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Foreign Income Tax

Do I have to pay tax on income earned in other countries?

If you live in the UK and have an income coming from a foreign country, you will have to pay tax to HMRC. You'll generally do this by filing a self assessment tax return. There are rules on the types of income that count, and a lot depends on your status as a UK resident. Here's what you need to know.

Paying tax on foreign income can include earnings, income from property or inheritance and capital gains tax. If you are paid in cryptocurrency from a customer or client based overseas the income must be declared.

Income from dividends is taxed at different rates per bracket so check out our guide to that.

File a TAX RETURN

What kinds of foreign income will I pay tax on?

Your foreign income might include things like:

wages from working abroad
overseas rental money
foreign investments and savings
income from pensions overseas

In most cases, your foreign income will be taxed in the same way as your UK money. However, there are special rules for pensions, property rental and jobs like working on a ship or for the government. Talk to RIFT to be sure of what you need to pay.

What's my residence status and what does it mean for my tax?

You generally only pay UK tax on foreign income if HMRC considers you a UK resident. That basically means you either:

Spent 183 days or more in the UK during the year you're being taxed on.
Owned or rented your sole home for 90 days or more in the UK, and spent at least 30 days there.

If your residence status changes during the tax year you might be able to get "split-year treatment". This means you'll only pay tax on the money you made as a UK resident. There are a few conditions to meet, though. If you come back after living abroad for under a tax year, you won't get split-year treatment.

How do I determine my tax residency?

Whether or not you count as a tax resident in the UK is decided through HMRC’s Statutory Residence Test. This will include:

The Automatic Overseas test, which looks at things like where you spent the last 3 tax years.
The Automatic UK test, dealing with questions like whether you've got a "home" in the UK and how long you spend there.
The Sufficient Ties test, which asks about family, accommodation and so on.

It’s absolutely essential to have your tax residency sorted out correctly. It’s possible to end up being taxed on the same income in more than one country, and getting these details right is the key to claiming the right kinds of tax relief to fix the problem.

What is a domicile status and what does it mean for tax?

In simple terms, your “domicile” is usually where you have your permanent home. You can only ever have one domicile at a time, which you’re assigned when you’re born. The rules around this can be complicated, but it’s generally determined by the domicile of your parents.

Your domicile is different from your tax residence status (which largely depends on where you spend your time during the year), but it can still affect the kinds of tax you pay.

So, confusing as it sounds, it's perfectly possible to be a UK resident whose permanent home is abroad. This is called being "non-domiciled". If you count as non-domiciled, but you’re still a UK tax resident, you won’t pay UK tax on up to £2,000 of your overseas income per year, providing you keep it abroad.

How do I tell HMRC if I have a foreign income?

You'll need to file a self-assessment tax return in order to let HMRC know about your foreign income. Don't worry though, if you're not keen on doing it yourself RIFT is here to help you. We can answer any questions and solve all your tax problems. We've been taking the stress, confusion and pain out of UK tax since 1999. Read more about self assessment for expats, or get in touch to see how we can help.

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Foreign Income Tax​