Category: Overseas personal tax issues

If you are UK resident and receive income from abroad, such as overseas wages, rent, or investments, you may need to pay UK Income Tax and report it through Self-Assessment.

Income Tax is generally payable on taxable income received by individuals including earnings from employment, earnings from self-employment, pensions income, interest on most savings, dividend income, rental income and trust income. The tax rules for foreign income can be complex. 

However, as a general rule if you are resident in the UK you need to pay UK Income Tax on your foreign income, such as:

• wages if you work abroad
• foreign investments and savings interest
• rental income on overseas property
• income from pensions held overseas

Foreign income is defined as any income from outside England, Scotland, Wales and Northern Ireland. The Channel Islands and the Isle of Man are classed as foreign. Different rules may apply if you’re eligible for Foreign Income and Gains relief.

If you are a UK resident, then you will usually need to complete a self-assessment tax return for foreign income or capital gains. The main exceptions are if your only foreign income is dividends and your total dividends (including UK dividends) are less than the £500 or you have no other income to report.

From 6 April 2025, non-doms face a major shift as the remittance basis is replaced by the Foreign Income and Gains (FIG) regime, now determined by UK tax residence, not domicile. Reporting obligations have expanded significantly.

Under the new rules, nearly all UK-resident individuals must report their foreign income and gains to HMRC, regardless of whether they had previously claimed remittance basis or are claiming relief under the FIG regime.

Former remittance basis users not eligible for the new FIG relief will now be taxed on newly arising foreign income and gains in the same way as other UK residents. However, they will still be taxed on any pre-6 April 2025 FIG that is remitted to the UK.

A key feature of the new regime is the 4-year FIG exemption, available to new UK residents who have not been UK tax resident in any of the 10 preceding tax years. These individuals can opt to receive full tax relief on their FIG for up to four years. Claims must be made through a Self-Assessment return, with deadlines falling on 31 January in the second tax year after the relevant claim year.

Importantly, claims can be made selectively in any of the four years but must include quantified figures for income and gains otherwise, tax will be due at standard rates. An individual’s ability to qualify for the 4-year FIG regime will be determined by whether they are UK resident under the Statutory Residence Test (SRT).

From 6 April 2025, the remittance basis for non-doms is abolished. A new UK tax regime now applies to non-domiciled individuals, focused solely on residence. New arrivals can benefit from a 4-year exemption on foreign income and gains, but action is needed. CGT rebasing, Overseas Workday Relief, and a limited-time 12%–15% repatriation facility could all offer planning opportunities. Review your position now.

Since 6 April 2025, significant changes to the UK tax status for non-UK domiciled individuals have come into force. The remittance basis of taxation has been abolished, and a simplified, residence-based regime is now in place. This marks a fundamental shift in how foreign income and gains (FIG) are taxed for individuals living in the UK.

Under the new system, a 4-year FIG regime has been introduced. Individuals newly arriving in the UK, who have not been UK tax residents in the previous ten consecutive years, can claim 100% tax relief on their foreign income and gains for their first four years of UK residence.

To ease the transition, Capital Gains Tax (CGT) rebasing is available. Those who previously used the remittance basis may rebase personally held foreign assets to their 5 April 2017 value, subject to conditions.

Overseas Workday Relief has also been extended to a four-year term, matching the FIG regime. From now on, this relief no longer requires employment income to remain offshore.

A Temporary Repatriation Facility (TRF) has also been launched. Running for three years from April 2025, it allows individuals taxed under the old remittance rules to bring in pre-reform foreign income and gains at reduced tax rates—12% for the first two years and 15% in the final year. This includes income and gains held in trust structures that were previously untaxed.

It was confirmed as part of the Autumn Budget measures that changes announced by the previous government at the Spring Budget earlier this year will proceed almost entirely as initially announced. From April 2025, the government will abolish the remittance basis of taxation for non-UK domiciled individuals and replace it with a simpler residence-based regime.

