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Wednesday, 3 October 2023

Money, tax and benefits

Money, tax and benefits

Tax on overseas income

If you live in the UK permanently you'll pay tax on overseas income. If you live here temporarily, you'll normally pay tax only on overseas income you bring into the UK. If there's a 'double taxation agreement' between the UK and a country in which income originates you won't have to pay tax twice.

What is overseas income?

Overseas income is all your income from outside the UK. The UK excludes the Isle of Man, Channel Islands and the Republic of Ireland.

Overseas income can include:

  • pensions
  • income from overseas investments
  • rental income
  • earnings from working abroad

Effect of residence, ordinary residence and domicile

How much tax you'll pay on overseas income depends on where you're 'resident', 'ordinarily resident' and 'domiciled'.

Resident

  • if you're in the UK for 183 days or more in a tax year, you're a 'resident' for that year for tax purposes
  • if you come to live in the UK permanently or to remain for three years or more you're resident from the date of arrival
  • you're also treated as resident if you're in the UK for an average of 91 days or more in a tax year (worked out over a maximum of four consecutive tax years)

Ordinarily resident

  • if you're resident in the UK year after year you will normally be treated as 'ordinarily resident'
  • you're treated as ordinarily resident in the UK from the date you arrive if it's clear that you intend to stay for at least three years

Domiciled

  • your domicile is normally acquired at birth, but this is a general law concept covering a range of factors

You can be more than one of these in the UK- or none.

If you're resident, ordinarily resident and domiciled

Overseas investment and property income

You'll pay UK tax on the full amount.

Income from overseas pensions

You'll normally pay tax on 90 per cent of the pension.

Income from overseas employment

You'll pay tax on the full amount - unless you're a seafarer and spend long periods abroad.

If you're resident and domiciled but not ordinarily resident

Overseas investment and property income

You can make a claim only to pay tax on overseas income that you bring into the UK - except in the case of income from the Republic of Ireland, which is taxable in full.

Income from overseas pensions

You can make a claim only to pay tax on overseas pensions income that you bring into the UK (called the 'remittance basis'). But this does not apply to a pension from the Republic of Ireland.

If you don't make a claim to be taxed on the remittance basis, you're liable to tax on all overseas pensions whether or not received in the UK. The charge is on 90 per cent of the actual amount of the pension.

Income from overseas employment

You'll pay tax on earnings from work you do abroad if you bring them into the UK.

If you work for an overseas employer and you do all your work in the UK, you'll pay tax on all your earnings.

If you work partly in the UK, you'll pay tax on the part of your earnings allocated to that work. You usually allocate your earnings by looking at the number of days you work in the UK and the number of days working abroad.

If you're resident and ordinarily resident but not domiciled

Overseas investment and property income

You can make a claim only to pay tax on overseas income that you bring into the UK - except in the case of income from the Republic of Ireland which is taxable in full.

Income from overseas pensions

You'll be liable to tax on any overseas pension income received in the UK. However, if the pension's from the Republic of Ireland, you'll pay tax on 90 per cent of the amount whether or not you bring it in. (There are special rules for Irish Government pensions.)

Income from overseas employment

If your employer's British or from the Republic of Ireland, you'll pay tax on all your earnings.

If your employer's not British or from the Republic of Ireland, and you only work abroad, you'll only pay tax on any earnings you bring into the UK. If you do any work in the UK you'll pay tax on all your earnings.

If you're resident but not ordinarily resident and not domiciled

Overseas investment and property income

You can make a claim only to pay tax on overseas income that you bring into the UK - except in the case of income from the Republic of Ireland, which is taxable in full.

Income from overseas pensions

You'll be liable to tax on any overseas pension income received in the UK. However, if the pension's from the Republic of Ireland, you'll pay tax on 90 per cent of the amount whether or not you bring it in. (There are special rules for Irish Government pensions.)

Income from overseas employment

You'll pay tax on any earnings from working overseas that you bring into the UK.

If you work for an overseas employer and you do all your work in the UK, you'll pay tax on all your earnings.

If you work partly in the UK, you'll pay tax on the part of your earnings allocated to that work. You usually allocate your earnings by looking at the number of days you work in the UK and the number of days working abroad.

If you're not resident

Overseas investment and property income

You won't pay any UK tax.

Income from overseas pensions

You won't pay any UK tax.

Income from overseas employment

You'll pay tax only on your earnings for work done in the UK.

If you work partly in the UK, you'll pay tax on the part of your earnings allocated to that work. You usually allocate your earnings by looking at the number of days you work in the UK and the number of days working abroad.

Coming into or leaving the UK part way through the tax year

If you come into or leave the UK part way through a tax year, you may become or stop being UK resident. If this happens, you'll usually be taxed on your overseas income for the part of the year when you were resident.

Double taxation relief

The UK has double taxation agreements with many countries. These aim to ensure that the same income is not taxed twice.

Declaring your overseas income

You declare overseas income on the foreign pages of the Self Assessment tax return, except for overseas employment income which you declare on the employment pages.

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