WITH Brexit still fresh in everyone’s minds, and a number of changes surrounding visas and the end of freedom of movement between the UK and the EU, the topic of residency, especially tax residency, can seem like a minefield.
So how does tax residency work, and how will it affect Olive Press readers?
Well, If you are a UK national and you live overseas with no intention to return to the UK to live, then you will only pay income tax on your UK income.
However if you are an overseas national, then you will need to consider your residency status.
The first step is to see if you are an overseas resident – and you can do this by answering three simple questions:
- Are you present in the UK, for less than 16 days in the tax year?
- Are you present in the UK, for less than 46 days and have not been a resident in the previous three tax years?
- Do you work overseas full-time and are not present in the UK for more than 90 Days in the tax year?
If the answer is yes to any of these questions then you are automatically an overseas resident.
But what if you answered no to all of the above? Well then this leads us onto the Automatic UK test.
The automatic UK test, comprises a further 3 questions:
- Are you present in the UK for 183 days or more in a tax year? (spending any day past midnight is classed as being present in the UK for a day)
- Is your only home in the UK?
- Do you carry out full-time work in the UK?
But it doesn’t end there – if you still answer no to all three of these questions, there are still steps to consider.
The Sufficient ties test, which looks at your connections to the UK, will help establish whether or not you can be considered as a tax resident.
A sufficient tie test takes into account the following:
- Your Sufficient Ties (otherwise known as connections to the UK).
- the amount of time spent in the UK
- what your previous residency status was in the UK
A sufficient tie, or connection to the uk, can be determined by the following:
- A UK resident who is a close family member – eg. a spouse or partner
- Available UK accommodation in which the individual has spent one night during the tax year
- Substantive UK work (Employed or Self-employed for at least 40 days, working for a minimum of 3 hours per day)
- Present in the UK for more than 90 days during either of the previous two tax years
- If the UK is the county that you spent the most time in during the tax year – this will be considered if you were resident in any of the previous 3 tax years
The below table will help to determine your sufficient tie test outcome – this can affect your residency.
|Days Spent in the UK||Previously Resident||Not Previously Resident|
|Less than 16 Days||Automatically Not Resident||Automatically Not Resident|
|16 – 45 Days||Resident if 4 UK Ties or more||Automatically Not Resident|
|46 – 90 Days||Resident if 3 UK Ties or more||Resident if 4 UK Ties or more|
|91- 120 Days||Resident if 2 UK Ties or more||Resident if 3 UK Ties or more|
|121 – 182 Days||Resident if 1 UK Tie or more||Resident if 2 UK Ties or more|
|183 Days||Automatically UK Resident||Automatically UK Resident|
So how does residency affect you? Well as a UK resident you will pay tax on both your UK Income and Overseas Income – but this also means that you are eligible for the UK tax free personal allowance.
If you are a non-resident then you will only be liable to pay income tax on all income arising in the UK.