tax-foreign-income

If you come to study in the UK

1:Overview 2:Paying tax on foreign income
3:UK residence and tax 4:Foreign income that’s taxed differently
5:If you come to study in the UK 6:If you come to study in the UK
7:’Non-domiciled’ residents

Foreign students usually don’t pay UK tax on foreign income or gains, as long as they’re used for course fees or living costs like:

  • food
  • rent
  • bills
  • study materials

Check that the country your income’s from has a ‘double-taxation agreement’ that covers students.

HM Revenue and Customs (HMRC) may ask you to account for your living costs if they’re more than £15,000 in a tax year (excluding course fees). The tax year is from 6 April to 5 April the following year.

When you need to pay tax

You may need to pay tax on your foreign income in the normal way if you:

  • are from a country without a double-taxation agreement for students
  • have other income that you don’t bring to the UK
  • bring it to the UK and spend it on things other than living costs and course fees
  • plan to stay in the UK as your permanent home (‘domicile’)

If you work in the UK

Some double-taxation agreements mean you don’t pay UK tax on your income if you work while you’re a student.

If your country doesn’t have an agreement like this, you have to pay tax in the same way as others who come to live in the UK.

If you’re taxed twice

You may be taxed on your foreign income by the UK and by the country where your income is from.

You can usually claim tax relief to get some or all of this tax back. How you claim depends on whether your foreign income has already been taxed.

There’s a different way to claim relief if you’re a non-resident with UK income.

If you’ve already paid tax on your foreign income

You can usually claim Foreign Tax Credit Relief when you report your overseas income in your tax return.

How much relief you get depends on the UK’s ‘double-taxation agreement’ with the country your income’s from.

You usually still get relief even if there isn’t an agreement, unless the foreign tax doesn’t correspond to UK Income Tax or Capital Gains Tax.

Contact HM Revenue and Customs (HMRC) or a get professional tax help if you’re not sure, or need help with double-taxation relief.

What you’ll get back

You may not get back the full amount of foreign tax you paid. You get back less if either:

  • a smaller amount is set by the country’s double-taxation agreement
  • the income would have been taxed at a lower rate in the UK

HMRC has guidance on how Foreign Tax Credit Relief is calculated, including the special rules for interest and dividends in ‘Foreign notes’.

You can’t claim this relief if the UK’s double-taxation agreement requires you to claim tax back from the country your income was from.

If you haven’t paid tax on the foreign income

You have to apply for tax relief in the country your income’s from if:

  • the income is exempt from foreign tax but is taxed in the UK (for example, most pensions)
  • required by that country’s double-taxation agreement

Ask the foreign tax authority for a form, or apply by letter if they don’t have one.

Before you apply, you must prove you’re eligible for tax relief by either:

Once you’ve got proof, send the form or letter to the foreign tax authority.

Capital Gains Tax

You’ll usually pay tax in the country where you’re resident and be exempt from tax in the country where you make the capital gain. You won’t usually need to make a claim.

You have to pay Capital Gains Tax on UK residential property even if you’re not UK resident.

When to claim relief

There are different rules if your gain comes from an asset that either:

  • can’t be taken out of the country, such as land or a house
  • you’re using for business in that country

You’ll need to pay tax in both countries and get relief from the UK.

Dual residents

You can be resident in both the UK and another country. You’ll need to check the other country’s residence rules and when the tax year starts and ends.

HMRC has guidance for claiming double-taxation relief if you’re dual resident.

Foreign income that’s taxed differently

1:Overview 2:Paying tax on foreign income
3:UK residence and tax 4:Foreign income that’s taxed differently
5:If you come to study in the UK 6:If you come to study in the UK
7:’Non-domiciled’ residents

Most foreign income is taxed in the same way as UK income, but there are special rules for:

  • pensions
  • rent from property
  • certain types of employment income

Pensions

You have to pay tax on pensions if you’re resident, or were resident in any of the 5 previous tax years.

You’ll usually only pay tax on 90% of your foreign pension payments (10% is exempt from tax). Check with your pension provider to find out how you’ll be taxed.

You pay UK tax on unauthorised payments from your foreign pension, such as some lump sums and early payments.

Rent from property

You pay tax in the normal way on overseas property. But if you rent out more than one, you can offset losses against other overseas properties.

Certain types of employment income

You usually pay tax in the normal way if you work both in the UK and abroad. There are special rules if you work:

  • on a ship or in the offshore gas or oil industry
  • for the EU or government, or as a volunteer development worker

Paying tax on foreign income

You usually need to fill in a Self Assessment tax return if you’re a UK resident with foreign income or capital gains. But there’s some foreign income that’s taxed differently.

You don’t need to fill in a tax return if your only foreign income is dividends under £300 in total and you don’t have anything else to report.

Different rules may apply if your permanent home (‘domicile’) is abroad.

