UK Non-resident’s Guide to Claiming Personal Allowance

UK Non-resident’s Guide to Claiming Personal Allowance

In many countries, people on low wages do not pay any income tax

This is not the case in the UK, where tax residents are granted a ‘personal allowance’ – a certain amount of money that can be earned in a tax year before Income Tax applies.

However, what happens when you’re living abroad but still have an income from the UK? Perhaps you’re working remotely for a UK employer, or you have a UK bank account that earns interest. This guide will provide you with all the information you need to navigate these circumstances. 

Understanding Tax Obligations as a Non-resident

As a non-resident earning income in the UK, it’s crucial to understand your tax obligations. The UK tax system may seem complex, but with the right information, you can navigate it effectively.

Firstly, non-residents are typically taxed only on the income they earn within the UK. This could be from employment, a UK-based business, rental income from UK property, or interest from UK bank accounts.

Secondly, the UK has double taxation agreements with many countries. If you’re a citizen of one of these countries, you may be eligible for the UK personal allowance, which means you won’t pay tax on the first £12,570 of your income.

However, tax laws can change, and your specific circumstances can significantly impact your tax obligations. Therefore, it’s always advisable to seek professional advice or guidance from tax authorities.

In the following sections, we’ll delve deeper into how you can claim your personal allowance and manage your UK income effectively.

Personal Allowance Thresholds

In the UK, the personal allowance thresholds play a crucial role in determining the amount of income tax you are liable to pay. The standard personal allowance for the tax year is £12,500. This means that you don’t pay tax on the first £12,570 of your income.

However, the personal allowance is reduced by £1 for every £2 of income above the income limit of £100,000. This means if your income is £125,000 or more, you won’t receive any personal allowance.

It’s important to note that these thresholds can change with each tax year, and it’s always a good idea to check the latest figures. If you’re a non-resident with UK income, understanding these thresholds can help you manage your tax obligations effectively.

Who is Entitled?

As an EEA national or a British citizen residing outside the UK, you are entitled to the same Personal Allowance as UK residents. Unlike UK residents, however, you will not receive it automatically – instead, you will have to claim a tax refund by submitting the R43 form at the end of each tax year. 

The latest version of the form is always available to download from the relevant GOV.UK webpage. The form is accompanied by an official HMRC Guidance, but if you’d rather not spend your time filling out every little detail, you can always contact our professional team, who will get this job done for you in a matter of hours/days. 

Once your application is processed by the HMRC, you can either receive your tax refund in the form of a cheque sent to your overseas home address or have it transferred to your UK bank account.

You are entitled to Personal Allowance and claim a tax refund if:

  • You are a resident of the Channel Islands or Isle of Man
  • You have previously resided in the UK before moving abroad due to health issues – either your own or that of your family members living with you
  • You are or have been an employee of the British Crown
  • You are employed in the service of any territory under Her Majesty’s protection
  • You are employed in the service of a missionary society
  • You are a widow, widower or surviving civil partner whose late husband, wife or civil partner was employed in the service of the British Crown

Managing your UK Income Effectively

Effectively managing your UK income as a non-resident involves understanding your tax obligations and making informed decisions. Here are some key points to consider:

1. Understand Your Tax Obligations

As a non-resident, you’re typically taxed only on the income you earn within the UK. This could be from employment, a UK-based business, rental income from UK property, or interest from UK bank accounts.

2. Claim Your Personal Allowance

If you’re a citizen of a country that has a double taxation agreement with the UK, you may be eligible for the UK personal allowance. This means you won’t pay tax on the first £12,570 of your income.

3. File Your Tax Returns

To claim your personal allowance, you’ll need to file a Self Assessment tax return. This can be done online through the HM Revenue and Customs (HMRC) website.

4. Seek Professional Advice

Tax laws can be complex and change frequently. Therefore, it’s always advisable to seek professional advice if you’re unsure about your tax obligations.

Get in Touch

Navigating tax obligations as a non-resident with UK income can be complex. Q Accountants offer a free consultation, so if you have any questions or need further clarification on claiming your personal allowance, don’t hesitate to get in touch or book a discovery call.

FAQs

  1. Does a non-resident get a personal allowance in the UK?

    Yes, non-residents who are citizens of countries that have a double taxation agreement with the UK are typically eligible for the personal allowance.

  2. What is the tax law for non-residents in the UK?

    Non-residents are usually taxed on the income they earn in the UK. They may also be eligible for personal allowances, depending on their circumstances.

  3. Do non-residents pay tax on UK savings?

    Yes, non-residents may have to pay tax on UK savings interest. However, the tax rules can be complex and depend on various factors, including the individual’s country of residence.

  4. What is excluded income for non-residents?

    Excluded income for non-residents typically includes income that is not earned in the UK. However, there may be exceptions depending on the individual’s circumstances and tax agreements between the UK and the individual’s country of residence.

  5. Do I have to pay UK tax if I live abroad?

    If you live abroad but earn income in the UK, you may have to pay UK tax. However, the specific tax obligations can vary depending on factors such as your residency status, the type of income you receive, and any tax treaties between the UK and your country of residence.