What are the Self-Assessment Rules for Non-UK Residents?

Individuals residing in the UK, whether they are UK nationals or overseas living in the UK, are liable to pay tax to the UK if certain conditions are met. If you are a non-UK resident, you need this article to get a detailed view of the self-assessment rules for non-UK residents.

 

What are the Self-Assessment Rules for Non-UK Residents?

Non-UK residents are liable to pay tax on the income generated from a source based in the UK. This encompasses earnings from pensions, rental properties, savings interest, and wages earned in the UK. On the contrary, non-UK residents are not imposed income tax on earnings sourced from sources outside of the UK. This is in contrast to the tax imposed on UK residents on earnings sourced from worldwide sources. Therefore, non-UK residents must understand the self-assessment rules for income tax and keep themselves updated about changes made by the UK government.

What Income is and isn’t Taxable in the UK?

Non-UK residents are required to do a self-assessment to calculate the payable tax amount. The tax payable on income is:

• UK self-employed income
• Wages from UK employment
• income from renting out UK land or property
• private pension payments
• Savings interest.

Other property or land matters also involve tax payments. If you are a non-UK resident and inherit some property or land, you are liable to pay the tax according to the HMRC rules; however, non-UK residents are exempt from paying the inheritance tax on property they inherit.

Adding to it, if the income of a non-UK resident is below the range of tax due to a treaty between the UK and the country of residence, then the individual has to fill and attach a claim form (HS302/HS304)  with their self-assessment tax return.

Sending a Self-Assessment Tax Return

Non-residents cannot use the HMRC’s online service to file tax returns, however, they should:

• Fill in a Self Assessment tax return and an SA109 form and send by post
• Use commercial self-assessment software that supports SA109 reporting
• Get a tax professional to report your UK income for you

The deadline for submitting self-assessment tax returns is 31st October; after the deadline, the individual is fined.

When Tax is Not Due or Is Already Deducted

The incomes where non-UK residents are exempted from tax are:

• The State Pension
• interest from UK government securities (‘gilts’)

If you are a non-UK resident working in the UK, then the tax is automatically calculated according to the number of days you have worked in the UK. The income tax from non-UK residents is not taken from interest on savings and investments.

When Non-UK Residents Overpay the Tax

A non-UK resident can always apply for a refund if they think that he has overpaid the tax to the HMRC. This can happen if the tax is deducted automatically from the income of a non-UK resident and the total income is below the personal allowance limit.

The refund can be applied by sending a form R43 to the HMRC or directly claiming the refund in the self-assessment form. The HMRC generally sends back the refund amount by post to the name and address provided by the individual, or it can be sent directly to the bank account upon request.

Tax Return on Rental Income

If you are a non-UK resident, then you are liable to pay tax on rental income. Non-residents also pay tax if they make a profit while selling property or land in the UK. If a non-resident is living for 6 months, then the individual is declared as a non-resident landlord by the HMRC, even if the individual is classified as a UK resident for tax purposes.

The tax on rental income can be paid through a self-assessment form or directly deducted by the property agent or tenant. If the non-resident wishes to pay rental tax through assessment, then he need to fill NRLi form and send it to the HMRC. If the application is approved by the HMRC, the property agent will be informed by the HMRC not to deduct the rental tax. However, the non-resident will declare the rental income in a self-assessment form by using the services and sending the form by post. He can also use available software for self-assessment or hire a professional to file a self-assessment tax return. You need to declare your rental income in a self-assessment tax return unless HMRC tells you not to.

Selling or Inheriting Assets

If you are a non-UK resident, then you are not liable to pay :

• Capital gains tax if you sell assets in the UK
• Inheritance tax if you inherit land or property in the UK

Non-residents will only pay tax if they make a gain by selling a property they inherited. The gain tax must be included in the self-assessment form at the end of the tax year.

If You’re Taxed Twice

The non-UK residents may get taxed twice by the UK and by the country they live in. This may not happen if the country of residence and the UK government have a double taxation agreement. The non-resident can claim tax relief, which can be full or half, or a refund can be claimed after each double-taxation agreement sets out:

• The country you pay tax in
• The country you apply for relief in

 

 Conclusion

The UK government has set clear rules regarding taxation applying to UK residents and non-UK residents. The rules are not the same for every individual. The non-UK residents enjoy their benefits in the taxation process, while the same goes for UK-residents. The non-UK residents cannot use the online services for self-assessment tax returns to the HMRC however, they may send it by post or hire a professional to file a tax return. The non-UK residents are not liable to pay inheritance tax or property tax; however, they must pay a gains tax if they sell the inherited property in the UK. The non-UK resident may be taxed twice by the UK government and by the country of residence. The double taxation agreement benefits individuals in taxation matters.

Disclaimer: All the information provided in this article on self-assessment rules for non-UK residents, including all the texts and graphics, is general in nature. It does not intend to disregard any of the professional advice.