If you have future interests or current activities going on in the UK, you’ll need to know about the way Income Tax works here.
This includes its rates, allowances, and the specific considerations you need to keep in mind as a non-UK resident.
It’s important to note that the UK’s Income Tax system has evolved significantly over the years, becoming a structured and essential component of the country’s revenue.
Unlike some countries, the UK operates a progressive tax system, meaning the more you earn, the higher the rate of tax you pay.
This system is designed to be fair and equitable, ensuring that those with higher incomes contribute more to infrastructure, welfare and health services in the country.
Your liability to pay Income Tax in the UK depends on your residency and domicile status.
As a non-UK resident, you are generally liable to only pay tax on your UK income for the first four years living in the country rather than your global earnings.
After this, you’ll likely be considered a domiciled resident and therefore be liable to pay Income Tax on your worldwide income.
The UK taxes various types of income, including:
- Employment income
- Self-employment income
- Property income
Double taxation agreements between the UK and other countries can help prevent you from being taxed twice on the same income so it’s best to check whether your current home country has one of these in place before moving.
Tax rates, allowances, and filing procedures
The UK has different tax rates and bands depending on the type of income and your total earnings.
For the tax year 2024/25, the main Income Tax rates are:
- Basic rate: 20 per cent on income up to £50,270
- Higher rate: 40 per cent on income between £50,271 and £150,000
- Additional rate: 45 per cent on income over £150,000
As a non-UK resident, you may still be eligible for the Personal Allowance, which is the amount of income you can earn tax-free.
Currently, the Personal Allowance is £12,570, but this may not apply to all non-residents so speak to a tax adviser to determine if you’ll be able to use this.
There are reliefs for specific circumstances, such as pension contributions, charitable donations, and certain business expenses and you can claim these allowances and reliefs when you file your tax return, potentially reducing your overall tax liability.
Again, your adviser will be able to help you apply for these and work out which ones you’re eligible for.
To file your tax return, you need to use the Self-Assessment system if you’re classed as self-employed, which involves completing an online return detailing your income and any allowances or reliefs you are claiming.
If you are being employed by a company that is not your own, your taxes should be deducted at source as a part of their payroll system.
Effective tax planning can help you minimise your tax liability and you might want to consider the following strategies:
- Make full use of available allowances and reliefs.
- Structure your investments to take advantage of favourable tax treatments.
- Keep detailed records and documentation to support your tax return and claims.
- Seek professional advice to ensure compliance and optimise your tax position.
To avoid common pitfalls, ensure you:
- Correctly determine your residency status using the SRT.
- Claim all available allowances and reliefs.
- File your tax return on time to avoid penalties.
- Understand the rules around the remittance basis if it applies to you.
By staying informed and seeking professional advice, you can navigate the UK’s Income Tax system effectively and ensure compliance with all legal requirements.
Again, we highly recommend you speak to one of the international tax advisers at SMCO for advice on this subject.
We’ll be able to help you avoid common issues, file your taxes effectively and find mitigating strategies to reduce your liabilities.
If you are thinking of moving to the UK, speak to a tax adviser – we’ll work with you to save you money.
