WHAT IS NON-UK RESIDENCE AND HOW COULD IT AFFECT YOU?

So stay with us as we simplify what it means to be a UK non-resident and how it affects the tax situation.

What is Non-Residence UK?

A non-resident is someone who doesn't live in the United Kingdom for the majority of the tax year. For example, you may live in another country for a proportion of the year and only visit the UK occasionally.

If you're an expat, either moving into the UK or leaving, you'll likely be considered a non-resident for some time. Simply put, being a UK non-resident means you don't live here permanently, which can have significant tax implications.

UK Non-resident Tax Returns

As you may know, a UK tax return is a form that some individuals need to file to inform HMRC of their income. Now, if you're a non-resident, this tax return can be a bit different. You'll report the money you earned in the UK, like rental income or investments, but not your income from other countries.

Here's why it's crucial: the UK government needs to know what you earned on their turf to calculate the right amount of tax you owe. Remember, taxes are essential for public services like healthcare and schools.

Filing a tax return is a way to ensure everyone pays their fair share. If you're a non-resident, it's all about reporting your UK income, nothing more. Don't let the process stress you out; Taxd is here to guide you throughout the tax return process. Taxd covers more ground than a human accountant. This way, we can help you pay the least tax possible.

What About Capital Gains Tax (CGT)?

If you make money by selling assets like property or investments, you may be liable for Capital Gains Tax. Simply put, when a UK non-resident sells a UK property, they will owe a share of the money they earned to the UK government.

The good news is that there's a tax-free allowance of £6,000 (this amount is changing to £3000 in April 2024). This means you won't pay CGT if your profit is below this amount.

If you want to understand how much Capital Gains Tax you owe, use our simple calculator.

HMRC STATUTORY RESIDENCE TESTS (SRT)

The HMRC has used the Statutory Residence Tests (SRT) since April 2013 to determine an individual's residency status for tax purposes. The tests must be applied in a specific order until one is met:

• Automatic Overseas Tests (AOT) – If met, the person is automatically considered non-UK tax resident.
• Automatic UK Tests (AUKT) – If AOT isn’t met, this determines automatic UK tax residency.
• Sufficient Ties Test (STT) – If neither AOT nor AUKT applies, this test looks at UK connections, like having a UK home or a UK-resident partner.

Each test has specific conditions, including the number of days spent in the UK and, for AOT, overseas full-time employment requirements. Many people fail the tests unexpectedly due to remote work changes.

Residency applies to the entire tax year, though there is an option to split the tax year when moving in or out of the UK. This requires careful planning, as errors can expose global income to high UK tax rates.

Does the Duration of UK Non-Residency Matters for Taxes?

If you're wondering how many years you've been a UK non-resident, it's important to know that each tax year can affect your income tax situation.

Here's the deal in simple terms: If you're away for only a short period, the rules might differ from someone who's been a non-resident for several years.

Rules apply if:

• You were a UK resident for at least 4 of the 7 years before departure.
• You become non-resident and return to the UK within 5 years.

Certain UK income sources, such as close company distributions, chargeable event gains, and lump sum pension distributions, will be taxed when you return.

For capital gains tax (CGT):

• Only disposals of assets owned before leaving the UK are taxable.
• Gains from assets acquired and sold during the period of temporary non-residence are exempt from tax.

You can use our tax residency calculator to better understand your tax situation.

Completing A UK Self-Assessment Tax Return with Taxd

• SA109 Form: This form is important for non-residents as it confirms your non-resident status and helps ensure you only pay tax on your UK income.

• SA105 Form (For Non-Resident Landlords): If you earn rental income from UK properties, you need to file this form alongside your SA109.

Here is an overview of the tax filing process:

To start filing your tax return, first obtain your Unique Taxpayer Reference (UTR) by registering for self-assessment on the HMRC website, then prepare and upload a valid photo ID, such as a passport or driver's license, to meet anti-money laundering requirements.

1. Start the Process: Visit the Taxd website and create an account or log in.

2. Select Tax Year and Residency Status: Choose the relevant tax year and confirm your non-resident status by selecting "Resident of another country."

Then, answer the upcoming questions to tailor your tax return.

3. Create an Account: Complete the sign-up process on Taxd and ensure all your information is saved for future reference.

4. SA109: Now, for filing SA109, we have divided the process into 7 sections: Introduction, residence, employment, credits and deductions, general, personal info, and finalising your returns.

5. SA105: In case you are a non-resident landlord earning from properties in the UK, you will have one more section called “Rental (SA105).”

6. Final Review: Once you are through all the sections, review the tax calculation and submit the return digitally to HMRC after verifying your identity.

If you want a detailed step-by-step guide, check out this video:

With Taxd, you can file a self-assessment tax return in as little as 30 minutes.

Conclusion

If you're a UK non-resident, being aware of your tax obligations is a must. From non-residency status and capital gains tax to the impact of your non-residency duration, you must understand these key areas to make informed financial decisions.

If you ever need assistance with the UK Income Tax, consider contacting Taxd. Our company specialises in guiding individuals like yourself through the tax maze, ensuring that you comply with the law while maximising your tax savings.

FAQS

1. What is non-residence UK income tax?

Non-resident income tax refers to the tax owed by non-residents on UK-sourced income.

2. What is Capital Gains Tax (CGT), and how does it relate to UK non-residents?

CGT applies when you profit by selling assets like property in the UK; non-residents may owe CGT on such gains.

3. Can Taxd help me with income tax as a UK non-resident?

Yes, Taxd specialises in assisting individuals with UK Income Tax matters, ensuring compliance and peace of mind for UK non-residents and residents.