How to work out my UK tax residence status

Your tax residence status in the United Kingdom is so important that it must be determined and discussed before you apply for a visa and book a flight. The least you should establish is when you are going to become tax resident here and how to prepare clean capital to be able to live off it tax-free.

Please always keep in mind that immigration status and tax status are different though related things. First one confirms your right to be in the country legally. Second one means what tax liabilities you are going to have and which taxes to pay.

Tax residency test

In order to understand at what moment you become tax resident in the UK, take statutory residence test introduced by the KM Revenue & Customs in 2013.

Some terminology used in the test needs clarification. For example, a year means a tax year that in the UK starts on 6 April and runs till 5 April the following year. A day means a calendar day from midnight to midnight.

Have a look at a chart below prepared for your convenience by London-based company Imperial & Legal.

Sufficient ties test

If you answered ‘No’ to all questions and your status cannot be determined automatically, do the next part of the test that establishes your status based on your ties to the UK. There are five ties and you must count how many apply to you.

Family tie

Your spouse or children under 18 live in the United Kingdom.

Accommodation tie

You own or rent a place in the UK that in the current tax year has been available to you for not less than 91 days and you spent there at least one night.

Work tie

In the current tax year, you have worked in Great Britain for minimum 40 days with at least 3 hours each day. Your employer can be located anywhere in the world ней.

90 days tie

At least one out of previous two tax years you spent at least 90 days in the UK.

Country tie

It applies to those who was UK tax resident before and have spent here 3 preceding tax years. And in the current tax year, you have spent more nights in the UK than anywhere else.

How to calculate ties

One positive answer gives you one point, negative 0. Your tax status will be determined based on the number of ties you have with the UK as well as number of days spent on the Isles. If you were UK tax resident once, this will be also counted.

It is enough for a returning resident to score 4 points and spend only 16 days in the UK in order to become tax resident again. If you have never been UK tax resident, but scored 4 points, only 46 days in Great Britain will make you one.

What if I am UK tax resident?

According to British legislation, all money you earn before becoming UK tax resident is considered clean capital and is tax-free. If you plan ahead and know exactly when you become tax resident, you can prepare your relocation by turning tangible assets into cash on a bank account.

There are a lot of things to be aware of and keep in mind when it comes to UK taxation, its pluses and minuses. A good tax adviser will help you sort out your tax issues and reduce your tax burden in the United Kingdom. Knowledge is power, and here it applies perfectly.