UK tax for non-UK residents on UK income and gains

Overview

If you are not resident in the UK under the statutory residence test, then in general your foreign income and gains are not in scope of UK tax.

Income

As a non-resident taxpayer, your liability to UK income tax is restricted to income from UK sources. This may include:

• income from letting property situated in the UK (for which you may wish to apply to the non-resident landlord scheme)
• savings income which arises in the UK, such as interest on savings in UK bank accounts
• dividends on shares in UK companies
• profits from carrying out a business (or part of a business) in the UK
• UK pension income (see also Retiring abroad)
• earnings relating to work duties carried out in the UK (even if for a non-UK employer, or if the earnings are paid overseas or from overseas)

In some cases, it may be unclear whether your income is from a UK source – for example, where you are carrying out a business remotely from overseas and you have UK customers. If you are unsure, then you should seek advice.

If you are working in the UK as a non-resident individual, then you should consider whether you might owe UK National Insurance contributions on your earnings.

If you are temporarily non-resident in the UK, then some limited types of foreign income received while non-resident may be taxable when you return to the UK.

If you are non-resident and you have UK-sourced income, then your UK tax liability may be restricted by either the disregarded income rules or a double tax agreement (see below).

Capital gains

Non-residents are liable to UK capital gains tax only on certain assets – including UK land and property. See Non-residents and capital gains tax.

Dual residence

If you are dual resident in the UK and another country, but non-resident in the UK under the terms of the relevant double tax agreement, you cannot assume that you will be taxed in the UK in the same way as if you were non-resident under the statutory residence test. You will need to check the terms of the relevant double tax agreement for each source of income.

Allowances and nil-rate bands

If you are non-resident in the UK then you will normally only be eligible for a personal allowance (and certain other allowances, if applicable) if you are either:

• a UK or EEA national, or
• eligible under the terms of a double taxation agreement.

For further details on who is eligible for these allowances, see Tax allowances.

If you are not completing a UK self assessment tax return for the year, you may need to complete a form R43 instead (see below).

However, the following allowances and nil rates of tax are available to all non-UK resident taxpayers:

• the personal savings allowance
• the starting rate for savings
• the dividend allowance
• the trading and miscellaneous income allowance
• the property allowance

In many cases, the availability of the above allowances and nil-rate bands will mean that non-residents will not owe any UK tax on their UK-sourced income.

For example, if you are a non-resident UK national and your only UK-sourced income is from letting out UK property, then provided your rental profits are within your UK personal allowance then you should not owe any UK tax on that income. However, note that in this situation:

• You would normally need to file a UK self assessment tax return to report the income.
• You would need to register for the non-resident landlord scheme if you wanted to receive the income without deduction of tax at source.
• You should seek advice in the country where you are resident to understand if you need to report and pay tax in that country.

If you are non-resident in the UK and your UK-sourced income exceeds your available allowances and nil-rate bands then, depending on the type of income, your liability to UK tax may be restricted to the amount which has already been deducted at source under the disregarded income rules.

Disregarded income

The UK tax liability of non-resident individuals is limited to the following:

1. the UK tax already deducted at source in respect of ‘disregarded income’, plus
2. the UK tax due on other types of UK-sourced income, ignoring UK tax allowances such as the personal allowance.

‘Disregarded income’ includes:

• UK dividends and interest payments
• UK state pension
• taxable UK social security payments (except jobseeker’s allowance and income support)

The above rules only apply where you are non-resident under the statutory residence test (so therefore not in a year where split year treatment applies).

In practice, this limit will be likely to apply if you have a large amount of disregarded income and little or no UK income from other sources, or if you are not eligible for UK tax allowances and you would otherwise owe tax on your disregarded income.

If you complete your UK self assessment tax return using HMRC’s online portal, then the system should calculate any limit automatically.

For more information on these rules, see HMRC’s Savings and Investment Manual.

Double tax agreements

If you are non-resident in the UK under the statutory residence test and you still owe tax on your UK-sourced income after considering:

• your available UK tax allowances and nil-rate bands, and
• the disregarded income rules,

then the UK’s right to tax the income may be restricted by the terms of a double tax agreement.

This may also apply if you are dual resident in the UK and another country, but non-resident in the UK under the terms of the relevant double tax agreement.

You will need to check the terms of the relevant double tax agreement for each source of income you have in the UK. The agreement may:

• not provide any restriction at all on the UK’s right to tax the income (this is usually the case for UK property income),
• may provide some restriction on the UK’s right to tax the income (this is sometimes the case for UK interest and dividends), or
• may state that the income should only be taxed in the other country (for example, this is usually the case if you are working in the UK for less than six months for an overseas employer).

Interpreting double tax agreements in the context of pension income can be complicated. We publish separate guidance on this point which may be helpful.

For information on how to make a claim under a double tax agreement as a non-resident or dual resident, see our page UK tax residence under the heading Telling HMRC your residence status.

Form R43

If you have been not resident in the UK but are entitled to the personal allowance because you are a citizen of a European Economic Area (EEA) country, a UK national or a resident of a country with which the UK has a double taxation agreement granting the UK personal allowance, HMRC may ask you to complete form R43 to ‘claim’ (or otherwise demonstrate entitlement to) the personal allowance and claim a repayment of UK tax if you have paid too much tax on your UK income.

You should not complete a form R43 if you are filing a self assessment tax return for the UK.

You can obtain form R43 by telephoning HMRC, or you can download it from GOV.UK. You can also find contact details for HMRC on GOV.UK.