Self Assessment: Tax Rules for Non-Residents

Navigating the tax regulations of HMRC can be daunting, especially for those who are self-employed and living outside the UK or if your circumstances are not simple. Understanding your UK residence status is crucial as a non-UK resident as it determines what tax liabilities you may have here in the UK.

If you are a UK tax resident, the rules are simple - you are taxed on all your income worldwide. But if you're a non-resident, you're only taxed on income earned in the UK. This means if your permanent home is abroad, you won't be taxed on income earned outside the UK.

How do HMRC determine if I am a UK resident?

Your residence status is determined by the number of days you spend in the UK during a given tax year, which runs from April 6th to April 5th.

You're considered a UK resident for a tax year if:

• You spent 183 or more days in the UK.

• The UK was your only home for 91 days or more consecutively, and you stayed there for at least 30 days during the tax year.

• You worked full-time in the UK for any period of 365 days, with at least one day falling within the tax year you're assessing.

Additionally, you might be considered a resident under the "sufficient ties" test if you have other connections to the UK, such as work or family. This flow chart by KPMG is very useful as a starting point.

If none of these criteria apply to you, then you're likely a non-resident for UK tax purposes.

Monitoring is key

Your residence status can change from one tax year to the next due to various factors such as spending more or less time in the UK year-on-year, changes in employment or family status, or relocating homes.

If you move during the tax year, your residence status can change part-way through the year. The UK government provides 'split-year treatment' for individuals relocating to or from the UK, dividing the tax year into resident and non-resident periods to ensure you are not taxed unfairly.

I think I am a non-UK resident, what tax do I pay?

Once you've confirmed you’re a non-UK resident for a particular tax year, you'll need to pay tax on your UK income only.

If you're self-employed or a freelancer, you'll do this by completing an annual Self Assessment tax return and submitting it to HMRC by the deadline, usually January 31st.

This process involves declaring all your earnings and expenses to HMRC, who will then calculate your tax liability. Unlike employees under the PAYE system, self-employed individuals handle their own tax deductions, including income from dividends, pensions, and savings and so on.

If you're planning to establish a limited company business in the UK as a non-resident, make sure to follow HMRC's rules accordingly. Please get in touch for further advice.