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View the related Tax Guidance about Remittance basis

Remittance basis ― overview

Remittance basis ― overviewSTOP PRESS: At Spring Budget 2024, the Chancellor announced that the remittance basis would be abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules will still apply to unremitted income and gains arising before that date but remitted later. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.This guidance note introduces the remittance basis of taxation that can be accessed by certain UK resident individuals and explains what ‘remittance basis’ means. It contains links to guidance notes that discuss the concepts in more detail.Note that this guidance note discusses the legislation which applies from 6 April 2008 only, however if foreign income or gains are remitted in the current year that arose prior to 6 April 2008 then the old rules must be used, which were mostly based on case law. For the earlier rules and transitional provisions, see RDRM36000–RDRM36470 and Simon’s E6.332AA–E6.332B.This guidance note does not cover trusts. For the interaction between remittance rules and non-resident trusts, see the Non-domiciled and deemed domiciled settlors and Non-domiciled and deemed domiciled beneficiaries guidance notes. See also RDRM33590–RDRM33596.For more on non-resident trusts generally, see the UK tax position of non-resident trusts guidance note.Arising basis and remittance basisMost people in the UK are taxable on their worldwide income and capital gains on an arising basis. This means that income is taxable when it is paid to the individual or

Ordinary residence — issues on leaving the UK up to 5 April 2013

Ordinary residence - issues on leaving the UK up to 5 April 2013STOP PRESS: The remittance basis is to be abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. The legislation is included in Finance Bill 2025. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.IntroductionOrdinary residence was abolished from 6 April 2013. There are transitional provisions for up to three years for those who are not ordinarily resident in the UK and are adversely affected by the changes. You should consider this when advising on this subject.This guidance note considers the application of the ordinary residence to people leaving the UK in the tax years up to 5 April 2013.The tax rules on UK ordinary residence are explained in the Ordinary residence - years to 5 April 2013 guidance note, and it is recommended that you read that note first. The transitional rules are discussed in the Ordinary residence - transitional rules (2013/14 to 2015/16) guidance note.You may also find the Residence - issues on leaving the UK up to 5 April 2013 guidance note

Pre-owned chattels

Pre-owned chattelsSTOP PRESS: The remittance basis is to be abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. The legislation is included in Finance Bill 2025. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.This guidance note considers the pre-owed asset tax (POAT) as it applies to chattels, where an individual has made a gift, or funded the purchase of a chattel, from which they now benefit. It applies to disposals since March 1986.Chattels include, for example, paintings, antiques, furniture, vehicles, boats, racehorses, jewellery, musical instruments, computers, wines and spirits and collectible items.For discussion of the regime generally, see the Pre-owned asset tax overview guidance note.Chattels are defined as ‘any tangible moveable property (or, in Scotland, corporeal moveable property) other than money’. The conditionsThe residence and domicile conditionsIn order for pre-owned asset tax (also known as POAT) to apply to the individual for any tax year, they must be resident in the UK during that year, see the Residence ― overview guidance note. Where the individual is UK resident but is domiciled outside the UK, the pre-owned asset tax applies only if the asset is situated in the UK. For this purpose, a person is domiciled in the UK at any time if they would be domiciled, or treated as domiciled, in the UK under

NIC settlements for inbound employees with UK employer

NIC settlements for inbound employees with UK employerSTOP PRESS: The remittance basis is to be abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. The legislation is included in Finance Bill 2025. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.HMRC offers two arrangements that relax the strict PAYE procedures in respect of NIC. One of these is the modified NIC arrangement covering inbound employees who are ordinarily resident and domiciled outside the UK, but who have been sent to work with a UK employer or host employer, known as an ‘EP Appendix 7A ― Modified Class 1 and Class 1A National Insurance contributions for expatriate employees subject to an EP Appendix 6 agreement’ (EP APP 7A). The EP APP 7A application form for employers to complete who operate a tax equalisation agreement for employees coming to work in the UK from abroad is available at PAYE82003.Scope of agreementAs the name suggests, this arrangement can only apply to employees who are included in an EP Appendix 6 Modified PAYE agreement. This means that in order for an EP Appendix 7A agreement to apply the employee must be a foreign national assigned to the UK who is tax equalised (see the Tax equalisation guidance note) and has an employer or host employer in the UK liable

Automatic remittance basis

Automatic remittance basisSTOP PRESS: The remittance basis is to be abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. The legislation is included in Finance Bill 2025. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.Before reading this note, it is recommended that you read the Remittance basis ― overview guidance note to familiarise yourself with the wider remittance basis regime.Most individuals who choose to use the remittance basis have to make a claim under ITA 2007, s 809B. See the Remittance basis ― formal claim guidance note.However, in three cases, the remittance basis is given automatically. These are where, in relation to a given tax year, the individual meets any of the following tests:•they have unremitted foreign income and gains totalling less than £2,000•they are under 18 at the end of the year, have no more than £100 of UK taxed investment income, and no other UK taxable income, and do not remit any relevant income or gains to the UK *•they have been resident in the UK for not more than six out of the last nine years, have no more than £100 of UK taxed investment income, no other UK taxable income, and do not remit any relevant income or gains to the UK ** Note that these latter

