jsm tax

What It Really Means To Be UK Tax Resident

"Being a tax resident in the UK means that you are liable to UK taxes on your worldwide income and gains"

Being a tax resident in the UK means that you are liable to UK taxes on your worldwide income and gains, even if they arise from an overseas source. For example, if you have property income from a property located overseas, you will likely be liable to tax in the country the property is located in, and also in the UK. 

The same is typically true of dividends from investments in overseas companies. The grasp of the UK tax system is wide reaching, with a host of anti-avoidance legislation that ensures if you’re a UK resident you’re usually subject to UK taxes on income across the globe.

The double tax treaty between the relevant country and the UK would determine exactly how each income source is taxed, and whether it is taxed in the UK or the source country. In most cases there will be a tax credit in the UK for amounts of tax paid overseas.

If you have a non-UK domicile you may be able to claim the remittance basis which allows your overseas income and gains to not be taxed in the UK providing they are not remitted to the UK. There are additional rules around this and if you have been in the UK for a number of years a charge will be levied for claiming the remittance basis. Other factors to consider would be the loss of personal allowances when claiming the remittance basis.

For most, becoming non-UK resident could lead to significant tax savings, especially if the new country of choice is a low tax jurisdiction, such as the UAE. This may allow for business income, dividends, interest income and the like to be received completely tax free. 

 

CASE STUDY

We recently worked with an entrepreneur running an online education business generating good profits each year, circa £300,000. He drew the majority of this each year to support his family and pay for his children’s school fees. Of the £300,000, after corporation taxes and income taxes in the UK he saw around £130,000 of this, with the lion share going over to HMRC via a whopping circa £170,000 tax bill every year. 

We had a consultation with this client to assess the initial feasibility of relocating his personal tax residency and to assess what options there were for his UK limited company. Having identified what the options were and where we should explore via our full tax review service, where we were able to undertake detailed calculations and provide in-depth written information for the client to digest with his family and other professional advisors. 

The end result in this case was to full relocation to Dubai, UAE. We and our partners were able to assist with visas for the family, the setting up of a new company with banking, and in helping him find a new family home. 

The cost of living in Dubai in this instance is comparable to London where they lived, meaning there is no additional costs, just a tax saving every year in the region of £170,000. The client is now able to use this money to invest in real estate internationally, buying properties in Dubai and England.

 

If you would like to discover how we can help you pay less in tax, schedule a consultation.