What Is A UK Residential Status And How To Work It Out


HMRC Tax residence Test

UK resident status is determined according to a test created by HMRC called the Statutory Residence Test (‘SRT’). The SRT determines whether you are resident or non-resident for a particular tax year.

To determine your resident status, you must work through a series of tests, split into three categories. The three categories are ranked in priority starting with 1) the automatic non-resident tests, then 2) the automatic resident tests, then 3) the sufficient ties test.

The SRT is an ‘each and every year’ test and therefore, you must assess your resident status in every UK tax year period (6 April to 5 April).

Once your personal circumstances and travel pattern satisfy one of the tests, this will conclude your resident status for the tax year in question.

The UK recognises the concept of ‘split year’, which enables departing taxpayers to split a tax year into a resident and non-resident part and arriving taxpayers to split a tax year into a non-resident and resident part, providing relevant criteria is satisfied.

Essentially, a split year status gives taxpayers the opportunity to align UK tax exposure with their travel pattern.

Factors that can impact your resident position are as follows:

Physical presence
Accommodation
Ties
Work pattern

What is the relevance of your resident status?

Your resident status determines what sources of incomes and gains you pay tax on to HMRC.

UK domiciled resident

UK domiciled residents pay tax on worldwide incomes and gains.

Non-domiciled resident

Non domiciled residents can elect to exempt foreign incomes and gains from taxation.

Non-resident

Non-residents pay tax on UK sourced incomes and UK property gains.

If you are relocating to the UK, it is essential that you manage your travel pattern and personal circumstances so that you can enter the tax system upon arrival, rather than at the beginning of the tax year. Upon entering the UK tax system, should you wish to exempt foreign incomes and gains from taxation, wealth/bank structuring advice should be explored to ensure the exemption benefits are retained throughout your period of residence in the UK.

If you are relocating abroad, it is essential that you manage your travel pattern and personal circumstances so that you can exit the tax system upon departure. This will enable you to minimise UK tax exposure while you’re abroad. As a starting point, UK sourced incomes will continue to be taxable in the UK however, you may be able to rely a on the UK’s network of double taxation agreements to completely remove the UK’s taxing right of your UK sources incomes.

How can GTC help?

For historic purposes, GTC can complete a resident assessment and assist with the necessary steps to bring your UK tax affairs up to date with HMRC.

For future purposes, GTC can advise on the steps you must take to achieve your desired resident status so that you can optimise tax exposure in the UK.

Become a GTC client

Book a free discovery call with our team. We will collect background information to develop a greater understanding of the necessary steps to take to optimise your UK tax affairs.


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