Most taxpayers in the UK are taxed at sourced and so do not need to complete a Self Assessment Tax Return. For example, an employer deducts tax at source from wages under the Pay as You Earn (PAYE) system.
However, individuals with more complicated affairs; those with income not taxed at source e.g. savings, investments, property and self-employed individuals, along with individuals earning approximately £100,000.00 or more are likely to have to complete a UK tax return.
Those who are relocating, or making regular visits, to the UK are also likely to require a tax return, and foreign individual’s will need to give consideration to their residence and domicile position.
Statutory Residence Test “SRT” and Domicile
A statutory residence test has applied in the UK since 6 April 2013. Subject to certain exceptions, UK residents pay UK tax on their worldwide income, whilst non-UK residents pay tax on their UK sourced income.
Very simply, your domicile is where you have your permanent home and is therefore a different concept to residence. You can only have one country of domicile at any given time and you can be domiciled in a different country from where you are tax resident.
These concepts are important for many reasons, one being that if you are not domiciled in the UK you can claim the “remittance basis” for taxing your foreign income and capital gains. They are then only subject to UK once the money is “remitted” (transferred) to the UK.
We would be pleased to advise you on your UK residency, with reference to the SRT, and domicile position, based on your particular circumstances, and the impact on your UK tax position.
It is important that foreign nationals correctly inform Her Majesty's Revenue and Customs (HM Revenue and Customs or HMRC) is a non-ministerial department of the UK Government responsible for the collection of taxes, the payment of some forms of state support and the administration of other regulatory regimes including the national minimum wage.... as to their residency and domicile status to ensure that they benefit from the more advantageous tax regimes than those afforded to a UK resident and domiciled taxpayer. Taxpayers are required to inform HMRC on the residency pages of the Tax Return.
Leaving the UK
For those individual’s completing a Tax Return, you inform HMRC of your departure date on the Tax Return. For employees who do not complete a Tax Return, a form P85 should be filed to inform HMRC that you are leaving the UK.
Although you have left the UK you may still be liable to UK tax and for this reason it is worthwhile obtaining advice on how to rearrange your personal assets to ensure the most beneficial tax treatment.
The UK tax year runs from 6 April to the following 5 April. Once you become chargeable to UK tax you should notify HMRC within 6 months of the end of the tax year that you have become chargeable to tax i.e. 5 October.
If you receive a tax return, or a notice to file a tax return, you must complete a one and submit it to HMRC.
The filing deadline for completing an online Tax Return is 31 January following the end of the tax year. The filing deadline is shortened to 31 October following the end of the tax year if you wish to submit a hard copy tax return by post.
Failure to submit Tax Returns on time will result in penalties being charged by HMRC.
Late Filing Penalties:
- Day one: you will be charged an initial penalty of £100, even if you have no tax to pay or you have already paid all the tax you owe
- Three months late: you will be charged an automatic daily penalty of £10 per day, up to a maximum of £900
- Six months late: you will be charged further penalties, which are the greater of 5 per cent of tax due or £300
- Twelve months late: you will be charged yet more penalties, which are the greatest of 5 per cent of tax due or £300. In serious cases you face a higher penalty of up to 100 per cent of the tax due
The tax is payable by 31 January following the end of the tax year. In addition to this, most individuals will be required to make advance payments on account towards their tax liability for the following tax year, being 50% of the tax due for the previous tax year, which are payable by 31 July and 31 January following the end of the tax year.
If tax is paid late, HMRC will issue penalties and interest on any overdue tax.
Late Payment Penalties
- Thirty days late: you will be charged an initial penalty of 5 per cent of the tax unpaid at that date
- Six months late: you will be charged a further penalty of 5 per cent of the tax that is still unpaid
- Twelve months late: you will be charged a further penalty of 5 per cent of the tax that is still unpaid
Please contact us to speak to one of our advisers.