UK non-resident’s guide to paying UK tax

About five million British people live permanently outside the UK, with a third calling Australia or New Zealand home and 28% living in the USA or Canada. A quarter live elsewhere in Europe, with Spain the most popular choice (about 300,000 Brits reportedly live there).

If you’re planning to relocate overseas permanently or if you’ve already moved but you’re not sure about your UK tax obligations, here are some facts that you should know.

What is a non-resident?

As regards UK tax, a “non-resident” is someone who does not live permanently in the UK but who earns taxable UK income. This includes many UK expats, of course, with many earning income from UK rental property and other UK sources. Non-residents only pay UK tax on their UK income, not on income from another country (although tax may be payable in that tax jurisdiction).

HMRC residency/non-residency tests

The total days you spend in the UK within a tax year (ie 6 April to 5 April) determines your tax status as either a UK resident or non-resident for tax purposes. 

You’ll automatically be considered non-resident if:

• you spend less than 16 days in the UK in a tax year (or 46 days if you have not been classed UK resident for the three previous tax years) or
• you work abroad full-time (ie at least 35 hours in an average week) and were in the UK for less than 91 days and no more than 30 of these were spent working in the UK.

You’ll automatically be considered UK resident if:

• you spent 183 or more days in the UK in the tax year or
• your only home was in the UK and it was available to you for at least 91 days in the tax year and you lived there for at least 30 days or
• you worked full-time in the UK for 365 days and at least one of these days fell within the specific tax year.
• You may also be considered resident under HMRC’s “ties test” if you spent time in the UK and have additional links such as work or family here.

Top tip! To find out whether you were a UK resident or not in any tax year from 6 April 2016, you can use HMRC’s online residence status checker. Government website GOV.uk provides details about the government’s Statutory Residence Test, which further explains many of the above points.

Non-residents and double taxation

The UK has “double taxation” treaties/agreements with more than 120 other countries. These ensure that you’re not taxed on the same income/gains in the UK and another country.

Top tip! If you’re a non-resident, you may be able claim full or partial UK tax relief on some of your UK income, which can include private and state pension payments.

Non-resident tax returns

If you’re a non-resident with taxable UK income, you’ll need to submit a Self Assessment tax return, with any additional non-resident pages required also filed. You can only do this digitally by using third-party Self Assessment software that supports online reporting from beyond the UK, you can’t do it directly via the HMRC website.

Need to know! You are responsible for telling HMRC about your non-resident status and you can declare it via your Self Assessment tax return, if this is how you normally report taxable income.

Non-resident landlords

HMRC considers people from the UK who live overseas for six or more months a year and rent out UK property to be “non-resident landlords” no matter whether they’re UK resident for tax purposes or not.

Under the Non-Resident Landlord Scheme, which was introduced in 1996 to ensure that UK Income Tax is paid on UK rental income, each month the tenant or letting agent is legally obliged to deduct tax due before the landlord living overseas receives any rent. This tax must be paid in full to HMRC every three months.

When the non-resident landlord completes their UK Self Assessment tax return, the tax their tenant or letting agent has paid to HMRC can be claimed as a deduction against their UK tax liability.

Need to know! Non-resident landlords can apply to have rent paid directly to them in full, in which case they must pay the tax themselves via Self Assessment.

How much UK rental income is tax-free?

The first £1,000 of your UK property rental income is your Property Allowance and it’s tax-free. If you co-own a UK rental property, each owner can claim the Property Allowance and deduct it from their share of the gross rental income. If you claim the Property Allowance, you cannot claim allowable expenses (see below).

You may also get a tax-free Personal Allowance of £12,570 a year (2024-25), depending on the agreement between the UK and the country in which you now reside, and if you are entitled to it you don’t pay tax on your total taxable income until it goes over this amount. The Personal Allowance decreases by £1 for every £2 above £100,000 net income and those with taxable income above £125,140 don’t get the Personal Allowance.

Claiming allowable expenses for things you buy to maintain and rent out your property will also reduce your tax bill. Allowable expenses can include letting agent, legal or accountancy fees, as well as insurance, maintenance, repairs, cleaning and gardening costs. If your rental property is furnished or part-furnished, you can claim Replacement Domestic Items relief for replacing sofas, beds, carpets, curtains, white goods, sofas, crockery, cutlery, etc.

How much tax will you pay on your rental income?

If your property rental income is  £1,000-£2,500 a year, contact HMRC, because you may not need to report it. If it’s £2,500 to £9,999 after deducting allowable expenses or £10,000 or more before allowable expenses, you must report it via Self Assessment.

• If you are entitled to the Personal Allowance, the first £12,570 of your income is tax-free. However, this income will be taxed at 20% if you aren’t eligible.
• The Basic Rate of Income Tax (20%) is payable on total taxable income between £12,571 and £37,700.
• The Higher Rate of Income Tax (40%) is payable on income between £50,271 and £125,140.
• The Additional Rate of Income Tax (45%) is payable on income of more than £125,140 (2024/25 for all figures).

Taxable income from all UK sources must be detailed when completing your Self Assessment tax return. As a non-resident, you are not taxed on worldwide income but you should be aware of the tax rules in the country you live in.

Non resident reporting of UK rental income

Usually, each year you must file a Self Assessment tax return if you earn taxable UK rental income, but you can’t do this online via HMRC if you’re not in the UK. Instead, you must use commercial Self Assessment software that supports online reporting from outside the UK or you could pay a UK-based tax professional to report your UK rental income to HMRC. If a letting agent or tenant deducts tax before paying you rent, obviously, no more tax is payable by you on your UK rental income.

Top tip! If in any doubt, seek tailored professional tax advice on compliance and how to minimise your UK tax bills if you’re non-resident.  

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.