UK tax facts; What Expats in the UK need to know about UK tax

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What Expats in the UK need to know about UK tax

UK tax facts; Are you an expat planning to move to the UK?

What are the most critical things you need to know is about UK tax? This article will discuss the taxes you’re likely to pay when living in the UK. Understanding important UK Tax facts will spare you from spending more than you need to transfer funds from your home country to the UK and vice versa and more importantly, overpaying on your UK tax returns.

UK tax for a UK resident

You are a UK resident for tax purposes if you meet the following criteria:

  • You spend at least 183 days in the UK within the UK tax year
  • Your only home is in the UK which you owned, rented, or lived in for a minimum total of 91 days. Spending at least 30 days of the tax year in that home, makes you a UK resident as well.

As a UK resident, you need to pay UK tax on all your income, whether received abroad or in the UK.

UK tax for non-resident in the UK

You are considered non-resident for tax purposes if you meet the following criteria:

  • You spend less than 16 days in the UK in the tax year
  • You spend less than 46 days for the previous three tax years that were not classed as a UK resident
  • You work abroad full time
  • You spend less than 90 days in the UK, 30 days of which are spent working abroad

As a non-resident for tax purposes, you don’t have to pay UK tax on any foreign income you receive.

Domicile vs residence: what’s the difference?

Your domicile or where you were born determines your tax liability. If you are domiciled in the UK, you may be charged a 40% inheritance tax on your worldwide assets.

If you only reside in the UK, the only inheritance tax you have to pay is on any UK assets that you own.

How is income taxed in the UK?

UK residents are entitled to a personal allowance, the amount they can earn that is tax-free, which is £11,500 for the 2017/18 tax year. Anything above this amount will be taxed based on the following rates:

  • 20% or the basic rate on any amount above £11,500 and up to up to £45,000
  • 40% on income between £45,001 and up to £150,000
  • 45% on earnings above £150,000

If you are a non-UK resident for tax purposes, make sure to check if your home country has a double taxation agreement with the UK to avoid being taxed twice for the same income or gains.

Sending money overseas to pay tax

Do you need to…

  • Transfer funds from overseas to pay a tax bill in the UK?
  • Pay a tax bill in a different country?

When moving money across on either situation, make sure not to pay over the odds. Take advantage of foreign currency specialists’ exchange rates rather than high street banks. In addition to favourable currency rates, these specialists will also tell you the best times to transfer money.  

UK tax is complicated for UK residents. Non-residents and expats from another country are better off working with tax specialists who can help sort things out, including concerns about PAYE and UK tax return.

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