UK non resident tax can get complicated real quick. This guide is here to help. Most commonly, if you are living elsewhere UK tax pops up in three key areas: through income generated in the UK, via any profits made from selling property, and any heirs may have to pay inheritance tax on non residents’ estates.
If you’ve made any money in the UK you’ll probably need to do a self assessment tax return whether you live there or not.
This guide gives you the low down in seven key areas:
- The Personal Allowance
- Property Taxes
- Investing Taxes
- Inheritance Tax
- Do I need to complete a tax return?
- UK Resident Status
- Certificate of Residence
If you want help with your taxes. We’ve written about how you can find a good tax accountant here, or compared tax software packages that can help you to do it yourself here.
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1. The Personal Allowance
Generally, above a certain amount you must pay tax in the UK, but below that amount you may not.
It will depend on whether you are eligible to receive the personal allowance.
A personal allowance is the amount of money you can receive without paying tax.
There are different personal allowances for different types of tax, but the main ones that non residents typically encounter are applied to income and capital gains.
At the time of writing the personal allowance threshold for income tax is £12,570 and the one for capital gains tax (CGT) is £3,000.
Not long ago, (pre April 2024) it was £6K for CGT. And just a year before that it was £12.3K. How times have change (quickly!).
Just to be clear, if you are eligible to receive the personal allowance for income tax and your income is less than £12,570 you shouldn’t usually pay any tax.
Similarly, if you are eligible to receive the allowance for CGT and you sell something for more than you bought it for, you shouldn’t pay any tax provided the gain is less than £3000.
The bad news is, the personal allowance is not available to everyone. Non residents should still be eligible providing one or more of the following criteria is fulfilled:
- You have a British Passport
- You are a British citizen
- You are a European Economic Area (EEA) citizen
- You worked for the UK government at any time during the tax year in question
- Your country of residence has a double-taxation agreement with the UK which enables you to receive the allowance
2. Property
Many overseas individuals own UK property. In fact, according to The Centre for Public Data, 180K properties were owned by people with an overseas address in 2021, and the trend was up, so no doubt the numbers today are greater.
The data suggests the biggest numbers of overseas property owners came from the following 10 countries in order (Hong Kong having the most).
- Hong Kong
- Singapore
- US
- UAE
- Malaysia
- Ireland
- China
- Australia
- Kuwait
- France
Whilst some of those properties will be homes that people intend to move into sooner rather than later, my guess is, many won’t be.
They will be investment properties, reliant on either capital gains growth or rental income or in many cases both. In any case there is likely to be some tax to pay somewhere down the line, starting with stamp duty.
Stamp Duty
You need to pay stamp duty when you buy a property in Britain. There have been some updates to this recently which have impacted overseas UK property buyers in a pretty big way. You can read about this in more detail here, but the headline is you now usually pay 5% above standard rates when buying property.
Take a look at the current rates below courtesy of MoneyHelper:
| Property or lease premium or transfer value | Standard rate | Expat stamp duty rates |
| Up to £125,000 | Zero | 5% |
| The next £675,000 (the portion from £250,001 to £925,000) | 5% | 10% |
| The next £575,000 (the portion from £925,001 to £1.5 million) | 10% | 15% |
| The remaining amount (the portion above £1.5 million) | 12% | 17% |
And by the way, it doesn’t help if you have a British passport. In our article dedicated to stamp duty we show how a British expat still pays four times as much stamp duty on a £295,000 property. Ouch!
Non Resident Landlord
If you let your property out to paying tenants you get blessed with a special status by UK tax authorities aka HMRC.
You instantly become a ‘Non Resident Landlord’ if you have rental property in the UK and live abroad for 6 months or more per year.
Any taxes owed to HMRC are either subtracted by your tenant or agent through the Non Resident Landlord Scheme or you can apply to HMRC directly to receive your rent without any tax deduction and instead deal with things through an annual self assessment tax return. (You can read more about the Non Resident Landlord Scheme here. )
Income Tax
If you an an investor letting out property to paying tenants you will encounter another major UK tax: Income tax.
There’s a personal allowance of £12,570 as touched on above. If you qualify, usually through being a British passport holder, you can earn tax free up to that amount. But once you go over it you pay tax. The amount you pay is directly related to the amount of income you generate as shown below.
| Tax Band | Taxable income | Tax Rate |
| Personal allowance | Up to £12,570 | 0% |
| Basic rate | £12,571 to £50,270 | 20% |
| Higher rate | £50,271 to £150,000 | 40% |
| Additional rate | over £150,000 | 45% |
You can find the official HMRC income tax calculator here if you’d like to avoid crunching the numbers yourself.
