It is important for non-resident individuals to understand their UK tax obligations, especially since failure to file required tax returns will often result in penalties.
While the rules regarding who must file a tax return are relatively straightforward, it can be still be confusing, especially for those who are unclear as to their residence position, or whose affairs are especially complicated. For those who are unclear about their tax filing obligations it would be recommended to seek assistance in order to confirm matters.
Which Non-Residents Need to File a Tax Return?
In tax years of non-residence, the only items to be reported on a self assessment tax return will be UK sources of income and gains. Though if an individual only receives disregarded income (such as UK bank interest, or a state pension), there will be no requirement to file a tax return. Situations in which a tax return may be required are:
- Receiving UK rental income:- HMRC will expect self assessment tax returns, unless they tell you not to do so.
- Earning income in the UK from an employment or self-employment:- if the correct amount of tax is being paid to HMRC under PAYE for an employment, then a tax return may not be required, though it would be prudent to always file a tax return in these situations if non-resident.
- Receiving UK source capital gains that are subject to capital gains tax:- see here
- Is a director of a UK company:- normally a tax return is required, though recent changes in HMRC guidance indicate that if there is no UK source income, and no tax, then a tax return is not required.
In order to file self assessment tax returns, it will be necessary to open a self-assessment record. Details can be found here.
Tax Compliance for Individuals Leaving the UK
For individuals who already file self assessment tax returns, the completion of the tax return for their year of departure should include ‘residency’ pages, on which they can show the date they left the UK for tax purposes. Often, HMRC will still issue a tax return the following year, as they won’t know whether or not the individual is still receiving UK source income.
If the individual no longer receives UK source income, the easiest solution is to telephone the HMRC Self Assessment helpline to inform HMRC, who will likely cancel requests for further tax returns from the individual.
For those individuals who don’t file tax returns, it is sometimes advised that the individuals complete form P85 to inform HMRC of their date of departure, and include details of their final employment income before leaving the UK. Doing this may even result in a tax refund. This is because an individual’s tax-free personal allowance is the same for individuals, whether resident an entire tax year (on which basis their PAYE code is calculated), or only part of it.
For individuals who will continue to receive UK source income after leaving the UK, then it may be necessary to continue filing self assessment tax return. The next section discusses the rules for who needs to file UK tax returns.