If you’re a resident of the UK and receive foreign income or capital gains from abroad, you’ll usually be required to declare this through Self-Assessment.
When foreign income consists of dividends that do not exceed £300, you do not have to fill in a tax return (unless you have anything else to report – e.g. if you’re Self Employed).
Self-Assessment (Foreign Income)
If you’re required to complete a tax return through Self-Assessment, you should use the ‘foreign’ section of the return to report any income or gains you have received from abroad. This should include income that has already been taxed abroad in order to claim Foreign Tax Credit Relief.
Foreign Tax Credit Relief
You may be taxed on your foreign income by both the UK and the country where the income is from. You can usually claim Foreign Tax Credit Relief on this income when you report it through Self-Assessment. The amount of relief you receive will depend on the UK’s double-taxation agreement with the country in question. Contact us for more information on claiming Foreign Tax Credit Relief.
Alternative Foreign Income Taxation
Despite the majority of foreign income being taxed similarly to that of UK income, there are special rules in place for income from pensions; rent from property abroad; and special types of employment.
If you receive a foreign pension, you will have to pay tax on this if you are resident in that country (or if you have been resident in any of the previous five tax years). Your pension provider will be able to confirm how you will be taxed, however you will usually only pay tax on 90% of the pension payment as 10% is exempt from tax.
Rent From Property Abroad:
Tax on rent received from overseas property is paid in the normal way. If you rent out more than one overseas property, losses can be offset against another overseas property.
Special Types of Employment:
There are special rules in place if you work on a ship or in the offshore gas or oil industry.
If you work on a ship, arrangements depend on a number of factors such as where you are legally resident; where your employer is based; where your vessel is registered; and whether you work outside of UK waters. HMRC have a Mariner’s Questionnaire to determine your National Insurance liability. UK Income Tax can be claimed back if you work on a vessel outside of the UK. Contact us if you would like assistance in claiming a refund.
If you’re a UK resident working in oil and gas fields in the UK (or in the designated area of the UK sector of the Continental Shelf) you will pay Income Tax and National Insurance as normal. If you work outside of the UK, most countries Double Taxation Agreement’s will exempt you from UK tax (depending on the length of time you spend out of the country). If you think you may be entitled to tax relief, please contact us for more information.