It is estimated that there are around 9.3 million expats living in the UK, each with their own home country tax requirements.
You should always seek professional advice from a qualified tax advisor before making any decisions. If you are an expat in the UK and would like a 15 min free tax consultation which will cover your UK and home country tax obligations, please complete our contact form and we will arrange for a tax consultant to contact you.
Many of our clients are high net worth individuals with complex tax issues and needs. We take time to gain a deep understanding of our clients’ tax issues and their objectives so that we can advise them appropriately.
The tax rules for UK residents and non-residents are very different, and one of the first thing you need to do is to determine your tax residency and domiciled status in the UK. It is important to remember that even if you are officially a resident in another country, you may still be a tax resident in the UK.
Establishing your UK tax residence status
The HM Revenue & Customs (HMRC) use their Statutory Residence Test to determine whether you are a tax resident which incorporates a number of factors. One of the most common, and often very expensive, mistakes non-residents make is reading about it on the internet and making their own decision about their residence status. Establishing your tax residence status can be complicated, and you should always seek advice from a qualified tax advisor. Getting it wrong can lead to penalties and unexpected tax bills.
What is a Self-Assessment tax return?
A Self-Assessment tax return is a declaration of the income you have received during a tax year. For example, the 2020/21 self-assessment tax return will cover the tax year ended 5 April 2021.
The UK tax year runs from 6th April to the 5th April the following year and most people earning an income in the UK during the tax year will be liable to UK income tax. If this is not paid automatically through a PAYE (pay as you earn) scheme, you are a director of a company, your saving income is above £1,000 or your employment income is over £100,000, you will be required to file a Self-Assessment Tax Return. Your “Self-Assessment” will determine what tax is owed and must be filed and paid by 31st January of the following year.
Under normal circumstances, if the HMRC deems that you are required to complete a Self-Assessment tax return, they will send you a notification once the tax year has ended and will be due to be submitted by October 31st (by paper) that year or January 31st the following year if submitted online. However, even if you did not receive the notice to file your Tax Return, it’s very important that you notify HMRC within 3 months period that you need to complete the tax return. You can be prosecuted if you give false information about the tax you owe.
Any tax payments will be due by 31st January. You may also need to make a payment on account on 31 July.
For example: You are requested to submit a tax return for the tax year 2018/19. You receive a notification in the post in May 2019. Your tax return will be due by October 31st 2019 if you intend to complete your tax return by post. If you are filing your tax return online, it must be submitted by 31st January 2020. All payments must also be received by January 31st 2020.
Expats tax obligations can be a highly complex, often a controversial affair and for expats living in the UK, it is no different. Failure to correctly file your taxes in the home country and the UK can result in significant penalties (sometimes thousands of pounds sterling).
However, it might also be possible to legally exclude some of the earned income from tax and reduce your tax liability. Therefore, it is worth getting professional advice to ensure you fully understand your tax obligations as an expat.
Double taxation treaties
A lot of countries have taxation treaties with the United Kingdom. The primary purpose of double taxation treaties is to minimise the chance of double taxation on any income and is usually delivered through double tax relief. I.e. the Government of another country may allow a tax credit to reduce your tax liability in your home country if tax has already been paid in the UK.
However, if it is not carefully managed, it may still be possible to be taxed twice on the same income. Correctly understanding and utilising the double taxation treaties is difficult and should only be done with the support and guidance from a qualified tax advisor who can understand how to apply rules to maximise any tax credits.
UK tax requirements for expats
If you are an expat living in the UK, you are considered a UK non-dom and the first thing that needs to be established is whether you are a tax resident of the UK.
Introduced in April 2013, the Statutory Residence Test is a series of questions which ultimately determines your UK tax residence status.
If you are considered a tax resident of the UK, you will be liable to pay tax on your worldwide earnings to the UK government.
If you are not considered a tax resident of the UK, you will only be liable for any income arising from work or investments in the UK (for example, a UK based salary, rental income or capital gains).
Under the remittance basis of taxation for non-doms, it is currently possible to pay to maintain a special tax status in the UK where you can technically be a tax resident in the UK, but only owe tax on income earned in the UK or income earned abroad which is remitted into the UK.
Income needed to be included to Self-Assessment Tax Return includes: earnings from employment, earnings from self-employment, receipts from most pension schemes (including state, company and personal), interest generated on the savings accounts (apart from ISA), income from shares, rental income and income paid to you from a trust.
Our team can help you to minimise the amount of income tax that is payable to the HMRC. Through our commitment to providing you with the latest tax advice, support and industry knowledge, our tax consultants can ensure that you pay only what you are liable for.
We can help you navigate through the UK tax system and meet your UK tax return obligations. Few people have sufficient time to give their financial affairs the full attention they deserve. When your wealth is held across a range of assets, such as land, company shares, property, investments, and trusts, it becomes even more difficult to manage and protect. Many of our private clients have complex interests in land, properties or businesses which need to be reflected on tax returns.
We are happy to deal with simple enquiries to clarify factual points on a tax return or more detailed and challenging technical queries, such as the deductibility of expenses, capital allowances, research and development tax credits or questions of residence and domicile and the taxability of overseas income and gains.
We can also provide advice on:
- Tax reliefs
- Tax efficient investments
- The tax consequences of establishing trusts and other structures
- Inheritance tax and succession planning
Many of our private clients have international tax issues – they may be resident but not domiciled in the UK, arriving in or leaving the UK, or be UK residents with overseas investments or businesses.
