What Taxes Need To Be Paid When You Move To The UK?
Employment Income
Employment performed wholly or partly in the UK is liable to UK tax.
For many employees, they are seconded from overseas and remain on the payroll in their home country. Although you may be paying taxes in that country, you are still taxed in the UK on any work you perform in the UK.
To stop double taxation, you may be able to claim the UK tax against the foreign tax on your employment performed in the UK.
See below for using the double taxation agreement for employments in the UK lasting less than 183 where you are employed by a non UK resident employer.
Overseas Workdays
If you move to the UK and are UK tax resident, for the first 3 tax years any days you spend working outside the UK can be excluded from UK tax.
To qualify for overseas workdays relief:
You are not domiciled in the UK for that year (domicile is your long-term tax home)
You claim the remittance basis
You are paid outside the UK for any work performed outside the UK and those funds are not transferred to the UK
Claiming Travel, Accommodation and Subsistence
If you have been seconded to the UK, where the plan is for the duration to not exceed 24 months, you can claim:
The cost of traveling to work during the secondment
Accommodation for the duration of the secondment
Additional subsistence costs attributable to the secondment
The expenses will be claimed in your UK tax return, this is known as Detached Duty Relief.
Self-Employed Income
If you are UK tax resident, you are taxed in the UK on all self-employed income whether this is performed in the UK or abroad.
If you can claim the remittance basis, any income from self-employed work performed outside the UK will be taxed in the UK only if the income is remitted (transferred) back to the UK.
Even if you are paid outside of the UK, if you perform the work in the UK then you are liable to tax in the UK on that work.
Using The Double Taxation Agreements
Employed income - for employees working in the UK who are not UK resident and they work for an employer who is non-resident in the UK, they may be able to use the double tax treaty to exempt the income from liability to UK tax.
Self-employed income - there are specific clauses in double tax treaties to provide relief against UK tax for non UK resident entertainers, such as a theatre, motion picture, radio, or television artist, or a musician, or as a sportsman, from their personal activities performed in the UK.
Remittance Basis
If you move to the UK and your permanent tax home (domicile) is outside the UK, you may not have to pay UK tax on your foreign income for the first 7 tax years.
Claiming the remittance basis means you only pay tax on the foreign income or gains that you transfer to the UK.
You can claim foreign tax credits against the UK tax due on the same foreign income.
The downside is that by claiming the remittance basis you will lose your tax free allowances (personal allowances) for income tax and capital gains tax.
If your foreign income and gains are less that £2,000 there is no UK tax while your domicile remains outside the UK and you don't transfer those funds to the UK. This relief is available even after the 7 year period mentioned above.
After 7 years you can still exclude all your foreign income and gains (if these are more than £2,000) by paying the annual remittance basis charge. This is £30,000 per year for years 8, 9, 10 and 11. Then the annual charge increases to £60,000 from year 12. See domicile section below for when you go into year 16.
Domicile (permanent tax home)
In April 2017, the government decided to introduce rules to override common law and treat you as domiciled in the UK for tax purposes if you meet condition A or B below.
Condition A
To meet this condition you must:
be born in the UK
have the UK as your domicile of origin
be resident in the UK for 2017 to 2018, or later years
Condition B
Condition B is met when you’ve been UK resident for at least 15 of the 20 tax years before the current tax year.
Other Income
If you have any other UK source income, that will need to be taxed in the UK, normally through a UK self-assessment tax return.
Including:
Property income and expenses
Investment income (interest, dividends and capital gains - even if these are automatically reinvested)
Trust income
ISA income is excluded from UK tax, but may need to be reported if you are tax resident in another country.
For all foreign income, unless you are claiming the remittance basis (or your domicile is outside the UK and the foreign income is less than £2,000 and is not transferred to the UK), you will need to declare worldwide income in the UK.
If you do have foreign taxable income, you can claim the foreign tax against UK tax on the same income.
But, any work performed in the UK will be UK source income, even if you are paid overseas for that work (there are some exceptions for this potentially under the double taxation agreements discussed above).
ANY QUESTIONS
We are very happy to help with any tax questions on moving to the UK and we can run through how to file your UK self-assessment tax return.
Our friendly team of qualified tax advisers and accountants have specialised tax preparation experience to help international clients, non domiciled and dual resident individuals in London, across the UK and will walk you through what the next steps are – contact us today.