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
There are additional rules for domicile and Inheritance Tax.
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:
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.
There are special rules if you come to study in the UK.