Tax Choices For Expats Living In Britain

If you live in the UK but have a main home in another country, HM Revenue and Customs has issued new guidance about how to pay taxes.

Essentially, taxpayers need to decide how they want to pay tax on their gains – such as the sale of property – and income from abroad.

This is a quick guide to help people through the maze.

Am I tax resident?

From April 2013, the rules deciding if someone is resident for tax in Britain changed. Called the Statutory Residence Test (SRT), for most people the rules haven’t really altered – but for those with more complex circumstances then the situation needs to be addressed.

To help, HMRC has launched an online test to help indicate residence and will ask questions such as how many days a person is resident in the country, where their home is and of their family ties.

Am I ‘resident’ or ‘domicile’?

The test is straightforward and, in the case of residents, depends on where the person’s parents are born, where their permanent home is and if they intend returning there.

A person is ‘not ordinarily resident’ for a range of factors including when the person arrived, whether they intend staying for more than three months in a year and whether they intended to stay for more three years when they first arrived.

How do I pay tax as a domicile?

For those living in the UK they have a choice over how they pay their tax on foreign income and gains.

There are two ways to pay: either pay tax in the UK on all UK and foreign income and gains or using a more complicated process known as ‘remittance basis’.

Pay tax on a remittance basis?

This is a more complicated process for paying tax in the UK on all income and gains earned here or overseas.

There is a helpful table to work out which is the most suitable course of action – follow the link at the end of this article – but it’s fairly straightforward.

Are there tax allowances for ‘remittance basis’?

Should the amount of income and/or gains from overseas be worth more than £2,000 then the person will lose their UK tax and Capital Gains Tax allowances under the remittance basis.

What are tax charges?

The rules around the tax status for a person have changed. If you have been resident in the UK for more than seven of the previous nine years, then you will have to pay £30,000 as a tax charge annually.

If you’ve been resident for 12 years or more then the charge will rise to £50,000 a year.