When you come to live in the UK but your permanent “homeland” is elsewhere and you are as it is known non-domicile, you may choose to have your overseas income and gains taxed on the remittance basis.
Meaning that you will be taxed only on foreign income and gains which are brought into or used in (remitted to) the UK and received in the UK. The income which arises abroad and remains abroad will not suffer taxation in the UK under the remittance basis.
The remittance basis is available if you are a tax resident but not domiciled in the UK.
It is necessary to claim the remittance basis each year; however, you may choose to claim under arising basis instead from year to year. You don’t pay UK tax on your foreign income or gains if they are less than £2,000 in the tax year or you don’t bring them into the UK.
To claim the remittance basis, you would need to submit a self-assessment tax return by the 31st January following each tax year. Once you make this claim you will lose your personal tax allowance which allows some of your income not to be taxed, currently it is set at first £11,500 of your income each year.
You will also need to take into consideration of how many tax years you have been resident in the UK, as that will determine an annual Remittance basis charge (RBC) payable per year:
- 7 out of 9 previous tax years – £30,000
- 12 out of 14 previous tax years – £60,000
The actual payment of the charge must be handled accurately so that it does not itself constitute a remittance.
The remittance basis is a complex but very important relief. Due to complexity of the rules, it is not always easy to determine whether the remittance basis will be worth claiming.
To discuss your requirements, please contact our specialists or call us on +44 (0)203 490 41 21.