Overview

You may need to pay UK Income Tax on your foreign income, such as:

• wages if you work abroad
• foreign investment income, for example dividends and savings interest
• rental income on overseas property
• income from pensions held overseas

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

Working out if you need to pay

Whether you need to pay depends on if you’re classed as ‘resident’ in the UK for tax.

If you’re not UK resident, you will not have to pay UK tax on your foreign income.

If you’re UK resident, you’ll normally pay tax on your foreign income. But you may not have to if your permanent home (‘domicile’) is abroad.

Reporting foreign income

If you need to pay tax, you usually report your foreign income in a Self Assessment tax return. But there’s some foreign income that’s taxed differently.

If your income is taxed in more than one country

You may be able to claim tax relief if you’re taxed in more than one country.

CHECK NOW

Other ways to get help

You can also:

• read HM Revenue and Customs’ (HMRC) guidance on the Statutory Residence Test
• get professional tax help

Your residence status when you move

When you move in or out of the UK, the tax year is usually split into 2 – a non-resident part and a resident part. This means you only pay UK tax on foreign income based on the time you were living here.

This is called ‘split-year treatment’.

You will not get split-year treatment if you live abroad for less than a full tax year before returning to the UK. You also need to meet other conditions.

To find out if you qualify and see which split-year treatment ‘case’ you’ll need to mention on your Self Assessment tax return, you can:

• read HMRC’s guidance about split-years under the Statutory Residence Test
• contact HMRC

If your situation changes

Your status can change from one tax year to the next. Check your status if your situation changes, for example:

• you spend more or less time in the UK
• you buy or sell a home in the UK
• you change your job
• your family moves in or out of the UK, or you get married, separate or have children

Residence and capital gains

You work out your residence status for capital gains (for example, when you sell shares or a second home) the same way as you do for income.

UK residents have to pay tax on their UK and foreign gains. Non-residents have to pay tax on income, but usually only pay Capital Gains Tax either:

• on UK property or land
• if they return to the UK

Residence before April 2013

There were different rules for working out your residence status before 6 April 2013.

‘Non-domiciled’ residents

UK residents who have their permanent home (‘domicile’) outside the UK may not have to pay UK tax on foreign income.

The same rules apply if you make any foreign capital gains, for example you sell shares or a second home.

Working out your domicile

Your domicile’s usually the country your father considered his permanent home when you were born. It may have changed if you moved abroad and you do not intend to return.

If you need help working out which country you’re domiciled in, you can:

• read chapter 5 of HM Revenue and Customs’ (HMRC) guidance on ‘Residence, Domicile and the Remittance Basis’
• get professional tax help, for example from a tax adviser

Tax if you’re non-domiciled

You do not pay UK tax on your foreign income or gains if both the following apply:

• they’re less than £2,000 in the tax year
• you do not bring them into the UK, for example by transferring them to a UK bank account

If this applies to you, you do not need to do anything.

Chapter 9 in HMRC’s guidance on ‘Residence, Domicile and the Remittance Basis’ explains the rules for bringing income or gains to the UK.

If your income is £2,000 or more

You must report foreign income or gains of £2,000 or more, or any money that you bring to the UK, in a Self Assessment tax return.

You can either:

• pay UK tax on them – you may be able to claim it back
• claim the ‘remittance basis’

Claiming the remittance basis means you only pay UK tax on the income or gains you bring to the UK, but you:

• lose tax-free allowances for Income Tax and Capital Gains Tax (some ‘dual residents’ may keep them)
• pay an annual charge if you’ve been resident of the UK for a certain amount of time

You pay an annual charge of either:

• £30,000 if you’ve been here for at least 7 of the previous 9 tax years
• £60,000 for at least 12 of the previous 14 tax years

Claiming the remittance basis is complicated. You can:

• contact HMRC
• get professional tax help, for example from a tax adviser

If you work in the UK and abroad

There are special rules if you work both in the UK and abroad.

You do not have to pay tax on foreign income or gains (even those you bring into the UK) if you get the ‘foreign workers’ exemption’.

You qualify if:

• your income from your overseas job is less than £10,000
• your other foreign income (such as bank interest) is less than £100
• all your foreign income has been subject to foreign tax (even if you did not have to pay, for example because of a tax-free allowance)
• your combined UK and foreign income is within the band for basic rate Income Tax
• you do not need to fill in a tax return for any other reason

If you qualify, you do not need to do anything to claim.

If you’re seconded to the UK

You may be able to claim Overseas Workday Relief if your employer sends you to work in the UK on secondment.

If you qualify you:

• pay UK tax on UK employment income based on the number of days you’ve worked here
• do not pay tax on income from days you work abroad (as long as you do not bring it into the UK)

Ask your employer to find out if you can claim.

Foreign students

There are special rules if you come to study in the UK.