Capital Gains Tax
Selling property incurs capital gains tax. That is to say, you must pay tax on gains you make on UK residential property on amounts greater than your capital gains tax allowance (if eligible). This applies even if you’re a British expat.
You avoid paying it on your main home, but again, when you live overseas, it will be difficult to argue that your main home is in the UK.
That said, to lower or even avoid capital gains tax non residents do sometimes come back to the UK and live in their property for a period of time before selling. If you know you are going to sell and you aren’t in a hurry, this could be worth looking at.
But as already touched upon above, you don’t pay capital gains tax on amounts below the (capital gains) personal allowance (£3,000). But lets face it.
According to the LSE using 150 years of data, UK property prices go up on average 4% (ish) per year. And with average house prices in the region of £300,000 Mr Average Joe’s capital gains are going to be taxable after just 3 months of property ownership.
- £300K x 4% = £12,000 for an average year
- £12,000 annual gains means on average a capital gain of £1K/month
- 3 months = £3K
Though capital gains tax is generally separate from income tax, they are related. That’s because, the amount of capital gains tax you pay depends on the income tax band you are in.
You pay 18% capital gains tax on property if you are a basic income tax rate payer and 24% if you are higher income tax rate payer. Looking at the income tax table above, you can see that you’d need to have a UK income over £50,271 before you would be liable for the higher rate.
The Low Incomes Tax Reform Group have done a deep dive into capital gains tax here, if you need more information.
Property Sales
One final point on property worth mentioning is this.
All non-residents need to inform HMRC of all property or land sales within 60 days. This applies regardless of whether or not you made a profit on the sale.
HMRC have a dedicated ‘Report and pay Capital Gains Tax on UK property’ page here where you can file your report online.
3. Investing
We usually focus our attention on ETFs on British Expat Money. There are a few reasons for this.
- They are available to everyone wherever you are. Other types of funds may not be.
- They are usually the most tax efficient way to invest for most people.
- Every question we’ve ever received about UK Non Resident Investing has related to Exchange Traded Funds (ETFs).
As a result, this section is focused on those. We’ve covered them in a lot more depth here.
That said, it’s worth pointing out a few things about other types of funds and shares in general.
OEICs, Unit Trusts, Investment Trusts and Shares
Though the most common types of investment vehicle in the UK are Open Ended Investment Companies (OEICs) or Unit Trusts, living overseas means we don’t usually have access to these. Some platforms do let you keep your OEIC or Unit Trust if you have them before you become non resident, but more don’t.
Even if you are lucky enough to use a platform that lets you keep your fund, it is unlikely that you will be able to add fresh money. Not only that, but all things being equal, this type of fund is usually more expensive and less tax efficient.
Investment Trusts are another type of fund popular in the UK. According to Morningstar, Tech focused Scottish Mortgage is still the most popular with £10 billion in assets under management.
Like ETFs, non residents can get easy access via a stock exchange. Essentially, this is because Investment Trusts are companies, and as such you buy their shares in exactly the same way you buy individual company shares.
When you buy investment trust shares from the London Stock Exchange you pay 0.5% stamp duty (Just like with individual company shares).
So again, all things being equal, this type of fund is likely to be more expensive and less tax efficient for those of us who don’t live within the UK.
ETFs
It’s probably no big surprise then that ETFs are taking over the investment industry.
According to PWC, global ETF Assets under management has almost tripled from USD 3.4 trillion in 2016 to over USD 10 trillion in November 2021.
My guess is, this is due to their convenience, passive nature, tax efficiency and low fees. All of which make them particularly attractive for non residents.
Whilst they are considered tax efficient, there are some things that you should be aware of that help to make it so if you make the correct choices.
These are Reporting / Distributor Status, Domicile / US Withholding Tax, and Country Exchange.
All of this information should be easily visible on product literature and associated webpages (we’ve got a sample below).
Reporting / Distributor Status
It is important that your ETF is either ‘reporting’ or ‘distributor’ status because this means the fund’s gains are subject to capital gains tax rather than the more expensive income tax. Most of the big providers’ ETFs have this status but it’s worth confirming before you invest.
