Split year treatment
Technically, you are either resident or non-resident for the whole tax year. However, there are special rules which may apply to you if you arrive in or leave the UK in the tax year.
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If split year treatment applies to you, you pay UK income tax as a UK resident for income earned in the ‘UK part’ of the year and you pay income tax as a non-resident for income earned in the ‘overseas part’ of the year. Broadly, this means that the non-UK income earned in the overseas part of the year is out of scope of UK income tax.
Split year treatment can apply when you are becoming resident in the UK (if so, there will be an overseas part of the year followed by a UK part), or when you are becoming non-resident in the UK (if so, there will be a UK part followed by an overseas part).
As non-residents are not taxable on foreign income and gains, income you receive in the overseas country before 1 July 2023 will not be taxable in the UK. Therefore, split year treatment can be quite useful in helping to prevent double taxation.
Split year treatment can be complex, and the year may not be split on the date you expect, particularly if you spend time in the UK before your arrival or after your departure.
You cannot choose the date on which you split the year; it is determined by law and depends on your circumstances.
However, if the date on which you split the year under the statutory residence test (SRT) is not what you expect (for example, in a year of arrival the UK part of the year begins sooner than the date you move here with your family, because of time you have spent in the UK prior to their arrival) it may be possible to ‘override’ the split year date for certain purposes by using a double tax agreement. This mechanism can also be used if you are ineligible for split year treatment for some reason (see below under the heading If you cannot split the year). However, this is a complex area and you should seek advice if you feel this applies to you.
Split year treatment does not require a claim; if you are eligible it applies automatically and cannot be disapplied.
Split year treatment can only apply if you are resident in the UK under the statutory residence test (SRT) for that year.
If you are non-resident for the year, then split year treatment is not applicable. In this case, you are subject to UK tax on UK-sourced income only for the whole tax year.
You can only split a particular tax year once.
When working out if you are eligible for split year treatment, you will often need to consider your circumstances for the following tax year. If you prepare your tax return on the basis that split year treatment applies, but it later turns out that the conditions for the following tax year are not met, then you will need to amend your return.
If you cannot split the year
If you are tax resident but ineligible for split year treatment in an arrival or departure year, it is usually possible to make appropriate claims under double taxation agreements (if one exists between the UK and the country concerned) to limit or exclude the UK’s ability to tax your pre-arrival (or post-departure) income. In effect, this secures the same result as split year treatment, but in a different way.
You can find more information on our page Dual tax residence.
Capital gains tax
Split year treatment applies to both income tax and capital gains tax.
However, capital gains tax can sometimes apply if you are non-resident in the UK, including during the overseas part of a split year. In addition, if you are only temporarily non-resident in the UK then capital gains tax can apply on disposals made while non-resident when you return to the UK. For more information, see our separate guidance.