Reporting your foreign income

You usually need to fill in a Self Assessment tax return if you’re a UK resident with foreign income or capital gains. But there’s some foreign income that’s taxed differently.

You do not need to fill in a tax return if all the following apply:

• your only foreign income is dividends
• your total dividends – including UK dividends – are less than the £2,000 dividend allowance
• you have no other income to report

Different rules may apply if your permanent home (‘domicile’) is abroad.

Register for Self Assessment

If you do not usually send a tax return, you need to register by 5 October following the tax year you had the income.

You’ll get a letter telling you what to do next after you’ve registered.

REGISTER NOW

Filling in your tax return

Use the ‘foreign’ section of the tax return to record your overseas income or gains.

Include income that’s already been taxed abroad to get Foreign Tax Credit Relief, if you’re eligible.

HM Revenue and Customs (HMRC) has guidance on how to report your foreign income or gains in your tax return in ‘Foreign notes’.

Foreign income that’s taxed differently

Most foreign income is taxed in the same way as UK income, but there are special rules for:

• pensions
• rent from property
• certain types of employment income

Pensions

You have to pay tax on pensions if you’re resident, or were resident in any of the 5 previous tax years.

You also pay tax on any foreign pension payments, including unauthorised payments like early payments and some lump sums.

Check with your pension provider to find out how you’ll be taxed.

Rent from property

You pay tax in the normal way on overseas property. But if you rent out more than one, you can offset losses against other overseas properties.

Certain types of employment income

You usually pay tax in the normal way if you work both in the UK and abroad. There are special rules if you work:

• on a ship or in the offshore gas or oil industry
• for the EU or government, or as a volunteer development worker

If you’re taxed twice

You may be taxed on your foreign income by the UK and by the country where your income is from.

You can usually claim tax relief to get some or all of this tax back. How you claim depends on whether your foreign income has already been taxed.

Apply for tax relief before you get taxed on foreign income

You have to apply for tax relief in the country your income’s from if:

• the income is exempt from foreign tax but is taxed in the UK (for example, most pensions)
• required by that country’s double-taxation agreement

Ask the foreign tax authority for a form, or apply by letter if they do not have one.

Before you apply, you must prove you’re eligible for tax relief by either:

• completing the form and sending it to HM Revenue and Customs (HMRC) – they’ll confirm whether you’re resident and send the form back to you
• including a UK certificate of residence, if you’re applying by letter

Once you’ve got proof, send the form or letter to the foreign tax authority.

If you’ve already paid tax on your foreign income

You can usually claim Foreign Tax Credit Relief when you report your overseas income in your tax return.

How much relief you get depends on the UK’s ‘double-taxation agreement’ with the country your income’s from.

You usually still get relief even if there is not an agreement, unless the foreign tax does not correspond to UK Income Tax or Capital Gains Tax.

Contact HM Revenue and Customs (HMRC) or a get professional tax help if you’re not sure, or need help with double-taxation relief.

What you’ll get back

You may not get back the full amount of foreign tax you paid. You get back less if either:

• a smaller amount is set by the country’s double-taxation agreement
• the income would have been taxed at a lower rate in the UK

HMRC has guidance on how Foreign Tax Credit Relief is calculated, including the special rules for interest and dividends in ‘Foreign notes’.

Capital Gains Tax

You’ll usually pay tax in the country where you’re resident and be exempt from tax in the country where you make the capital gain. You will not usually need to make a claim.

When to claim relief

There are different rules if your gain comes from an asset that either:

• cannot be taken out of the country, such as land or a house
• you’re using for business in that country

You’ll need to pay tax in both countries and get relief from the UK.

Dual residents

You can be resident in both the UK and another country. You’ll need to check the other country’s residence rules and when the tax year starts and ends.

HMRC has guidance for claiming double-taxation relief if you’re dual resident.

If you come to study in the UK

Foreign students usually do not pay UK tax on foreign income or gains, as long as they’re used for course fees or living costs like:

• food
• rent
• bills
• study materials

Check that the country your income’s from has a ‘double-taxation agreement’ that covers students.

HM Revenue and Customs (HMRC) may ask you to account for your living costs if they’re more than £15,000 in a tax year (excluding course fees). The tax year is from 6 April to 5 April the following year.

When you need to pay tax

You may need to pay tax on your foreign income in the normal way if you:

• are from a country without a double-taxation agreement for students
• have other income that you do not bring to the UK
• bring it to the UK and spend it on things other than living costs and course fees
• plan to stay in the UK as your permanent home (‘domicile’)

If you work in the UK

Some double-taxation agreements mean you do not pay UK tax on your income if you work while you’re a student.

If your country does not have an agreement like this, you have to pay tax in the same way as others who come to live in the UK.

Some Useful links

Asylum Business Home Office Preparing Stories UKVI Visa World