - special rules apply, which HM Revenue and Customs (HMRC) explain in section 10 of ‘Residence, Domicile and the Remittance Basis.’

Note:

Maintaining detailed records of income earned and taxes paid in both countries is vital. This documentation will support claims for relief under DTAs. Mistakes in reporting can lead to fines and penalties, negating the benefits of DTAs.

How to claim tax relief

Check ‘Double taxation HMRC digest’ for countries that have an agreement with the UK on how income, such as pensions and interest, is taxed.

You need to look at the relevant tax treaty for the rules on other types of income like wages and rent.

Expat tax filing form

Use the correct form depending on whether you’re a resident of:

• Australia
• Canada
• France
• Germany
• Ireland
• Japan
• New Zealand
• Netherlands
• South Africa
• Spain
• Sweden
• Switzerland
• United States of America

If you’re a resident somewhere else, use HMRC’s standard claim form.

When you’ve filled in the form, send it to the tax authority in the country where you’re resident. They’ll confirm your eligibility and either send the form to HMRC or return it to you to send on (use the address on the form).

There’s a different form for individuals and companies claiming a refund on dividends paid by UK Real Estate Investment Trusts.

Capital gains tax

You only pay capital gains tax on UK property or land, not on other assets like UK shares. Typically, you don’t need to claim tax relief on assets you aren’t taxed on, but check the relevant double taxation agreement. If you return to the UK after being non-resident, you may have to pay non-resident tax UK on assets you owned before leaving (even if you paid tax on gains in your new country). Double taxation relief can usually be claimed.

Dual residents

If you're a resident in both the UK and another country (dual resident), check the other country’s residence rules and its tax year dates. HMRC provides guidance on how to claim double taxation relief UK for dual residents.

Conclusion

Dealing with double taxation means understanding international tax rules and using Double Taxation Agreements (DTAs) wisely. Expat tax filing with DTAs can help you avoid paying taxes twice and secure a better financial future abroad.

You should contact HMRC directly to reclaim any UK taxes you might have overpaid or to request no-tax codes for UK income tax under the Pay As You Earn (PAYE) system. For a smoother expat tax filing process, consider reaching out to Taxd.

Note: This advice is not legally binding and does not affect your right to appeal if you disagree with your tax liability.

FAQs

1. How does tax relief work in the UK?

The amount of tax relief you get cannot be more than the amount of tax you paid in that year. You'll get tax relief based on what you've spent and the rate at which you pay tax. If you claim £60 and pay tax at a rate of 20% in that year, the amount you are entitled to is £12 (20% of £60).

2. Who is eligible for tax relief in the UK?

Workers are usually eligible for tax relief if they're under the age of 75 (if they're 75 years or older, they aren't eligible) and fit under one of the following categories:

They have UK earnings that are subject to income tax for the tax year. They're residents of the UK for some time during the tax year.

3. What is the double taxation relief UK?

Your home country should provide double taxation relief by crediting UK taxes paid. If you're a resident of a country with a double taxation agreement with the UK, you may be eligible for relief from UK tax if you spend fewer than 183 days in the UK and have a non-UK employer.