Non UK Resident tax rules

Non UK Resident tax rules


If an individual does not stay in the United Kingdom, he/she will still be required to file a tax return with the HM Revenue and Customs (HMRC), even though an individual is a non-resident. The tax rules for non-residents and United Kingdom residents is very dissimilar, and one of the initial necessities is to define the tax residency status in the United Kingdom. It is imperative to keep in mind that even if an individual is legitimately an inhabitant in another country, he/she may still be a tax resident in the United Kingdom

Creating an individual’s United Kingdom tax residence status

Through their Statutory Residence Test, HMRC decides whether an individual is a tax resident which includes numerous factors. One of the usual mistakes non-residents make is to read about the tax residence status on the internet, and arrive at their own conclusion about their residence status. It must be noted that forming a tax residence status can be complex, and an individual should at all times seek guidance from a competent accountant. Getting it wrong can result in unexpected tax bills and penalties

What is a Self-Assessment tax return?

An individual’s Self-Assessment tax return is an affirmation of the income earned during a tax year. For example, the 2017/18 self-assessment tax return will include the tax year ended 5 April 2018 (tax year starts on 6 April and finishes on 5 April). The tax return will allow the HMRC to compute the amount of tax an individual owes in the UK, or any reimbursements which are owed to individual from income received all through the tax year under assessment’

Under usual conditions, if the HMRC believes that an individual is obligatory to file a Self-Assessment tax return, they will send the person a notice once the tax year has ended and the return will be due to be given in to by October 31st (through paper) in that year or January 31st the subsequent year, if filed online. Usually, tax payments are due by 31st January. For example: An individual is required to submit a 2017/18 tax return and receives a notice by post in May 2018. In such a scenario, the tax return will be due by 31st October 2018 if an individual aims to complete and submit the tax return by post. However, if an individual is filing a tax return online, it must be submitted by 31st January 2019

Tax return requirements for Non-resident

Just because an individual does not stay in the United Kingdom, he/she may still have to complete a tax return. If an individual is believed to be a non-United Kingdom resident, it may still be essential to file a tax return if he/she has United Kingdom source income even if no tax is payable. Classic situations that may need a tax return for non-United Kingdom residents to be filed include:

  • If an individual is a director of a United Kingdom company
  • If an individual does not stay in the United Kingdom, however, has done certain work in the United Kingdom
  • If an individual receives profits from a United Kingdom partnership
  • If an individual made capital gains from disposal of assets in the United Kingdom
  • If an individual receives United Kingdom rental income
  • If an individual earns some income in the United Kingdom through self-employment

Earnings received from investments (such as dividends or interest) characteristically do not have to be acknowledged if that is the only United Kingdom earning and the total is less than £11,000. If an individual works in the United Kingdom, any work performed will be taxable (unless tax was pre-deducted by an employer through pay-as-you-earn scheme) and will consequently be obligatory to complete a tax return

It is also imperative to keep in mind that an individual may be taxed on income in their country of residence, if it is the United Kingdom. However, the United Kingdom has double tax treaties with certain countries which implies that tax is only payable in one country

Non-resident tax return penalties

If an individual files Self-Assessment tax return after 31st January (via online), he/she will suffer a fine. The penalty rule is as follows:

Act 2006 and earlier Companies Acts:

  • Filing a return 1 day late results in an initial fine of £100
  • Filing a return 3 months after the due date will result in an automatic fine of £10 each day, up to a maximum of £900
  • Filing a return 6 months after the due date will result in fine of greater than £300 or 5% of the tax that would have been due
  • Filing a return12 months after the due date will result in a penalty of £300 or 5% of the tax due and payable if the return was submitted on time.


An individual is a non-resident – does he/she have to complete tax return?

In order to arrive at a conclusion, it is imperative to understand whether the person needs to complete a Self-Assessment tax return and should never assume that they do or don’t have to complete a tax return

An individual is not a British citizen, however, he/she stays in the United Kingdom – what is the tax return status?

If an individual is a foreign national staying in the United Kingdom, and has an income in the United Kingdom, as well as foreign income then he/she will pay tax on:

  • Capital gains on assets in the United Kingdom
  • United Kingdom income
  • Capital gains and foreign income, if he/she bring it back to the United Kingdom

A number of key factors will regulate whether an individual should file a tax return, and it is imperative to seek professional advice to avoid double taxation or any penalties

Speak to a tax consultation

If an individual is in any doubt with regards to the tax return, he/she should always interact with a consultant. The adviser must be skilful in assisting non-UK residents in the United Kingdom with tax matters, be able to institute tax residence status and assist in completing the tax return, if required

What if an individual is taxed twice

An individual can typically be taxed in the home country and in the United Kingdom. An individual might not be required to pay the tax twice if his/her home country has a ‘Double taxation agreement’ with the United Kingdom. Basis the agreement, an individual can apply for:

  • Full or partial relief before an individual has been taxed
  • A refund after an individual has been taxed
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