The government will also introduce a 4-year foreign income and gains (FIG) regime. New arrivals to the UK who opt into the regime will benefit from 100% relief on FIG in their first four years of tax residence, provided they have not been UK tax resident in any of the 10 consecutive years prior to their arrival.

As a transitional measure for Capital Gains Tax purposes, current and past remittance basis users will be able to rebase personally held foreign assets they held on 5 April 2017 to that date where certain conditions are met.

Overseas Workday Relief will be extended to a 4 year period to align with the new 4-year FIG regime. This will remove the need for users of this relief to keep their employment income offshore. The amount of Overseas Workday Relief that can be claimed annually will be limited to the lower of £300,000 or 30% of the employee’s net employment income from 6 April 2025.

A new Temporary Repatriation Facility (TRF) for individuals who have been taxed on the remittance basis will also be introduced from April 2025 for 3 years. This will allow individuals to designate and remit at a reduced rate foreign income and gains that arose prior to the changes. This includes unattributed foreign income and gains held within trust structures. The TRF rate will be 12% for the first 2 years and 15% in the final tax year of operation.

A reminder that the government has stated that it will remove preferential tax treatment based on domicile status for all new foreign income and gains (FIG) that arise from 6 April 2025. To replace the present remittance basis of tax, the government will introduce an internationally competitive residence-based regime, providing 100% relief on FIG for new arrivals to the UK in their first four years of tax residence, this is provided that they have not been UK tax resident in any of the 10 consecutive years prior to their arrival.

From 6 April 2025, the protection from tax on income and gains arising within settlor-interested trust structures will no longer be available for non-domiciled and deemed domiciled individuals who do not qualify for the 4-year FIG regime.

The government intends to conduct a review of offshore anti-avoidance legislation, including the Transfer of Assets Abroad and Settlements legislation, to modernise the rules and ensure they are fit for purpose. The intention for this review will be to remove ambiguity and uncertainty in the legislation, make the rules simpler to apply in practice and ensure these anti-avoidance provisions are effective. Further details on the review will be provided in due course. It is not anticipated that this review will result in any changes before the start of the 2026-27 tax year.

A form of Overseas Workday Relief (OWR) will be retained. Government officials will engage with stakeholders on the design principles for this tax relief and further details are expected to be confirmed in the Budget later this month.

One of the more ‘niche’ measures introduced as part of the Autumn Statement measures related to Capital Gains Tax: Share for Share Exchange. 

This is intended to stop UK tax being avoided by non-UK domiciled individuals on chargeable gains made on the disposal of a UK business, or income received in respect of shares or securities held in a UK business, by exchanging securities in a UK company for securities in a non-UK holding company. 

The new measure took effect for share exchanges or schemes of reconstruction conducted on or after 17 November 2022. The measure only applies to holdings greater than 5% in ‘close’ companies.

The measure deems shares and securities in a non-UK company received in exchange for share or securities in a UK company to be located in the UK for the purpose of Capital Gains Tax.

Non-domiciled individuals will now pay tax on gains or income received from the shares or securities in the non-UK company, in the same way as if they were in a UK company.
 

UK Income Tax is generally payable on taxable income received by individuals including earnings from employment, earnings from self-employment, pensions income, interest on most savings, dividend income, rental income and trust income. The tax rules for foreign income can be overly complex.

However, as a general rule if you are resident in the UK you will need to pay UK Income Tax on your foreign income, such as:

• wages if you work abroad;
• foreign investments and savings interest;
• rental income on overseas property; and
• income from pensions held overseas.

Foreign income is defined as any income from outside England, Scotland, Wales and Northern Ireland. The Channel Islands and the Isle of Man are classed as foreign.

If you are not UK resident, you do not generally have to pay UK tax on your foreign income. There are special rules if you work both in the UK and abroad.

The rules are even more complicated when addressing the liability to UK Income Tax for non-domiciles spending a substantial amount of time in the UK. There is a concept in the UK of deemed domicile, whereby any person who has been resident in the UK for more than 15 of the previous 20 years will be deemed to be domiciled in the UK for tax purposes.