Register for Self Assessment

If you don’t usually send a tax return, you need to register by 5 October following the tax year you had the income.

You’ll get a letter telling you what to do next after you’ve registered.

Filling in your tax return

Use the ‘foreign’ section of the tax return to record your overseas income or gains.

Include income that’s already been taxed abroad to get Foreign Tax Credit Relief, if you’re eligible.

HMRC has guidance on how to report your foreign income or gains in your tax return in ‘Foreign notes’.

‘Non-domiciled’ residents

1:Overview 2:Paying tax on foreign income
3:UK residence and tax 4:Foreign income that’s taxed differently
5:If you come to study in the UK 6:If you come to study in the UK
7:’Non-domiciled’ residents

UK residents who have their permanent home (‘domicile’) outside the UK may not have to pay UK tax on foreign income.

The same rules apply if you make any foreign capital gains, for example you sell shares or a second home.

Working out your domicile

Your domicile’s usually the country your father considered his permanent home when you were born. It may have changed if you moved abroad and you don’t intend to return.

If you need help working out which country you’re domiciled in, you can:

There are additional rules for domicile and Inheritance Tax.

Tax if you’re non-domiciled

You don’t pay UK tax on your foreign income or gains if both:

  • they’re less than £2,000 in the tax year
  • you don’t bring them into the UK, for example you transfer them to a UK bank account

If this applies to you, you don’t need to do anything.

Chapter 9 in HMRC’s guidance on ‘Residence, Domicile and the Remittance Basis’ explains the rules for bringing income or gains to the UK.

If your income is £2,000 or more

You must report foreign income or gains of £2,000 or more, or any money that you bring to the UK, in a Self Assessment tax return.

UK residence and tax

1:Overview 2:Paying tax on foreign income
3:UK residence and tax 4:Foreign income that’s taxed differently
5:If you come to study in the UK 6:If you come to study in the UK
7:’Non-domiciled’ residents

Your UK residence status affects whether you need to pay tax in the UK on your foreign income.

Non-residents only pay tax on their UK income – they don’t pay UK tax on their foreign income.

Residents normally pay UK tax on all their income, whether it’s from the UK or abroad. But there are special rules for UK residents whose permanent home (‘domicile’) is abroad.

Work out your residence status

Whether you’re UK resident usually depends on how many days you spend in the UK in the tax year (6 April to 5 April the following year).

You’re automatically resident if either:

  • you spent 183 or more days in the UK in the tax year
  • your only home was in the UK – you must have owned, rented or lived in it for at least 91 days in total – and you spent at least 30 days there in the tax year

You’re automatically non-resident if either:

  • you spent fewer than 16 days in the UK (or 46 days if you haven’t 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

Get help

If your situation’s more complicated or you need to confirm your status, you can:

Your residence status when you move

When you move in or out of the UK, the tax year is usually split into 2 – a non-resident part and a resident part. This means you only pay UK tax on foreign income based on the time you were living here. This is called ‘split-year treatment’.

You don’t need to claim split-year treatment – it’s applied automatically.

You won’t get it if you live abroad for less than a full tax year before returning to the UK. You also need to meet other conditions – to find out if you qualify, you can:

If your situation changes

Your status can change from one tax year to the next. Check your status if your situation changes, for example:

  • you spend more or less time in the UK
  • you buy or sell a home in the UK
  • you change your job
  • your family moves in or out of the UK, or you get married, separate or have children

Residence and capital gains

You work out your residence status for capital gains (for example, when you sell shares or a second home) the same way as you do for income.

UK residents have to pay tax on their UK and foreign gains. Non-residents have to pay tax on income, but only pay Capital Gains Tax either:

Residence before April 2013

There were different rules for working out your residence status before 6 April 2013.

Overview

1:Overview 2:Paying tax on foreign income
3:UK residence and tax 4:Foreign income that’s taxed differently
5:If you come to study in the UK 6:If you come to study in the UK
7:’Non-domiciled’ residents

You may need to pay UK Income Tax on your foreign income, such as:

  • wages if you work abroad
  • foreign investments and savings interest
  • rental income on overseas property
  • income from pensions held overseas

Foreign income is anything from outside England, Scotland, Wales and Northern Ireland. The Channel Islands and the Isle of Man are classed as foreign.

Working out if you need to pay

Whether you need to pay depends on if you’re classed as ‘resident’ in the UK for tax.

If you’re not UK resident, you won’t have to pay UK tax on your foreign income.

If you’re UK resident, you’ll normally pay tax on your foreign income. But you may not have to if your permanent home (‘domicile’) is abroad.

Reporting foreign income

If you need to pay tax, you usually report your foreign income in a Self Assessment tax return. But there’s some foreign income that’s taxed differently.

If your income is taxed in more than one country

You may be able to claim tax relief if you’re taxed in more than one country.

If you’ve not yet paid tax on the foreign income, you may need to apply for a certificate of residence to prove you’re eligible for relief.