There are thousands of British non-residents unnecessarily paying UK tax on their UK income, savings and private pensions. This is often due to UK non- residents not knowing the facts about their tax situation or because they haven’t informed Her Majesty’s Revenue and Customs of their status.
Income Tax is automatically deducted from your earnings and this continues unless taxpayers officially tell HMRC that they are now a non-resident. Britain has ‘Double Taxation Treaties’ with a large number of countries so that people don’t end up paying income tax twice.
Tax on Private Pensions
You are eligible to claim the tax back on a private pension if it is a ‘qualifying recognised overseas pension scheme’, sometimes shortened to QROPS. This also applies to other non-UK pension schemes that were granted tax relief from April 6th 2006.
Tax on Savings for non residents
You are also entitled to a full tax refund for any tax you have paid on income from savings, such as bank interest, if you are a UK non-resident.
Being a non-resident for tax purposes
As with all things HMRC related, there are specific ways to define residency status for tax purposes. It is crucial to have your non-resident status confirmed so that any liability to pay income tax can be properly administered.
As of 6th April 2013 a new Statutory Residence Test was introduced to determine taxpayers’ status.
This is split into two separate tests. The first is called the Automatic Overseas Test which is designed to show if someone only has minimal links to the UK. Passing this element usually means that you are classed as non-UK resident for tax purposes and are not liable to pay tax on UK earnings.
The second test is the Sufficient Ties Test and would only be completed if the AOT was not successful.
These tests are only applicable from the 2013-14 tax year onwards. Any previous years were governed by different rules and you may have changed status with the rule change. This is an important point when you consider that you can backdate a tax rebate claim for four years.
You are resident if;
- You spent 183 days in the UK during a tax year
- Your only home is in the UK and you have lived in it for a total of 91 days, with 30 days spent there during the tax year. This applies to owned and rented homes.
You are non-resident if;
- You have spent less than 91 days in the UK, with up to 31 of those days spent working.
- Your full-time work is abroad, with an average of a 35 hour working week.
- You are in the UK for less than 16 days of the tax year.
How do I claim tax back as a non resident?
Self Assessment tax return
Many of you will be familiar with the Self Assessment tax return, which is the form you usually need to complete a tax relief claim for private pension and savings interest as a non-resident. In addition to the usual information, you will also need to fill in the non-resident section.
Unfortunately this cannot be done through HMRC’s free online system, you need to send it by post or use commercial software. The postal deadline is 31st October, earlier than online.
R43 form
In some cases an R43 form will need to be submitted if you are wanting to claim back personal allowances and a tax repayment.