Other non-doms living in the UK that wish to retain access to the remittance basis of taxation must pay an additional sum in addition to the tax on any income or gains remitted. This sum is known as the Remittance Basis Charge.

Domicile is a general legal concept which in basic terms is taken to mean the country where you permanently belong. However, actually determining domicile status can be complex. In fact, HMRC’s guidance states that domicile cannot be defined precisely, but the concept rests on various basic principles.

• Every individual must have a domicile at all times. The law ascribes a domicile to those individuals it regards as lacking capacity to choose one.
• An individual cannot have more than one domicile at the same time for the same purpose.
• An existing domicile is presumed to continue until it is proven that a new domicile has been acquired.

Your first domicile, known as a domicile of origin, is based on that of your parents, usually your father. Your domicile will change if you acquire a new domicile of choice. To do this, you usually have to move to another country and establish a permanent intention to remain there.

Although domicile can change, there is generally a presumption in favour of the continuation of an existing domicile. To change a domicile, lots of factors are considered. For example, the location family, property and business interests. The issues that need to be considered are one of the primary reasons that many of these complex cases are decided in court.

It is also possible for an individual to have two domiciles although this is unusual. Further, there is a concept in the UK of deemed domicile, whereby any person who has been resident in the UK for more than 15 of the previous 20 years will be deemed to be domiciled in the UK for tax purposes.

The length of time you intend to export your car from the UK will determine declarations that you will need to make to the UK authorities and to overseas customs. It will also play an important role in determining the documentation that will be required both in the UK and on arrival at the overseas destination.

If you are taking your vehicle out of the UK for more than 12 months, it will be considered permanently exported and you must notify the DVLA. You can do this by completing the ‘permanent export’ section of your vehicle log book (V5C) to show the intended date of export. The completed V5C form should then be returned to DVLA along with a letter confirming you have moved abroad and require a vehicle tax refund (if you’re entitled to one) be sent to your new address.

You should keep the rest of your log book with you as you may have to hand it over to the relevant authority when the vehicle is registered abroad.

If you’re buying a vehicle to take abroad make sure the seller follows the correct process for vehicles that will be registered in another country. They must give you the full log book (V5C) – not just the new keeper slip. The process is more complex if you do not have a vehicle log book (V5C).

If you are taking your vehicle out of the country for less than 12 months then this is known as a ‘temporary export’ and the rules are different.

The rules for driving may change from 1 January 2021 when the UK leaves the EU. For example, you might need an international driving permit (IDP) to drive in some countries.

The Statutory Resident Test (SRT) rules can be used to determine if someone is resident in the UK for tax purposes. These rules are especially important in cases where an expat or non-dom stays for more than a certain number of days in the UK. Depending on certain pre-defined tests, non-residents can spend between 16 to 183 days in the UK each tax year before they have to start paying UK tax.

In an update to the exceptional circumstances rules for claiming the SRT, HMRC accepts that the Coronavirus (COVID-19) pandemic may impact a person's ability to move freely, to and from the UK or require someone to remain unexpectedly in the UK.

The revised guidance states that if you:

• are quarantined or advised by a health professional or public health guidance to self-isolate in the UK as a result of the virus
• find yourself advised by official Government advice not to travel from the UK as a result of the virus
• are unable to leave the UK as a result of the closure of international borders, or
• are asked by your employer to return to the UK temporarily as a result of the virus

the circumstances are considered as exceptional.

HM Treasury has also issued a letter confirming they will amend the SRT to ensure that any period(s) between 1 March and 1 June 2020 spent in the UK by individuals working on COVID-19 related activities will not count towards the residence tests.

If you are leaving the UK to work abroad for at least one year (or permanently), there is a requirement to notify HMRC. This is done using a P85 form which should be completed and submitted to HMRC. You will also be required to submit a Self-Assessment tax return if you usually complete one, for example, if you are self-employed.

The completion of the P85 form will also ensure you can claim any tax refund you are entitled to and will also help HMRC decide how you should be treated for the purposes of UK tax. 

