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What is residence?
Your residence status is one of the factors that decides what UK tax you pay and on which types of income and gains. Here we explain what residence means and how it applies to you. This information also applies to international students studying in the UK.
What is residence?
Your ‘tax residence’ helps determine the scope of your tax liability in the UK. The UK taxes its residents on their worldwide income and gains (although relief from UK tax on certain foreign-sourced income and gains may be available for non-UK domiciled individuals – see the page How are foreign income and gains taxed?). Non-residents are typically liable to tax on their UK-sourced income only.
Since 6 April 2013, there has been a Statutory Residence Test (SRT) in the UK to determine your tax residence status – this means that the rules for residence are set out in law. Prior to 6 April 2013, residence was a general term, with no legal definition. However, the position under both is broadly the same for many people.
You are likely to be treated as UK tax resident under the SRT if you:
- spend 183 days or more in the UK during a tax year; or
- have a home in the UK, and do not have a home overseas; or
- work full-time in the UK over a period of 365 days (this does not need to coincide with the tax year).
You could also be treated as UK resident even if you do not satisfy any of these conditions. This will be determined in part by how much time you spend in the UK in a tax year (or a series of tax years) and the number of ‘ties’ you have to the UK. The more time you spend in the UK, the fewer ties you need to be UK resident for tax purposes and therefore subject to UK tax on your foreign income and gains.
There is more detail on the page When is someone resident in the UK?.
Normally you are tax resident (or not) in the UK for a complete tax year – however sometimes you can split the tax year. In this instance the year is split into a UK part and an overseas part. It is also possible to be tax resident in both the UK and another country at the same time: this is called dual residence. Note that your residence status is determined separately from your domicile status.
You can find the guidance for the SRT on GOV.UK.
Why does tax residence matter for migrants working in the UK?
Migrant workers are subject to UK tax on their UK earnings, whether or not they are resident in the UK. So, if you only have UK income while you are here, it may not matter much whether or not you are tax resident: all of your income will be subject to UK tax.
However, when you are UK resident, any foreign income and gains you have may also be taxed in the UK. It is therefore important to know if you are tax resident or not for this reason. This is the case even if your income has already been taxed in another country (although you should be able to get some double taxation relief if this is the case). There is more information on this topic on our page How are foreign income and gains taxed?.
Your residence status may also affect whether or not you are eligible for the UK personal allowance and therefore the amount of UK tax that you pay. If you are tax resident in the UK you will normally get a personal allowance. If not, you may be able to get a personal allowance in certain situations – for example, if you are a national of the UK or an EEA country. This remains the case irrespective of the UK’s membership of the European Union. You can find out more about this in section 8 of HMRC’s RDR1 booklet available on GOV.UK.
As the personal allowance is quite generous (£12,500 for 2020/21), it is quite possible to have income below the personal allowance. In this case you may have no tax to pay. If your taxable income exceeds the personal allowance, you only pay tax on the excess. Whether or not you are entitled to a personal allowance is therefore very important. For example, for a basic-rate taxpayer in 2020/21 the personal allowance reduces their tax liability by £2,500 (because £12,500 of income which would have otherwise been taxed at 20% is tax free).
There are also some circumstances in which you may be resident but lose your personal allowance. This means you may pay more tax. There is more information on this topic on our webpage How are foreign income and gains taxed?.
How do I tell HMRC what my residence status is?
In the UK, you self-assess your residence and domicile status.
There is no formal process for agreeing your residence status with HMRC (or even for advising them of your arrival in the UK). However, if you are someone who is required to submit a tax return, you will need to complete SA109 ‘Residence, remittance basis etc.’ supplementary pages if your residence status is relevant to the entries on your tax return (for example, if you have left out your foreign income and gains on the basis that you consider yourself to be non-resident in the UK). This is then subject to potential enquiry by HMRC if they wish to challenge the position you have taken. Note that it is not currently possible to file the SA109 pages online using HMRC’s online filing portal. You will therefore need to file on paper (before an earlier deadline) or using commercial software.
It is important that you keep certain information and records to justify the position you have taken, if necessary.