Non-domiciled and deemed domiciled beneficiaries

Non-domiciled and deemed domiciled beneficiariesIntroductionThe current tax position of non-domiciled and deemed domiciled beneficiaries of non-resident trusts is a complex landscape mapped by successive changes in the law. Before 2008, UK resident but non-domiciled beneficiaries were protected by a cost-free remittance basis option for income tax and, like non-domiciled settlors, they were exempt from attribution of capital gains within the trust. Major changes in 2008, 2017 and 2018 have incrementally brought non-domiciles into the regime under which UK domiciled beneficiaries of non-resident trusts are taxed.Changes introduced in 2008 scaled down some of the advantages of long-term non-domiciled status. The remittance basis charge was introduced to impose a cost on accessing the benefits of the remittance basis. See the Remittance basis ― overview guidance note in the Personal Tax module. At the same time, changes were made to the taxation of non-domiciled beneficiaries of non-resident trusts to bring their benefits from the trust within the scope of capital gains tax.Notwithstanding the imposition of a charge for the use of the remittance basis, public and political opinion continued to oppose the non-domiciled advantage. As a result, Finance (No 2) Act 2017 introduced the concept of deemed domicile for income tax and capital gains tax for the first time. Long-term residents of the UK, and those who were originally UK domiciled, can no longer benefit indefinitely from the remittance basis. Once they satisfy the conditions for deemed domicile, they become taxable on their worldwide income and gains.In conjunction with the introduction of

Introduction to capital gains tax

Introduction to capital gains taxIn general terms, a charge to capital gains tax arises when a chargeable person makes a chargeable disposal of a chargeable asset. The disposal may produce a profit (known as a gain) or a loss.See Checklist ― calculation of capital gains and losses for issues to consider when reporting client gains and losses.A number of changes to capital gains tax rates for individuals were announced in Autumn Budget 2024:•the rates that apply to most assets increased from 10% to 18% and from 20% to 24% for disposals taking place from 30 October 2024 onwards•carried interest subject to capital gains tax is to be taxed at a flat rate of 32% in the 2025/26 tax year irrespective of the individual’s unused basic rate band and will be subject to income tax from 2026/27 onwards•the rates that apply to gains subject to business asset disposal relief and investors’ relief are to be increased from 10% to 14% for disposals in the 2025/26 tax year and to 18% for disposals from 2026/27 onwardsTolley’s Finance Bill Tracking Service, Finance Bill 2025, cl 7–9, 12Chargeable personA chargeable person could be an individual, a trustee, a personal representative or a company, although companies are subject to corporation tax on chargeable gains not capital gains tax. For further discussion, see CG10700 and Simon’s Taxes C1.102. Exempt persons include, amongst others, charities (so long as the gain is applicable and applied for charitable purposes) and local authorities. See CG10760P.Gains arising

Remittance basis and foreign currency bank accounts

Remittance basis and foreign currency bank accountsForeign currency bank accounts are central to the operation of the remittance basis. See in particular the Remittance basis - setting up foreign accounts guidance note, but also the Remittance basis - mixed funds and When are income and gains remitted? guidance notes.Fundamental change to foreign exchange gains from 6 April 2012From 6 April 2012 foreign currency gains or losses made by individuals, trustees and personal representatives on the withdrawal of funds from foreign bank accounts are exempt for capital gains tax purposes. Generally speaking, this is welcome news for taxpayers and their advisers since:•gains on foreign currency accounts will not be taxed, and•the complexities of the previous regime have been swept awayHowever, if there is a loss on foreign currency, then there is no relief for that loss.See Example 1.Rules for tax years up to and including 2011/12The remainder of this guidance note discusses the position in tax years 6 April 2008 to 5 April 2012.For the purposes of the other remittance basis notes in TolleyGuidance, it was assumed for simplicity that there were no foreign exchange (FX) differences to be taken into account. In reality this is not the case. Some key issues relating to FX on foreign currency bank accounts in the tax years from 6 April 2008 to 5 April 2012 are covered below.Important note regarding links to legislationThe legislative links in these rest of this guidance note are for reference

Remittance basis ― overview with employment focus

Remittance basis ― overview with employment focusSTOP PRESS: At Spring Budget 2024, the Chancellor announced that the remittance basis would be abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.Key points•provided certain conditions are met, Overseas Workday Relief (OWR) can be an extremely valuable form of tax relief for non-domiciled individuals who perform employment duties both in the UK and overseas•OWR is only available in the tax year of arrival and subsequent two tax years following a three year period of non-residence•OWR is generally calculated by reference to the percentage of days an individual spends working overseas•a bank account which qualifies for the special mixed fund rules allows for all offshore transfers to be treated as one single transfer for the year and all remittances as one single remittanceIntroduction ― the remittance basisThe default position for employees who are resident in the UK for tax purposes is that they are chargeable to income tax on their worldwide income and gains. Where an individual is not domiciled in the UK, they may be eligible to claim the remittance basis of taxation. For an individual who has been UK resident for a number of years, there are additional rules which may deem them to

Determining residence status (2013/14 onwards)

Determining residence status (2013/14 onwards)STOP PRESS: The remittance basis is to be abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. The legislation is included in Finance Bill 2025. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.IntroductionResidence is one of the key factors you should consider when deciding whether, or to what extent, an individual is liable to tax in the UK. The other key factor is domicile.Residence refers to the individual’s tax status on a year by year basis and domicile is the place which a person regards as their true home. See the Domicile guidance note.This guidance note explains the statutory residence test (also known as the SRT), which applies from 6 April 2013. It applies for income tax, capital gains tax, inheritance tax and corporation tax (to the extent that the residence status of individuals is relevant to the latter two taxes). The statutory residence test is not used for national insurance purposes.For the implications of residence status on UK taxation, see the Residence ― overview guidance note.If the individual comes to the UK or leaves the UK but is classed as resident in that tax year under the statutory residence test, it may be possible to split the tax year into periods of UK residence and non-residence. For a discussion