Residence and domicile for armed forces
Your residence and domicile are factors that can help to decide what UK tax you pay and on what types of income and gains. This section of the website provides guidance on special rules for serving personnel in relation to residence and domicile. General information on residence and domicile is available in the ‘migrants and tax section’.
The general position is that if you are resident and domiciled in the UK for tax purposes, you pay UK tax on your worldwide income and gains on the arising basis (in the tax year in which they arise). If you are not resident in the UK, you are normally liable to UK tax on your UK income, but not on your foreign income and gains; in addition, you might not be liable to UK tax on UK capital gains.
There are special rules that apply to serving personnel in the armed forces, however, which may affect the tax and National Insurance contributions (NIC) you pay.
The rules for determining your residence and domicile status are the same as those for other individuals.
Serving personnel in the armed forces must use the Statutory Residence Test (SRT) to determine their residence status for tax purposes. There is more information on working out if you are resident in the UK in the ‘migrants and tax section’.
You can determine your domicile according to the normal rules. There is more information on domicile in the ‘migrants and tax section’.
Why does residence matter?
Your residence position may affect the UK allowances you are entitled to. Your status as a member of the armed forces may also affect your entitlement.
Some individuals are entitled to the UK personal allowance even if they are not UK resident. This includes current and former employees of the British Crown, which means that current and former service personnel are entitled to the UK personal allowance even when they are not UK resident under the SRT.
Provided you are a British citizen, you would also be eligible for the UK personal allowance as a citizen of a state within the European Economic Area (EEA), even when not UK resident.
Married couples’ allowance
You can normally claim married couple’s allowance (MCA) if all the following apply:
- you are married or in a civil partnership;
- you are living with your spouse or civil partner;
- one of you was born before 6 April 1935.
You can still claim MCA, provided you meet the conditions mentioned above, if you are unable to live with your spouse or civil partner because of an armed forces posting.
You can claim marriage allowance if all the following apply:
- you are married or in a civil partnership;
- neither you nor your partner are liable to income tax at a higher rate than the basic rate of income tax (if you are a Scottish taxpayer, you are eligible provided you do not pay Scottish income tax at a rate other than the starter, basic or intermediate rate);
- both you and your partner were born on or after 6 April 1935.
You may still be able to claim marriage allowance if you are posted abroad, provided you get a personal allowance. (Note that current and former service personnel are entitled to the UK personal allowance even if not UK resident).
What tax do I pay if I am working abroad?
Your residence status normally helps to determine the taxation position of your income and capital gains. If you work for the British Crown, you need to consider your employment income separately from all your other income and gains, because of a special rule.
Armed forces employment income
Your residence status does not affect the taxation position of your income from your employment by the British Crown – your earned income from your employment by the armed forces. As a member of the armed forces, you are a Crown servant and you will always be taxed in the UK in full on your Crown employment income whether or not the duties of the employment are carried out in the UK or overseas – but see the exception below.
So, if you work abroad (are posted overseas) as a member of the armed forces, you pay UK income tax on your earnings from your job. This rule applies regardless of your actual residence status for tax purposes; it does not matter for how long you are working abroad, in which country you are working or how settled you are.
The one exception to this is if you were recruited overseas to the armed forces and are not resident in the UK, providing that the maximum rate of pay for your grade is less than that of an executive officer in the UK civil service working in Inner London. Note carefully that this exception does NOT include, after 12 June 2006, any Queen’s Gurkha Officers or members of the Brigade of Gurkhas who were recruited in Nepal.
Other income and gains
You need to consider your residence status as normal using the SRT, however, in order to determine the taxation position in relation to all your other income and gains (apart from your armed forces employment income), whether from UK or foreign sources.
As noted above, if after considering the SRT you are resident in the UK, you are normally taxable in the UK on the arising basis on your worldwide income and gains.
If you are not resident in the UK, you may still have to pay UK tax on other types of UK income, as well as your armed forces earnings, if you continue to receive income from UK sources, for example:
- rental income;
- savings interest.
If you have UK rental income, you may have to complete a UK self assessment tax return, in order to tell HMRC about the income and pay tax on any profits. Normally, a letting agent or tenant deducts basic rate income tax when paying rent to a UK landlord who usually lives outside the UK. A letting agent should allow for any expenses they have paid when working out how much tax to deduct.
You may apply to use the non-resident landlord scheme however, under which you can receive your rental income with no tax deducted. To join the scheme you need to make an application to HMRC on form NRL1, which is available to complete online on GOV.UK. If HMRC accept your application, they may ask you to complete an annual self assessment tax return, on which you should declare all your UK income, including the rental property income.
If you are not resident in the UK, you do not normally have to pay UK capital gains tax (CGT) on any gains you make. However, you may have to pay CGT if you dispose of a UK residential property. There is more information in the ‘other tax issues section’.
If you return to the UK after being non-resident, you may have to pay CGT on any gains on assets you owned before you left the UK, even if you have paid tax on any gains in the country you moved to. You can usually claim double taxation relief.
Foreign income and gains
If you are resident and domiciled in the UK, you must pay UK tax on your worldwide income and gains on the arising basis. This means you pay UK tax on your foreign income and gains, regardless of whether you bring them to the UK or not.
