Non-Residents - British Citizens Living Overseas

Income Tax

As well as the years of departing from or returning to the UK, British citizens living abroad may have to complete a UK tax return and pay UK tax, if they have income arising in the UK. Most commonly this is rental income, and the rules surrounding deduction of tax on UK arising rents can be quite complicated. But UK tax will almost always be payable on rental income arising in the UK, in the first place this should be by deduction from the rent.

There is an extra statutory concession covering the years of entering and leaving the country, when the residence status changes part way through the year. The two parts of the year are then looked at separately under the different rules.

UK citizens living abroad have a full personal allowance. For some people this will cover profits from rentals so no tax will be payable, and exemption can be gained from the deduction-at-source rules for most landlords by registering, but a tax return may still need to be submitted each year.

Hornbeam can advise on the tax arising on UK rentals, prepare rental accounts, maximise the benefits from expenditure, arrange registration with the Revenue for gross payments, act as UK tax deduction agents if required, and of course prepare your UK tax return.

Any non-resident British citizen, whether they work for a British or a foreign employer, is liable to UK tax on the salary relating to any duties performed in the UK. Again there may be the need to complete a tax return and if tax has been deducted under PAYE, especially if this is only for part of a year, there may even be a refund of tax due.

If you are living abroad you are unlikely to be taxed on salaries earned abroad, but see the separate section of this website for an outline of the rules.

Similarly, income from a UK pension needs to be shown on a tax return, unless substantial periods were spent working abroad in the years when the contributions were made.

For the National Insurance retirement pension and income from any retirement annuity contracts, wherever you receive them, and any investment income received in the UK the rules are complex and involve two calculations, so that only the lower amount of tax is due.

Hornbeam can advise on the liability to tax of all UK sources of income, calculate the minimum amount of tax due, and of course prepare your UK tax return.

Capital Gains Tax

Capital Gains Tax is not payable by persons who are permanently not resident in the UK, although gains anywhere in the world might well be liable if the non-resident returns to the UK, even after the event.

However most foreign countries also have Capital Gains Tax or the equivalent and readers should be aware of the tax in the jurisdiction in which they are living when the gain is made. If tax is due in both countries there will be relief given so that only tax equivalent to the higher amount is paid.

Capital Gains Tax avoidance schemes are quite complex and fraught with danger. Hornbeam are pleased to advise how such schemes work, or to look over any such scheme which might be promoted by third parties.