The P85 form can be found on the GOV.UK website. There is an online form available as well as a postal form. Your liability to Income Tax will depend on whether you are resident and / or ordinarily resident and / or domiciled in the UK. 

It is also important to consider the National Insurance (NI) implications of working abroad. In some cases, it can be beneficial to continue paying NI contributions whilst abroad as this should help you secure state pension credits.

Domicile is a general legal concept which in basic terms is taken to mean the country where you permanently belong. However, determining domicile status can be complex. In fact, HMRC guidance states that domicile cannot be defined precisely, but the concept rests on various basic principles.

• Every individual must have a domicile at all times. The law ascribes a domicile to those individuals it regards as lacking capacity to choose one.
• An individual cannot have more than one domicile at the same time for the same purpose.
• An existing domicile is presumed to continue until it is proven that a new domicile has been acquired.

Your first domicile, known as a domicile of origin, is based on that of your parents, usually your father. Your domicile will only change if you acquire a new domicile of choice. To do this, you usually have to move to another country and establish a permanent intention to remain there.

Although domicile can change, there is generally a presumption in favour of the continuation of an existing domicile. To change a domicile, lots of factors are taken into account for example, the location family, property and business interests. This issues that need to be considered are one of the primary reasons that many of these complex cases end up with the courts having to determine the issue.

It is also possible in certain circumstances for an individual to have two domiciles although this is unusual. There is also a concept in the UK of deemed domicile – under new rules introduced from 6 April 2017, any person who has been resident in the UK for more than 15 of the previous 20 years will be deemed to be domiciled in the UK for tax purposes.

The HMRC Double Taxation Relief Manual sets out the overall principles to be applied in respect of pension income.

It states:

‘Pensions, other than Government pensions, paid in consideration of past employment to a resident of a country with which the United Kingdom has a double taxation agreement, are normally taxable only in the country of which the pensioner is a resident, but there are exceptions to this.

For example, the agreement with Sweden gives limited taxing rights to the source country; the agreement with Zimbabwe gives sole taxing rights to the source country if the employment in respect of which the pension is paid was exercised in the source country; and some other agreements enable both countries to tax such pensions, or only give exemption in the source country if the pension is subject to tax in the country of which the recipient is a resident.

Claims by residents of agreement countries to exemption from United Kingdom tax on such pensions are made to HMRC. The relevant office will authorise non-deduction of United Kingdom tax if a claim is accepted.’

Double Taxation Agreements (DTAs) are drafted to stop scenarios where income and gains are taxed twice. Most DTAs contain articles that govern the taxation of pension income and this varies from country to country. In many cases the DTA awards taxation rights to one State at the exclusion of another State.

Planning note

Anyone considering retiring to a different jurisdiction should give careful consideration to how their pension would be taxed abroad as well as quantifying the cost of living etc. We can help with the calculations.

Income Tax is generally payable on taxable income received by individuals in the UK, including earnings from employment, earnings from self-employment, pensions income, interest on most savings, dividend income, rental income and trust income.

However, if you are resident in the UK you will also need to pay UK Income Tax on your foreign income, such as:

• wages if you work abroad
• foreign investments and savings interest
• rental income on overseas property
• income from pensions held overseas

Foreign income is defined as any income from outside England, Scotland, Wales and Northern Ireland. The Channel Islands and the Isle of Man are classed as foreign

If you are not UK resident for tax purposes, you may not be required to pay UK tax on your foreign income. There are special rules if you work both in the UK and abroad.

Planning note

The rules become more complex if we consider the liability to UK Income Tax for non-domiciles spending a substantial amount of time in the UK. New measures came into effect from April 2017, whereby any person who has been resident in the UK for more than 15 of the previous 20 years will be deemed to be domiciled in the UK for tax purposes. Some other Non-doms living in the UK that wish to retain access to the remittance basis of taxation must pay an additional sum in addition to the tax on any income or gains remitted. This sum is known as the Remittance Basis Charge.

If you are concerned that any of these issues affect you, we would be happy to discuss your options.