Domicile / US Withholding Tax
Most European ETFs are domiciled in either Ireland or Luxembourg. However, they often hold lots of US shares, so they require a Tax Treaty with the US. Some countries’ tax treaties are better than others.
For example, Ireland has a double-taxation treaty with the US which allows most Irish domiciled ETFs to receive dividends from US companies after a 15% deduction for withholding tax.
Other countries may charge more. Dividends from ETFs domiciled in France, Luxembourg and the US may be subject to a withholding tax of 30% for example.
Irish ETFs often make most sense for Brits abroad, whereas for Americans living overseas US ones do. It pays to do a little research to establish which ones are right for you.
My guess is, most people who are reading this that aren’t American will be good with Irish domiciled funds.
Country Exchange
US estate tax laws can be complicated. If you purchase US ETFs from a US exchange you may be liable to pay US estate taxes, whether you are American or not. The really bad news is that if you’re not American the starting balance for which this tax kicks in is much lower.
No matter where you are from, non US citizens with holdings of over $60,000 in US ETFs may come under US estate tax law. This means whoever you leave your money to could be taxed up to 40%. Ouch!
If you are buying off non-American exchanges such as the London Stock Exchange you shouldn’t have this problem.
Be aware, most investment platforms let investors make purchases off exchanges everywhere these days. And the cheaper fees can make US exchanges very tempting. Unless you’ve done your own research and established that the risk is worth the cost savings don’t let US exchanges attract you. It maybe a big mistake.
In short, it is probably advisable for non resident non Americans to avoid using US exchanges altogether.
Fact sheets
Have a look at the Fact Sheet for iShares UK Gilts 0-5yr UCITS ETF, a popular UK short term government bond fund. I’ve underlined the key information we need to look at in red.
The IE in the number ‘IE00B4WXJK79’ at the top provides us with the ISIN number, which in of itself isn’t that interesting. Its the first couple of letters that we need:
IE
This shows us the fund is domiciled in Ireland which in many cases is going to reduce our tax bill. And just to be sure, they’ve told us the domicile is Ireland in the section below that.
We can also see that the fund has UK reporting status. Again, that’s going to be a bonus for saving on taxes for most of us.
The following image is extracted from another page of the fact sheet. Two stock exchanges are shown. One of which is the LSE, which most Brits abroad tend to us. The other is the Mexican equivalent. Hopefully by buying our shares from either of those we should avoid US estate tax laws.
You can download the latest Fact Sheet version here if you want a better look at it.
Dividend and Interest Payments
ETFs of stocks may pay dividends.
As you don’t pay dividend tax on UK assets if you a non resident you’ll not have to pay this.
However, if you are a British expat, be warned, this only applies if you do not return to the UK to live within 5 years. If you return any earlier HMRC will expect any tax savings you made to be reimbursed.
At the time of writing there is a dividend allowance of £500 so you would pay tax on any amount above that. As with Capital Gains Tax, this was much higher in the not too distant past.
A basic rate tax payer pays 8.5%, a higher rate tax payer pays 33.75% and an additional rate tax payer pays 39.35%.
Bond ETFs pay interest and this is taxable too. However, there’s some rest bite with savings. You don’t pay any tax on savings income up to £5,000 if your total other UK income is less than £17,570. If your UK income is over that amount there’s a personal savings allowance. Basic rate tax payers have a £1,000 tax free allowance and higher rate tax payers have a £500 tax allowance.
Your personal income tax allowance can also be used alongside the dividend and personal savings allowances, which is going to mean many people living overseas simply won’t pay tax on their interest.
Capital Gains
As with dividends, you don’t pay Capital Gains Tax on UK assets that are not property unless you return to the UK within 5 years of leaving, so those overseas for long term don’t have to worry too much about UK capital gains on their ETFs.
If you return to the UK any earlier, however, you would pay just like UK residents do and would have to pay back any tax savings you’ve made during your time away. The amount you pay is lower than for property, though. It is 10% for basic income tax rate payers and 20% for higher rate payers.
4. Inheritance Tax
Inheritance Tax is a tax on the estate (money, investments, houses etc) of somebody who’s passed away.
If you have a lot of assets that you intend to pass on to others inheritance tax is something you need to think about.
As far as the UK government is concerned, it comes into play at £325,000, so if the value of the your total assets (property, money and other possessions) is less than £325,000 there’s usually no inheritance tax to pay in the UK.
