Figuring out the full extent of your taxes can be confusing as a British expat as most people are not aware of the finer details of their obligations to their home country even if they are living, working, or running businesses abroad. Most British expats have the misconception that if they have moved to another country they are suddenly not part of the tax net in the UK anymore and will no longer need to file taxes yearly.
The residence and the domicile are deciding factors for calculating the tax that is applicable on any individual living in or away from the UK. Other secondary factors also apply such as the amount and the source of the individual’s income and the capital gains they can expect.
Navigating ‘Residence’ For Taxable Income
Non-residents only need to pay tax if they are earning from a UK company, business, or organization. UK residents however need to pay on all forms of income whether generated from inside the UK or a foreign country. Non-residents have to pay for all types of income whether they emerge from a job or business dealings and enterprises. Certain provisions can relieve part of the tax burden but someone being awarded these clauses is more the exception rather than the norm. Earnings from interest, dividends from shares, and rent are also applicable for income tax.
A double tax treaty is a provision that allows British expats to not be doubly taxed both on the income they are generating from another country or the residual income they still earn in the US such as from business sales, rent, dividends, and so forth.
Unilateral relief can also provide a tax credit to British expats but this is not usually a lucrative offering if the expat is living and working in a poorer or third-world country that has a low tax bracket anyway. Just like one may need a tax accountant for US expats in the UK, British expats should also consult local tax consultants to be aware of the taxes levied on them in the host country. They should then inform the HMRC yearly of the taxes they are paying abroad along with sharing their business ventures, financial investments, and income sources.
Capital Gains Tax
Non-residents or British expats that haven’t resided in the UK for 3 years or a little less usually do not need to pay capital gains tax. There are a few instances in which expats would need to file for capital gains tax such as if they are associated with any business or agency that operates in the UK using UK assets. Companies or small businesses owned by British expats that still have their headquarters in the UK are also liable for these taxes.
Anti-avoidance legislation of a certain type that applies to expats from time to time states that all capital gains are technically income and should be considered taxable for residents and non-residents alike. For expats or non-residents that have been away for a period of 5 years or more, they may be accumulatively taxed on capital gains on assets accrued in the interim period.
