skip to main content

UK tax rules on foreign income for UK tax residents

When you have sources of foreign income, it is important you understand your legal obligation to pay income tax on it within the UK.

Last updated 2 February 2022 at 13:56

UK Tax on Foreign Income

When you have sources of foreign income, it is important you understand your legal obligation to pay income tax on it within the UK.

The two most important factors in determining your UK tax liabilities on this foreign income will be your tax residency status and your domicile status.

Everyone’s individual circumstances are unique and vary in complexity, which is why you should always seek professional tailored advice when unsure of your own liability.

Below is a clearer breakdown of what types of foreign income are taxable in the UK, how you can determine what your UK tax liabilities are, and how you can benefit from seeking advice from a UK tax expert.

What types of foreign income can be subject to UK tax?

There are multiple sources of foreign income, and although acquired outside of the UK, many will be automatically subject to UK tax. Some of these can include:

  • Overseas pension income
  • Interest on any international bank accounts held
  • Income from renting out a property overseas
  • Profits made from running a registered business in another country
  • Earings from employment outside of the UK
  • Gains that are made from selling assets overseas (such as shares or property)

How do my Residency and Domicile status effect my UK tax liability on foreign income?

Being established as UK tax resident ultimately means that you will be required to pay tax on all income and gains that has been made both in the UK and overseas.

It is important to remember that your residency status is not fixed and permanent and can easily change depending on how much time has been spent in different locations.

Meaning that just because you may not be liable to pay UK tax on your foreign income right now, does not necessarily mean that this will remain the case.

As well as this, your domicile status can also impact your overall tax liability within the UK.

You will need to pay UK tax on all income and gains worldwide on an ‘arising basis’, if you are found to be both UK resident and UK domicile.

Paying on an arising basis will mean paying tax on your worldwide income and gains, regardless of whether that income is brought into the UK.

If you are not deemed to be of UK-domicile, but are still deemed UK-resident, you will then have a choice between being taxed on the arising basis or the remittance basis.

The remittance basis means that despite the positive of only being subject to UK tax on foreign income that you actually bring into the UK, other obstacles and charges will apply such as:

  • A Remittance Basis Charge (RBC)
  • The loss of use of the personal allowance and capital gains exemption

How do I report my Foreign Income in the UK?

All foreign income must be reported to HMRC, regardless of your residency and domicile status.

Reporting this income to HMRC is done through completing a self-assessment tax return. This has a filing deadline of January 31st the following tax year, as well as paying any other tax due.

Will I be taxed twice on my foreign income?

The risk of double taxation is certainly a possibility when it comes to foreign income and gains.

When this happens, it means that you have been taxed within the country that the income or gain was originally earned, as well as being taxed in the UK (as UK tax resident).

Maintaining a dual residency status may also trigger double taxation.

Fortunately, the UK holds double taxation agreements with over 130 countries worldwide.

The tax relief that you receive will ultimately depend on that country’s specific rules and restrictions, which will all have an impact on how much relief will be claimable.

If there is no agreement in place with that country, tax relief may still be obtainable as long as the foreign tax in question was taxed on either foreign income or Capital Gains.

Check out our guide to Double Tax Treaties here for further information on this.

When you know in advance that this may happen, or if you have sought advice from a professional, you should, or will more than likely have been advised to apply for tax relief as soon as possible (before actually being taxed).

This is usually done by either obtaining a specific form from the foreign tax authority in question (where the foreign income was earned) and send it completed to HMRC, or alternatively, depending on the country (if no such form exists), sending a letter requesting tax relief in writing.

How can seeking help from a UK tax specialist help me?

Whether you are unsure of your tax liability, or need some clarity on double tax treaties, it is important to seek specialist advice to ensure you are not taxed unfavourably.

We offer free introductions to tax specialists, who after a short initial consultation, can provide you with answers to your questions, and most importantly tailor those answers to what best suits your needs and situation.

These introductions can lead you to professional, financially smart advice, and essentially help you to avoid and save significant amounts of unnecessary tax.

