Tax Compliance

Tax Returns are required to report your income to HMRC for the UK tax year, which runs from 6 April to 5 April.

Tax Returns are essential documents that provide comprehensive details about your income to HMRC. While they typically apply to self-employed individuals, there are various circumstances that may require you to complete one, such as living overseas and receiving rental income from a property in the UK. Even for seemingly straightforward Tax Returns, the preparation process can be complex, making it common practice to seek guidance from an expat tax expert. This becomes particularly crucial if you have intricate tax arrangements or receive income from multiple sources.

Personal Tax Return

Typically, individuals falling into one or more of the following categories are required to complete a Personal Tax Return:

Self-employed or operating as a sole trader
Paying tax at a higher rate
Director of a limited company receiving dividends
Receiving rental income or income fro a UK property
Receiving foreign income even if you are not a UK resident
Earning any form of untaxed income, capital gains, or losses
Have your own pension fund or certain savings/investments
Receiving other types of untaxed income specified by HMRC

It is important to fulfil the obligation of submitting a Personal Tax return if you fall into any of these categories specified by HMRC.

Residency rules in the UK

Income tax depends on residency status. UK residents are taxed on their worldwide income, while non-residents are taxed only on UK-source income. Accurate residency determination is essential for avoiding double taxation and accessing tax reliefs, such as foreign tax credits. UK residents report all income on their self-assessment tax return, while non-residents report only UK income.

You are considered a UK resident for tax purposes if you:

Live in the UK for at least 183 days in a tax year.

Own and live in property for 91 consecutive days, including 30 days in the tax year being assessed.

Have your main job and work for at least 274 days in the tax year being assessed.

UK nationals living abroad should only have to pay tax on UK pensions, rental income, savings interest and salary.

The Statutory Residence Test (SRT) determines UK tax residency for tax years starting 2013/14. It comprises of three parts:

Automatic Non-Residency: You are automatically non-resident if you meet any of the automatic overseas tests. These tests generally involve:

Spending fewer than 16 days in the UK if you were a resident in any of the last three years.

Spending fewer than 46 days in the UK if you were not a resident in any of the last three years.

Working full-time abroad with minimal UK presence and work.

Automatic Residency: You are a resident if you meet none of the automatic overseas tests but satisfy at least one of the automatic UK tests, which include:

Spending 183 days or more in the UK.

Having a UK home meeting specific conditions.

Working full-time in the UK for a year or more.

Sufficient Ties Test: If neither automatic test applies, you determine residency based on the number of days spent in the UK and your ties to the country. Ties include family, accommodation, work, and other connections, with the number of days and ties required varying based on your previous residency status. Special rules exist for exceptional circumstances, transit, and COVID-19-related activities. To ensure accurate tax residence status, individuals should monitor their days and ties to the UK annually and keep detailed records.

Statutory Residence Test

Filing Tax Returns

Filing a UK tax return is crucial even if you live abroad. It ensures compliance with UK tax laws, helping you avoid penalties and legal issues. If you have UK income, such as from rentals or pensions, reporting it allows for accurate tax payment and claiming of reliefs like double-taxation relief. Reporting foreign income to HMRC is also essential for managing tax obligations across countries. Timely and accurate filing prevents fines, maintains good standing with HMRC, and provides a detailed financial record, which is useful for financial management, loans, or resolving disputes.

Late Submission Penalties

Late submission penalties, or late filing penalties, are imposed for submitting tax returns after the deadline, regardless of whether you owe tax:

The GOV.UK website offers a tool to estimate penalties for late submissions under self-assessment.

Late Payment Penalties

If you pay your income tax late, HMRC will typically impose a late payment penalty which are as follows:

Penalties for Failure to Notify

You must notify HMRC of any tax liabilities, such as income or capital gains tax, and if you miss the deadline, you could face a "failure to notify" penalty. This penalty is based on a percentage of the unpaid tax due to the delay. HMRC may reduce the penalty if you promptly report the issue and cooperate. The table below shows the penalty scale:

Allowences Reduce Tax

You can claim the following allowances to reduce your tax bill:

Personal allowance: £12,750 for the 2024/25 tax year, available to UK and EEA citizens, or those who have worked for the government in the tax year.

Double-tax relief: Available if your income is taxed in both the UK and your country of residence, provided there is a double-taxation agreement between the UK and that country.

Minimising Taxes

To reduce your tax liabilities when moving abroad, consider the following:

Maintain non-resident status: Ensure you qualify as a non-resident for tax purposes.

Manage assets: Hold UK property jointly with your spouse/partner to reduce tax impact.

Use offshore accounts: Transfer movable cash assets to offshore bank accounts with favourable tax arrangements to avoid tax on earned interest.

Consolidate pensions: Mov pensions to a qualifying recognized overseas pension scheme.

Claim a tax refund: If previously employed in the UK, you might be eligible for a tax refund if you did not use your full tax allowance.

Register for the non-resident landlord scheme (NRLS): When renting out property in the UK, the NRLS allows you to receive rental income without tax deductions.

Deadlines for Self-Assessment Returns

If you are liable for UK taxes while living abroad, you must file an annual tax return and pay any tax owed to HMRC.

These key deadlines should not be missed:

To file taxes online, set up a gateway account with HMRC where you should apply for a unique taxpayer reference (UTR) number, and activate your account with a code sent to a UK address. For paper returns, complete the SA100 form and, if you are a non-resident, the SA109 form. Declare all untaxed income, allowances, expenses, and deductions to calculate the tax owed.

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How We Can Help You

Ensuring your taxes are up to date can be a tall order, but with the expertise of Expat UK Tax, we will ensure a carefree process.

Our services include assistance with filing your tax return, from reporting self-employment income and property expenses to managing pension contributions and capital gains.

We also offer support in claiming all eligible allowances, such as personal allowance and double-tax relief, to reduce your tax liability.

Our team will also advise on strategies to minimize your tax burden, including maintaining non-resident status, managing UK assets effectively, and utilizing offshore accounts. With our help, you can ensure timely and accurate tax submissions, avoid penalties and benefit from tax reliefs.

Tax Compliance

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