If you are a UK resident but have income from abroad you need to pay tax on that income.
You may have wages from abroad, foreign dividends and savings interest or foreign rental property income.
With foreign property purchased to allow an escape to the sunshine, some clients use this personally and do not rent it out – and in this situation there are no income tax issues. But there could be capital gains tax payable when sold.
Others take the plunge and move abroad completely and are no longer UK resident. We also have customers who own a foreign property and rent it out to earn a little income from it.
These clients need to report the income they receive from it. We can work out the total income and make deductions for allowable expenses paid against the property.
If you have income from abroad and are unsure on your position firstly we 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:
l 183 or more days in the UK in the tax year
l your only home was 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:
l you spent less than 16 days in the UK
l 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 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 two.
This 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.
This is so that overall the total income and total tax can be assessed.