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UK Tax Issues

Your liability to UK tax will depend on whether you are resident in the UK, or not resident in any particular tax year. It is possible to be resident in one year and not resident in another if your circumstances change. In some cases your liability to UK tax may also depend on whether you are ordinarily resident or not ordinarily resident in the UK.

How do I know whether I am resident in the UK?

This normally depends on how much time you spend in the UK in a tax year. Even if you live or have retired abroad, you may nevertheless be resident in the UK for tax purposes if you spend part of the year in the UK.

You will be resident in the UK if you spend 183 days or more in the UK during the tax year, or your visits to the UK average 91 days or more a tax year over a maximum of four years.

You will be ordinarily resident in the UK if, broadly, you are resident in the UK year after year. You can remain ordinarily resident in the UK even if you are not resident in the UK during a particular year – for example, because you normally live in the UK but go abroad for a long holiday and do not set foot in the UK during that year. Or, you can be resident in the UK in a particular year without being ordinarily resident in the UK, for example, because you normally live abroad but spend more than 182 days in the UK in that year.

Your position will depend on all the facts in your particular case. If you are not resident in the UK for tax purposes, you will not be liable to UK tax on any overseas income. You will, however, normally remain liable to UK tax on your UK income. Whether you will pay tax and if so at what rate will depend on the type and amount of your chargeable income.

If you are not ordinarily resident in the UK for tax purposes, you will not be liable to UK tax on the interest from exempt UK Government securities. You may also be able to apply for bank and building society interest to be paid to you without deduction of UK tax.

What counts as UK income?

UK income is any income from a source in the UK. The UK covers England, Wales, Scotland and Northern Ireland. Everywhere else is ‘overseas’, including the Channel Islands and the Isle of Man. Examples of UK income are:

  • Interest from a UK bank or building society account
  • Interest paid by a UK company
  • Dividends from a UK company
  • Interest on UK Government securities (gilts)
  • Income from property in the UK
  • UK pensions or annuities.

Will I be entitled to any relief from UK tax on my income?

Your liability to UK tax may be reduced in certain circumstances, for example if there is a double taxation agreement between the UK and the country in which you live, or you are able to claim personal allowances.

What is a ‘double taxation’ agreement?

‘Double taxation’ occurs when tax is charged by both the UK and another country on the same income. A double taxation agreement is an arrangement between the UK and another country, which aims to prevent, or give relief for, double taxation.

What if I return to the UK?

Return visits will not change your tax position as long as they do not make you resident in the UK. If you return to the UK and do become resident, you may be liable to UK tax on overseas income, and you will still be liable to UK tax on your UK income. If you return to the UK to live, you should tell your UK Tax Office or the Inland Revenue office which dealt with your tax when you were abroad.

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