Are you the individual who wants to pursue the aim to move to the UK? Here is something imperative that you must consider before you finally decide to move, we are here with giving you the low down on Income Tax and how it works for foreigners in the UK. You are required to be aware of the tax affairs and relevant obligations when you are residing in the UK. The discussion will focus on the tax implications that involve an individual who are from other origins and are settled in the UK to make a living.
We will take an instance of such a person who was born in the UK origin and also raised here. However, because he can not stand the gloomy weather of the UK, considering the situation, a one-way ticket is booked to Costa Rica. You are considered a foreigner in Costa Rica. Ex-pats also refer to the UK tax that is applicable to UK residents who are originally from overseas. So in the terms of tax, a foreigner means an individual who is making earnings outside of his origin country.
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The Low Down on Income Tax – Do Foreigners Pay Income Tax in the UK?
If you are residing in the UK and you are earning over the certain limit of the personal allowance which is an amount of £12,570, this means you are under the obligation to pay the income tax. This is imperative to understand that Income Tax is a way to cover the money from savings interest, benefits, and pension. Moreover, this depends on your income which will help you to know the amount of income tax that you are obliged to pay. Generally, three bands are considered in this regard.
- The basic rate is 20%. This applies to individuals who are earning between the limit of £12,571 to £50,270 in the UK.
- The higher rate is 40%. This applies to individuals who are earning between the limit of £50,271 to £150,000 in the UK.
- The additional rate is 45%. This applies to individuals who are earning over the limit of £150,000 in the UK.
Recently Moved to the UK? – Learn to Pay Income Tax
If you have recently settled in the UK and are also associated with a company as an employee, the tax you will pay will be through PAYE. On the other hand, the case of being self-employed brings in the responsibility to get registered for self-assessment. You are required to file tax returns so that you can pay income tax. Moreover, if you find yourself in a position to meet any one of the following listed requirements, you will be a UK tax resident automatically.
- If you own a home in the UK and that is the only home you have. The minimum period you have spent here is the duration of a month within a tax year.
- A period of 183 days is spent by you as a UK resident here.
- You are a full-time employee who works for 365 days in the UK for a period of two or more years.
How to Become a Resident of the UK?
Now, you have figured out to meet any one of the mentioned requirements and now you are a UK resident, you are further required to pay the UK tax on your income. The income you are earning from the UK and from the other country as well. Now as a UK resident you will enjoy the perks of social benefits, pension, and healthcare. The income sources from the UK make you obliged to pay tax. The foreign income will not be taxed.
Moreover, there is a chance for the individual who has settled in the UK to pay tax twice. Once in the UK and in the country, they belong to. The good news is that the double taxation agreement with many other countries can protect you from double payments of tax. The individual agreement will set out to decide in which country you will pay the tax.
The Bottom Line
Now that you have gathered a fair amount of information about the low down on Income Tax, we can bring the discussion towards wrapping up. The low down of the income tax in the UK for foreigners is not a complicated process to follow, however, you might need a professional beginner to understand your obligations related to the tax implications. This will further help to get charged with the right tax bill. We hope these few minutes of reading will help you to develop a better understanding of the UK tax policy for foreigners.
Disclaimer: The information about the low down on Income Tax in this blog includes text and graphics of general nature. It does not intend to disregard any of the professional advice.