Nickie’s thoughts drift to foreign parts…
It’s a dark, drizzly early December morning here – so I thought I’d turn my thoughts to further afield, perhaps even sunnier climes… but that brought thoughts of Tax. I can’t help it, I’m an accountant!
If you are a UK resident but have income from abroad, you need to pay tax on that income. You may, for example, have wages from abroad, foreign dividends and savings interest, or possibly foreign rental property income.
If you do own property abroad, purchased to allow you an escape to the sunshine which is used purely for personal purposes and not rented out, then there are no income tax issues. Beware when you sell, though, as this may result in a capital gains tax liability.
We have some clients who own a foreign property and rent it out to earn a little income from it. This income needs to be reported, but deductions for allowable expenses need to be taken into account to reduce your tax liability.
If you have income from abroad and are unsure on your position, we firstly need to look at your residence status. UK residence rules depend on how many days you spend in the UK in the tax year.
You are automatically resident if you spend either:
- 183 or more days in the UK in the tax year or
- your only home is in the UK, you must have rented or lived in it for at least 91 days in total and spent at least 30 days there in the tax year.
Non-resident status is automatic if
- you spent less than 16 days in the UK or
- you work abroad full-time and spent less than 91 days in the UK of which less than 31 were spent working
These rules can be quite complicated and each individual case needs looking at closely to be sure which category you fall in.
After years of living abroad you can find yourself changing status quite suddenly on a move to the UK.
If you have lived abroad for more than a year you may need to look at split year treatment. Moving in or out of the UK, the tax year is usually split into 2. These means you only pay tax on the foreign income from the time you were living here, splitting the year and the income.
If you feel you may have foreign income you need to report you will need to submit a self-assessment tax return. The tax can be calculated and reported on special foreign pages added to the standard tax return. When completing a return, we always need to supply all income and gains even if they have already been taxed, so that overall the total income and total tax can be assessed.
It is a complex area – but we can help! Do get in touch…