Your tax return: the basics
December 9, 2018
Employees entertainment expenses
January 28, 2019
When you come from abroad i.e. France, Belgium, etc. to live in the UK, you become a UK resident, eventually a UK ordinarily resident but you usually remain a non-domiciled person.
In this case, do you need to declare your foreign income? What if you have already paid your taxes in your country of origin?
The income you declare in the UK depends if you are on a remittance or arising basis.
1. « Remittance » et « arising basis »
1.1 « Remittance »
You will be liable to UK tax on all of your UK income and gains as they arise or accrue each year but you will only be liable to UK tax on your foreign income and/or gains if and when you bring them (remit them) to the UK.
If you choose to be on a remittance basis, you will lose your “Personal Allowance” ie you will pay your taxes from the first pound you earn.
1.2 « Arising Basis »
Being taxed on an arising basis means that you are liable to pay UK tax on your worldwide income and gains, wherever those arise or accrue.
2. If you’ve already paid tax in the country of origin
If you find that you’re being asked to pay tax both in the country of origin and in the UK, you may be able to claim relief – ‘foreign tax credit relief’ – from double taxation.
How much foreign tax credit relief will you get?
You’ll get relief on the lower of:
- foreign tax payable under the terms of the agreement
- the amount of UK tax due
If the foreign tax you’re due to pay is more than that payable as UK tax, you’ll still only get relief on the amount of UK tax payable.
3. Earned income
Earned income is any payment you receive as a result of an employment, from a trade, profession or vocation you have, or from a pension you receive.
3.1. Earnings you receive from an employer
When you are liable to UK tax on the arising basis, you are taxed in the UK on your earnings from any employments, whether your duties of employment are carried out in the UK or abroad.
If you can and choose to be liable to UK tax on the remittance basis, your UK employment earnings are taxed in the UK but any earnings from employment abroad will only be taxed if they are remitted here.
But if you are resident and ordinarily resident in the UK, but are not domiciled here, the remittance basis will apply only to foreign employment income where the employment is performed wholly outside the UK for a foreign (non-UK) employer.
3.2 Tax on foreign savings and investment income
Foreign tax on dividends and interest
Double taxation agreements usually set out a rate of tax (called ‘withholding tax’) that a country can charge on a UK resident receiving certain types of income from that country – for example, dividends from companies or interest on savings.
Any claim that you make for relief against UK tax must be restricted to this amount. If you’ve paid foreign withholding tax at a higher rate than is listed for that type of income, you’ll need to approach the overseas tax authority for a refund of the tax paid above the withholding tax rate.
Rent from overseas property
If UK tax is due on rental income from an overseas property, you can deduct certain expenses and allowances in the same way as you can from income from UK property.
You can claim relief for tax paid in the other country.
3.3 Pensions
If you receive pension payments from outside the UK (an overseas pension) you might be entitled to a 10% deduction from the amount chargeable.
To summarise, if you come from abroad to live in the UK, you need to determine first if you are on a remittance or arising basis. This depends on each specific case. If you are on a remittance basis, your foreign income will not be taxed in the UK unless you remit it in this country.
If you are on an arising basis, your worldwide income will be taxed in the UK. However, you will not pay your taxes twice i.e. if you have already paid your taxes in France, you will get a tax relief.
International taxation is a complex area. We do not take any responsibility if your interpretation of the information provided is wrong. We would advise you to consult us before making any decision.
For further information, please contact us:
Phone : +44 (0)778 986 2405
+44 (0)845 680 5168
