If you think working out your income
or business tax is hard enough, it becomes even more difficult when
you move abroad. Because contrary to popular belief, British expats
are not exempt from UK tax automatically. No, you’re not. And yes,
we’re not kidding.
The reality is tax requirements for
British expats are complicated. There are plenty of aspects you
must consider, especially with regard to your rental property
In a nutshell, you are liable to
capital gains tax on worldwide income/gains and UK income tax if
you are a UK resident. If your resident status has changed, special
Non-resident for UK Tax
- You are only charged on income
arising from a property/source in the UK.
- You are charged on profits
generated from properties situated in the UK.
- You are charged on interests,
dividend income and other savings that will arise from a source in
the UK. The exception is when an income is considered disregarded
- Rental income is excluded from
- Unless specific relieving
positions are imposed, UK income is chargeable in both basic and
higher rate tax.
- All non-resident British citizens
are eligible for a tax-free personal allowance, although its
availability is currently under review.
- British expats living in a country
that has a double tax treaty with the UK will be protected against
double taxation, but income from property and government pensions
remain taxable in the UK.
- British expats living in the
country without a double tax treaty with the UK is afforded
unilateral relief. That is, they are granted credit in the UK for
foreign taxes paid. This will turn out to be no relief at all if
the country you reside in has a lower tax rate than the
Dual residency for tax
If you happen to be a resident in
the UK and in another country, tax treatment will depend on whether
or not the other country has a double taxation treaty with the UK.
All the rules outlined above will apply accordingly.
Non-Resident Landlord Scheme
This refers to a system of deducting
basic rate tax from your UK rental income before it is passed on to
you. In most cases, your letting agents will operate your NRLS. In
the event that you don’t have one, and your rent is more than Â£100
a week, your tenant will be the one to deduct tax. Whatever
deduction is made, you can set off against your own tax bill at the
end of the year.
There are instances when you are
exempt from NRLS, provided that you seek approval from HMRC to
receive rental income in full or gross. Approval will be granted if
you meet the following criteria:
- You promise to comply with your UK
- Your UK tax affairs are up to
date, with no pending obligations whatsoever.
- You are not liable to UK income
tax in the year that you apply for an approval.
Because of the complexity of your
tax obligation as an overseas landlord, it is best to seek
specialist advice in this area.
Think you may be due a tax refund? Apply here to get
your tax back.