After having our initial introduction and you decide that you wish to proceed with further tax advice or services on offer, you will then be provided with a quote after which you can decide whether you would like to go ahead or not.

There are many complex rules and complications that come with foreign income tax, residency and double tax treaties, and our qualified, experienced accountants can help you navigate your concerns.

Testimonials from people who have used our UK tax introduction service

Your website and immediate response to my enquiry immediately gave me the re-assurance that my tax enquiry would be handled professionally. The partner provided clear and concise advice on what was not a straightforward tax matter. It was finalised within eleven days of the first enquiry which included out of hours contact and managing the eleven hour time difference between Australia and Scotland.

Robert M. Australia, UK Tax Advice

Excellent service. You provided us with a professional who responded to us quickly and efficiently. He undertook the work required swiftly and expertly, and all was completed in a very short time scale.

Angela P. Austria, Double tax claim

Very pleased with the introduction, whom I have now retained. I interviewed several prospects and they came out on top due to the crisp, concise answers they provide and the reasonableness of their fees.

Sylvia B. United States, Remittance Advice

Experts for Expats has been featured in...

The Guardian - Brexit: how the new rules will change your visits to the EU - click to see article
The Times - Thousands of retiring Britons vote for Brexodus - click to see article
The Telegraph - The surprising places British expats can earn the most - click to see article
Saga - Want to retire in the EU? What could the future hold for you? - click to see article
The Guardian - The older expats facing poverty – thanks to Brexit and frozen pensions - click to see article
Are you a British expat whose bank account is being closed due to Brexit? Here's what's happening and what you can do about it - Are you a British expat whose bank account is being closed due to Brexit? Here's what's happening and what you can do about it - click to see article

What expats say about our experts

Contact was fast. Initial consultation was informative and helpful. The consultant was very personable, listened to my questions and was thoughtful and thorough in his responses. In a forum such as this, the consultant must convince the client that they are trustworthy and knowledgeable; The consultant I spoke with did that!

Lucy P.

Pensions introduction in United States

We have been struggling with the complexity of the immigration process to the UK. Experts for Expats referred us to a tax accountant who was very responsive and in just a few minutes clarified many of our questions and gave us some peace of mind regarding at least that part of the process. We are very pleased and will continue to use the site and the referred accountant as we continue to navigate the process.

Lolin G.

Cross border tax planning introduction in United States

Quick efficient and friendly - answered my question re tax status for my dual US/UK National daughter

Liz H.

Tax introduction in United Kingdom

I found the initial response from both Experts for Expats and the Consultant to be excellent. Since I am already abroad the consultant arranged the consultation via Zoom. It proved possible to resolve my issue within the initial consultation. It was however apparent that the consultant has the necessary knowledge to assist further if this becomes necessary. In that case I will not hesitate to contact the same consultant again.

Ian B.

Statutory Residence Test, UK Tax Return introduction in Tanzania

It's an excellent resource. Swift initial response. Quickly connected to a consultant afterwards and my questions were answered. It was a relief and I would definitely use the service again should anything else arise.

Zoe B.

UK Tax Return, Statutory Residence Test introduction in United States

Response was quick and the advice given in 15 minutes was concise, understandable to a layman and useful. I also liked the fact there was no hard sell for follow up paid consultations. As much advice as possible was given in the time frame with a simple "get back to us" if you want to take it further in the future. Excellent service with no pressure to commit. As a result, when I do need to need their paid support, I'll have no hesitation.

Gary R.

UK Capital Gains Tax introduction in Singapore

Knowledgeable in all the areas I had questions on, spent the time to go through all my questions which gave me a lot to think about and what options I should consider. Followed up with email outlining what we had discussed. Very professional.

Belinda B.

Investment Advice introduction in United States

There is lots of really useful information with real-life examples on the website. When you need specific advice from an expert the process is simple and very quick. My consultant dealt with my unusual situation well and it was reassuring to know that my tax return was being dealt with by an expert. Follow ups were done to ensure I was happy with the consultant. Everything was handled very professionally.

Rosie M.

UK Tax Return introduction in Botswana