If you are UK resident and not domiciled in the UK you pay UK tax on your UK income and gains on the arising basis. You can choose to pay UK tax on your foreign income and gains on either the arising basis or the ‘remittance basis’ of taxation. There is more information on the remittance basis in the ‘migrants and tax section’.
If you are not resident in the UK, you are not liable to UK tax on your foreign income and gains unless you return to the UK after a short period of being non-resident. You can read more about this in the section ‘Capital Gains Tax for individuals not resident in the UK’.
If the UK has a double taxation agreement with the country where you are working, this may prevent you from having to pay tax in more than one country. If there is no double taxation agreement, you may still be able to obtain tax relief, by means of a tax credit.
What National Insurance contributions do I pay if I am working abroad?
Most people who work in the UK pay National Insurance contributions (NIC) in addition to paying tax. If you leave the UK to work abroad for the armed forces, you may have to continue paying UK NIC.
Going to an EEA country or Switzerland
If you go to work for the armed forces in another EEA country or Switzerland you will probably be covered by EU social security rules. The general rule is that people who go to work in an EEA country or Switzerland are subject to the social security legislation of the country in which they are working and will pay contributions there. However, as a member of the armed forces (including reservists) you fall into one of the following categories, so you will be an exception to the general rule and you have to continue paying UK NIC:
- you are a member of the armed forces; or
- you are a civilian who works for the armed forces in Germany, or for an organisation like NAAFI which serves the armed forces.
Going to work in a country with which the UK has a Bilateral Social Security Agreement
The general rule is that you will be subject to the social security legislation of the country in which you work. However, each agreement contains exceptions to this general rule; if you fall into one of the exceptions, you have to continue paying UK NIC. The exceptions include where you are a member of the armed forces.
If you are covered by an exception then you (or your employer) should apply to HMRC NIC&EO International Caseworker for a certificate to confirm that UK NIC continue to be paid while you are working in the other country. This certificate ensures that you are also not required to contribute to the other country’s social security scheme.
Going to a country which is outside the EEA or Switzerland and not covered by a Bilateral Social Security Agreement
If you are going to work in a country which is outside the EEA and Switzerland, and is not covered by a Bilateral Social Security Agreement, then your position will depend on the domestic rules in that country. The general rule is that you will have to pay social security contributions there.
However, as a member of the armed forces, your employer is sending you to work in the country. This means you will have to continue paying UK NIC. No certificate is required to confirm that you continue to pay UK NIC.
Can I get Child Benefit?
Normally, you have to tell the Child Benefit Office if you go abroad for more than eight weeks as this might affect your claim. Special rules apply if you work abroad as a Crown servant – this includes serving personnel of the armed forces.
You can get Child Benefit while you work abroad as a member of the armed forces provided that, just before you were posted abroad, you were either:
- living in the UK and it was your main home; or
- posted to the UK.
You can get Child Benefit while you work abroad as a member of the armed forces whether your child goes abroad with you or stays in the UK
HMRC normally pay Child Benefit into a bank account in the UK.
Do I have to complete a self assessment tax return?
You need to complete a self assessment tax return if HMRC ask you to, for example if you are a non-resident landlord and need to tell HMRC about your UK rental income. There is information about who normally needs to send a tax return on GOV.UK.
If you are not resident in the UK, you cannot use HMRC’s online services to tell them about your income. Instead, you need to send a paper tax return by post, use software or get help from a tax adviser. You can find a Chartered Tax Adviser on the Chartered Institute of Taxation website.
If you are not resident in the UK, in addition to the main SA 100 form, you must also complete some of the supplementary pages, for example, the ‘residence’ section (form SA109) and the ‘employment’ section (form SA102). If you have any other income or gains, you must complete the appropriate supplementary pages. For example, if you rent out a UK property, you must complete the ‘UK property income’ section (form SA105).
You can download the paper forms from GOV.UK.
It is important to note that the deadline for submitting paper self assessment tax returns is 31 October following the end of the tax year.
Do I need to tell HMRC I am going to work abroad?
You must tell HMRC if either:
- you are leaving the UK to live abroad permanently; or
- you are going to work abroad full-time for at least one complete tax year.
You do not need to tell HMRC if you are leaving the UK for holidays or business trips.
If you need to tell HMRC that you are leaving the UK, you should either:
- fill in form P85 and send it to HMRC before you leave the UK; or
- submit your self assessment tax return if you usually complete one.
If you are going to be working full-time for a UK-based employer (the armed forces) for at least one full tax year you should send both form P85 and a self assessment tax return. You can complete form P85 online on GOV.UK.
There is general information about what to do if you leave the UK to work abroad in the ‘employed section’.
Where can I find more help?
Members of the armed forces living overseas can contact HMRC on the Crown Servants Helpline to discuss income tax or capital gains tax queries.
You can find more information on residence for tax purposes in the ‘migrants and tax section’.
For more information on tax when leaving the UK, go to GOV.UK.
You can find double taxation agreements between the UK and other countries on GOV.UK.
You can find more information on NIC if you are going abroad on GOV.UK.
For a list of countries that have a social security agreement with the UK, visit GOV.UK.
This is a complex area; you might need to seek advice from a professional tax adviser. You can find a tax adviser on the Chartered Institute of Taxation's website.