We advise many non-domiciled individuals on appropriate structures for holding their personal and business assets. In many cases, relief is available for remittances used to invest in UK businesses, and we can advise you on the conditions for obtaining this relief.
If you are arriving in or leaving the UK, we can advise you on whether you will be resident in the UK for tax purposes. Your UK tax position could be improved by undertaking restructuring before coming to the UK.
We understand that whatever the complexity of a particular client’s affairs, HMRC enquiries can be complex, stressful and difficult to deal with, for both individuals and companies.
HMRC has increased its focus in recent times on investigating the affairs of high net worth individuals and businesses with complex or unusual features, and is showing particular interest in the affairs of taxpayers with international connections. The majority of our clients fall within these categories and we are well versed in dealing with HMRC enquiries and investigations.
Where errors or omissions have been made in past tax returns and if you have previously paid your taxes incorrectly, we can help you get a partial refund and avoid similar mistakes in the future.
PRIVATE CLIENT ADVISORY – PROACTIVE TAX PLANNING
We can help you develop a cohesive management and succession strategy for your privately held wealth enabling you to:
Protect your wealth by understanding and taking control of your financial affairs, especially with regard to current and future tax exposure, especially inheritance tax.
Benefit from better-informed decision making, because you fully understand the issues that affect you or might affect you in future.
Create an informed plan that makes the best use of your wealth for yourself, your retirement and for future generations.
Avoid the threat of future tax demands, by knowing that your financial affairs are proactively managed and you’re paying the correct amount of tax.
Many people lose wealth from threats they never anticipated, so we will challenge your existing planning assumptions and encourage you to consider contingency plans to avoid possible future liabilities.
FILLING IN AND SUBMITTING TAX RETURN FORMS
The majority of British residents as well as people who do not reside in the UK but own business or property or receive an annual income of over £1,000 in the territory of the United Kingdom, have to fill in a tax return form every year. You also have to notify HMRC if you have remitting income or no income.
If you are deemed to be a non-UK resident, it may still be necessary to complete a tax return if you have UK source income even if you owe no tax.
The most common reasons that a tax return may be required are as follows:
- You are self-employed or a partner in a UK partnership
- You are a UK company director
- If you do not live in the UK, but you do some or all of your work in the UK
- You have large amounts of savings or investment income
- You have untaxed savings or investment income
- If you make capital gains from the sale or disposal of assets in the UK
- You own land or property in the UK that is being let
- Your household receives Child Benefit and you have income in excess of £50,000
- You have income from overseas
- You have sold or given an asset away (such as a holiday home or some shares)
- You’ve lived or worked abroad or aren’t domiciled in the UK
- You have remitted income
Income received from investments (e.g. interest and dividends) might still need to be declared even if they are your only UK income or this is the income brought to the UK from abroad. This area can be complex, so it is always worth getting advice before making a decision on whether to declare the income or not.
If you work in the UK, unless tax has already been deducted by your employer through pay as you earn scheme, any work you do will be taxable and you will therefore be required to complete a tax return.
Non-resident tax return penalties
If you file or pay your Self-Assessment after the 31st January, you will incur a penalty. The penalty regime currently in place is as follows:
- 1 day late: Initial penalty of £100
- 3 Months late: Automatic penalty of £10 per day up to a maximum of £900
- 6 months late: A further penalty of the greater of £300 or 5% of the tax that would have been due and payable if the Return had been submitted on time.
- 12 months late: Another penalty of £300 or 5% of the tax that would have been due and payable if the Return had been submitted on time.
In addition to the above you will be required to pay tax geared penalties and interest on any outstanding tax payments.
Our experts will assist you in completing these documents correctly and minimising the amount of taxes to be paid. We will submit your tax return in time to help you avoid any additional fees or penalties. Also, we can assist with any appeals and claims to HMRC.
I’m a non-resident, do I have to complete tax return?
There is no one single rule. Understanding whether you should complete a Self-Assessment tax return is incredibly important and you should never simply assume that you do or don’t have to file a tax return.
I’m not British, but I live in the UK – do I need to file a tax return?
If you are a foreign national living in the UK, (i.e. not domiciled in the UK, but a UK resident), have an income in the UK and have foreign income and/or gains then you will pay tax on:
- your UK income
- your capital gains on assets in the UK
- your foreign income and capital gains if you bring it back to the UK.
A number of key factors will determine whether you should complete a tax return, and you should always seek professional advice to avoid any penalties or double taxation.
Immigration Tax Partners provide a full tax return compliance service which includes:
- Preparation of Personal Tax Return including calculation of your tax liabilities and submission to HMRC
- Completion of additional pages in your Tax Return, e.g. Residence and Foreign Income
- Claiming any reliefs, deductions and allowances
- Schedule of Payments due
- Suggestions for mitigation of your liabilities for the current and future years
- Ensuring that every deadline is met
- Personal situation assessment to potentially reduce tax liabilities
- Correction of incorrectly submitted tax returns for the previous years
As part of the above service, we can analyse your self-assessment tax return to see if any tax savings can be made and we can also review the form to see if there are any anomalies that need to be addressed before the return is submitted.
This process helps to minimise your risk of a HMRC enquiry into your tax affairs. If you are experiencing cashflow problems, we can explore the possibilities of deferring your tax payments or negotiating a payment plan with HM Revenue & Customs on your behalf.
We can take the worry away when it comes to self-assessment tax returns; allowing you to concentrate on running your business.