If you are a UK resident you may have to pay UK tax on your foreign income. Knowing your business taxes, self assessment or reporting your income, and other intricate topics like taxation on foreign sourced income is important to prevent non-compliance with HMRC.

In this blog post, we will cover the following information you might find useful regarding taxation of foreign income for UK residents.

Who Needs to Pay UK Tax on Foreign Income?

Foreign income is also subject to taxation in the United Kingdom for all the residents of the United Kingdom. This includes:

• Income from letting of property situated in another country.
• Royalty or interest income receivable from your investment in a foreign country.
• Income from other country pension schemes.

UK residents and businesses receiving income in foreign currency have to normally complete a Self Assessment tax return in order to alert the UK HMRC of the incomings, and to pay the relative UK tax.

Determining Your Residency Status

Your residency status directly impacts your tax obligations.

• UK Residents: Subject to UK and overseas income and chargeable gains tax.
• Non-UK Residents: Only taxed on UK-based income.

How to Know If You’re a UK Resident

You’re classed as a UK resident if:

• You meet one or more of the automatic tests, for example, you spent 183 or more days in the UK in that tax year.
• There are no snap international assessments (for instance, when you are living most of the year in the UK).

Your residential status may change at some point in the financial year and therefore it is wise to update the HMRC accordingly.

Reporting Foreign Income to HMRC

It is important to note most foreign income must be declared on a Self Assessment tax return and additional pages (SA106) for income and gains abroad.

Special Rules for Foreign Income

Foreign income of some certain forms like pension, rental income and specific employment income may have its own tax treatments.

Understanding Double Taxation

If you are taxed on the same income in the UK and other country, then you may apply for double taxation relief.

How to Claim Tax Relief

• You need to obtain a certificate of residence for the purpose of proving that you are qualified for the certain category.
• Submit this HMRC form and send it to the right foreign tax authority as provided by law.

If you have also paid taxes to another country, you are allowed to claim Foreign Tax Credit Relief when filling UK tax return.

What If You Are Non-Domiciled in the UK?

Non-domiciled individuals (those whose permanent home is outside the UK) may have different tax obligations:

• Foreign income below £2,000: This should be emphasized on because it can be seen that no UK tax is payable if the income stays outside the United Kingdom.

• Foreign income of £2,000 or more: Self Assessment has to be used to complete the tax report and the individual may choose to pay tax on their income as is done in the UK or pay tax on the remittance basis where only the income that has been requested to the UK attracts tax payment.

Changes from April 2025

The UK Government also proposes to abolish the remittance basis for newly resident individuals in favour of a new 4-year FIG regime. You should consult your personal attorney to signify to you how these deviances will impact you.

Dual Residency

If you are a tax resident in the UK but also receive income from another country, ensure to read the treaty between the two countries in order to avoid duplicated taxation.

Foreign Students and Work

Students who get a job while studying in the UK, or after completing their education in UK, may be relieved from UK tax under double tax avoidance treaties entered into between the UK and their home countries. Though students gain practical experience working during vacations in different countries may incur UK tax based of their income and stipend allowed.

Capital Gains Tax (CGT)

Profits on the sale of capital assets, specifically, are usually subject to taxation where the investor is more than likely a resident. However, UK domestic real estate is been subject to tax in the same manner for all persons, regardless of whether such persons are residents in the United Kingdom or not.

The issue of taxation of the income derived from foreign sources is quite technical depending on factors such as residence status, type of income, and availability of tax relief. Due to these complexities of the laws and to avoid falling foul of the law a wise man will engage the services of a professional.

As TVR Accountants, we focus on assisting people guide the United Kingdom and foreign taxation mechanisms. To receive advice on your specific situation and on all international income and tax returns do not hesitate to contact us at any time.

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