Amounts above £325,000 still may not be subject to inheritance tax if they are left to the your spouse, civil partner, a charity or community amateur sports club.
And perhaps the best news for anybody with kids is the fact that this threshold increases to £500,000 if everything goes to them or their kids (your grandchildren).
In fact, as long as the value of your entire estate is lower than your threshold, unused threshold can be passed on to your partner. This means the threshold can increase to £1,000,000 if one parent passes on their estate to the other one who in turn leaves it to their children or grandchildren.
The bad news is, if your heirs are liable for inheritance tax the standard rate is 40%.
MoneyHelper go into more depth on the topic here.
5. Do I Need to Complete a Tax Return?
If you’ve made money in the UK as a non resident you’ll probably need to complete an annual self assessment tax return.
There are three ways to do this. First, you can complete the hand written forms yourself and stick them in the post. Second, you can get some software to help you and finally you can pay a professional to help you.
If you are taking the handwritten form approach there are multiple paper forms that you may need to fill out.
To start with, there is the main form (SA100), and then there are some supplementary forms that may or may not apply to you as follows:
employees or company directors – SA102
self-employment – SA103S or SA103F
business partnerships – SA104S or SA104F
UK property income – SA105
foreign income or gains – SA106
capital gains – SA108
non-UK residents or dual residents – SA109
Each of the above links takes you directly to the government’s web page. You can then download the form in question and some supplementary notes if required. If you are not sure which forms apply to you, the supplementary notes should help you decide.
UK Online Tax Returns
Alternatively, you can take advantage of the internet. Nowadays there are plenty of services available.
First, there’s getting some software to help you. Taking the best part of a day to fill paper forms becomes about half an hour when taking the app/software approach. I’ve compared some tax software packages here, but for tax returns specifically you might want to try GoSimpleTax. Right now you can try it for free here.
Alternatively, if you want to minimize the chance of errors and maximize your time, you can pay somebody to do everything for you. Prices are a lot lower than they used to be. I’ve talked more about that here, but UK Landlord Tax would be a safe place to start. This page contains their contact form. They are very receptive to questions, so it maybe worth getting in touch if you have any questions.
Whichever method you choose to complete your tax return do be aware that the UK tax system operates from the 6 April in one year to the 5 April of the next year.
And forms need to be submitted by 31 October by post or 31 January for online.
Meeting these deadlines avoids a minimum £100 fine and I’m sure it goes without saying that HMRC has all kinds of options if you don’t pay your tax. These include accessing your bank account directly and selling your possessions.
6. UK Resident Status
According to HMRC, you’re automatically non-resident if either:
- you spent fewer than 16 days in the UK (or 46 days if you have not been classed as UK resident for the 3 previous tax years)
- you work abroad full-time (averaging at least 35 hours a week) and spent fewer than 91 days in the UK, of which no more than 30 were spent working
If that’s not clear, there are also resident status UK tests that look at it from the opposite end of the spectrum. In other words, they can tell you if you your status. You can find them here.
And if that doesn’t clear things up, you would probably be advised to go through the Statutory Residence Test which is the formal approach for letting you work out your residence status for a particular tax year. You can find it here.
There’s also a Sufficient Ties test you can do. It looks at your ties to the UK, like family members and properties. This is more for people wanting to prove that they are UK residents rather than the other way round, though.
And note we are taking about resident status here, not domicile. Non domicile UK rules are something different. You can read more about this here.
7. UK Certificate of Residence
If it turns out you are in fact a UK resident even though you spend time overseas you may be able to claim tax relief if you have a UK tax residency certificate, otherwise known as a Certificate of Residence.
The rules with these are pretty straight forward. You can apply for a Certificate of Residence if:
- you’re classed as a resident of the UK
- there’s a double taxation agreement with the country concerned.
You can read more about this here.
UK Non Resident Tax Summary
- Whilst there’s no UK capital gains tax on shares for non residents, the same can’t be said for property. Everyone pays!
- British passport holders should be eligible for the personal allowance
- Property sales in the UK need reporting to HMRC within 60 days
- You are classes as a ‘Non Resident Landlord’ if you have rental property in the UK and live abroad for 6 months or more per year
- It’s probably safest to buy ETFs with Reporting or Distributor Status that are domiciled in Ireland
- UK tax rules are constantly being updated. You can find all the latest information directly here
- If large amounts of tax are at stake it may be worth getting some advice
- If you’ve made any money in the UK don’t forget to submit a self assessment tax return