TAX ON FOREIGN INCOME

ASESA Solutions Ltd - TAX ON FOREIGN INCOME

TAX on Foreign Income

In today’s global economy, many individuals earn income from outside their home country — whether through overseas jobs, foreign investments, or property abroad. For those living in the UK, it's important to understand how this foreign income is treated for tax purposes. The following explains how UK tax applies to income earned abroad and how to avoid being taxed twice on the same income.

1. When You Pay UK Tax on Foreign Income

   1. UK residents: Pay UK tax on all worldwide income.

   2. Non-residents: Pay UK tax only on UK income.

2. Common Foreign Income Sources

   1. Wages from abroad

   2. Overseas investments (interest/dividends)

   3. Rent from overseas property

   4. Foreign pensions

      
      

3. UK Tax Residence – Key Points

   1. Resident if:

      1. 183+ days in UK, or

      2. Only home in UK (91+ days, used 30+), or

      3. Full-time UK work for 365 days.

   2. Non-resident if:

      1. Less than 16 UK days (or Less than 46 if non-resident last 3 years), or

      2. Full-time work abroad, Less than 91 UK days, Less than 31 UK workdays.

      3. If unclear → Sufficient ties test (family, work, accommodation).

4. Avoiding Double Tax

   1. If you’ve already paid tax in another country, the UK may offer Foreign Tax Credit Relief (FTCR) so you don’t pay tax twice.

   2. This is possible through Double Taxation Agreements (DTAs) between the UK and other countries.

5. Claiming Relief

   1. Get HMRC Certificate of Residence (CoR) if required.

   2. Give CoR to foreign tax office.

   3. Claim FTCR via Self-Assessment form SA106.

6. Key Notes

   1. No return needed if only foreign income is dividends under £500 and no other income.

   2. 2025 changes do not affect most UK residents with UK roots.