In this section:
If you live in the UK but have your permanent home in another country, you may need to decide how you want to pay tax on the income and 'gains' (such as taxable profits from the sale of property or investments) you earn abroad. There are two choices and it is important to decide which is best for you.
On this page:
You are probably 'resident in the UK for tax purposes' but 'domiciled abroad' if all of the following apply:
You may be treated as 'not ordinarily resident' if all of the following apply:
Find out more about the meaning of residence and domicile (PDF 559K)
If you are living in the UK and are either 'domiciled abroad' or 'not ordinarily resident' in the UK, you can choose how you want to pay tax on your foreign income and gains (a 'gain' is when something which you own is sold for a profit).
You can:
The table below shows what you pay tax on if you choose the remittance basis.
The information after the table tells you about the effect on your tax-free allowances and about possible extra charges.
| Residence/domicile status | What you pay tax on if you choose the remittance basis |
|---|---|
| Not ordinarily resident in the UK and domiciled abroad |
|
| Resident in the UK for tax purposes but domiciled abroad |
|
If the amount of foreign income and/or gains that you leave abroad is £2,000 or more in any year, and you decide to be taxed on the remittance basis, you will lose your annual UK tax-free personal allowances and Capital Gains Tax annual exempt amount. (These are explained later in this guide.)
You will lose these allowances whether you are 'not ordinarily resident' or 'resident in the UK for tax but domiciled abroad'.
If you've been resident in the UK for more than seven out of the previous nine tax years, excluding the current tax year, you may have to pay a £30,000 charge each year. This is called the 'remittance basis charge'.
If the foreign income and/or gains that you leave outside the UK in a tax year are more than £2,000 and you want to pay tax on the remittance basis you must complete a Self Assessment tax return at the end of the tax year. This is an online or paper form that you have to complete and send to HM Revenue & Customs (HMRC) every year. There is a box to tick where you claim the remittance basis.
You also use the tax return to claim any relief for any foreign tax you have paid on your foreign income and gains, and to tell HMRC about foreign income and gains that you bring into the UK.
Find out about Self Assessment tax returns
If the foreign income and/or gains that you leave outside the UK in a tax year are £2,000 or less, you can use the remittance basis without making a claim or completing a Self Assessment return. You will also be able to keep your UK personal allowances and Capital Gains Tax annual exempt amount.
However, if you bring more than £500 of your income and gains into the UK you must still complete a tax return to tell HMRC about it and pay UK tax on it.
Find out about Self Assessment tax returns
If you do not choose to be taxed on the remittance basis, you will automatically be taxed on the 'arising' basis, which means you:
You can read more about the Personal Allowance and Capital Gains Tax annual exempt amount below.
You can tell HMRC about foreign income and gains by completing a Self Assessment tax return. You can also use the tax return to claim relief for any foreign tax you have paid on your foreign income and gains. The tax return is an online or paper form that you have to complete and return every year.
Find out about Self Assessment tax returns
The Personal Allowance is an amount of income you can normally receive tax-free each tax year. For the tax year 2011-12 the tax-free Personal Allowance is £7,475. This means you only pay Income Tax on taxable earnings above £7,475.
However if you are claiming the remittance basis you may lose your annual UK tax-free Personal Allowance and any other allowances - such as Blind Person's Allowance - to which you are otherwise entitled. (See the earlier section 'Allowances and charges if you choose the remittance basis'.)
Personal Allowance - find out more
Blind Person's Allowance - find out more
Capital Gains Tax is a tax on the profit or 'gain' you make when you sell, give away, transfer or exchange ('dispose of') something of value - 'an asset'. The Capital Gains Tax 'annual exempt amount' in 2011-12 is £10,600. This means you only pay Capital Gains Tax on 'gains' (profits from the sale of, for example, property or investments) above £10,600.
However if you are claiming the remittance basis (see 'Tax allowances if you choose the remittance basis' above) you may lose your UK Capital Gains Tax annual exempt amount ('allowance').
Capital Gains Tax - find out more
Residency, domicile and tax on foreign income and gains are complicated. You can get help and advice on your situation from HMRC.
