Your ‘residence’ is where you spend your time for tax purposes. It is not the same as nationality, citizenship or domicile.
It’s important to know your residence status if you generate income from abroad, as it will affect how much tax you need to pay for that tax year.
The UK tax year runs from 6 April to the following 5 April. If you are not a UK resident, you will only need to pay UK tax on your UK income and not on your foreign income.
If you are UK resident, you need to pay tax on all your income, whether from UK or abroad. There are, however, special rules if your permanent home – otherwise known as your ‘domicile’ – is abroad.
Your residence is determined by the Statutory Residence Test, which is made up of four parts:
1. How much time have you spent in the UK in a tax year?
You are automatically resident in the UK if, within the tax year:
- you spent 183 or more days in the UK; or
- you have a home in the UK that was available for at least one consecutive period of 91 days (with at least 30 of these days falling within the tax year). If you have an overseas home, you must have spent less than 30 days there during the tax year.
- You don’t work on a ship or plane, and you do work full time with no significant breaks for 12 months. At least one working day must fall in the tax year and more than 75% of your work days in the year are UK working days).
You are automatically non-resident in the UK if, within the tax year:
- you were in the UK for less than 16 days; or
- you worked abroad full time (an average of 35 hours a week) with no significant breaks, and were in the UK for less than 91 days, with fewer than 30 of those days spent working.
Make sure you keep a record of trips back to the UK, and any days in the tax year where you spend more than three hours working in the UK.
What if I move during the year?
If you move in to, or out of, the UK, the tax year is usually split into a non-resident part and a resident part. This ‘split-year treatment’ means you only pay UK tax on foreign income based on the time you were living in the UK.
2. Leaving the UK (Automatic Overseas Test)
The Automatic Overseas Test will apply if you leave the UK part way through a tax year, either to:
- Work overseas full time
- Accompany a partner who has started work abroad full time
- Live abroad and cease to have a home in the UK (if you had a UK home, you need to have given it up at the start of the year) and spend less than 15 days in the UK that tax year.
3. Arriving in the UK (Automatic Residence Test)
The Automatic Residence Test will apply if you:
- Start to have your only home in the UK
- Start full time work in the UK
- Return to the UK after a period of work abroad
- Accompany a partner who has returned to the UK following work abroad
4. Sufficient Ties Test
If you’re no longer UK resident, but don’t qualify under the Statutory Residence Test, the Sufficient Ties Test may help. This looks at how many days you have spent in the UK during the year, your permanent status re your work and home, the 90-day rule and your country of residence.
Leaving – and returning
If you have left the UK and returned in less than five years, you are treated as temporary non-resident, meaning any gains realised during that period are taxable in the year you return.
As you can see, this can all get quite complicated. If you are in any doubt about your residence, seek advice from a qualified professional