Tax Residence Rules
Bill Bryson
"In a funny way, nothing makes you feel more like a native of your own country than to live where nearly everyone is not."
What are the rules for UK tax residence?
The statutory basis for UK tax residence was introduced for periods after April 5, 2013. The basic structure of the residence test consists of three parts :
➣ Automatic UK non-resident tests
➣ Automatic UK resident tests
➣ Sufficient ties / day count test
Temporary Non-Residence
Targeted anti-avoidance rules prevent people from using short periods of non-residence to receive income free of UK tax. These rules already apply to capital gains, pension scheme withdrawals and remittances of foreign income in some cases.
The rules are extended to include -
• dividends and other income from personal or family companies if the income came from profits which arose at a time of UK tax residence.
• lump sum benefits from an employment in certain cases.
The Statutory Tests
The statutory residence tests are considered in a particular order and the starting point is the ‘Automatically Non-Resident’ tests.
Automatically Non-Resident
You cannot be UK resident if :
➣ you spend less than 16 days in the UK during the tax year and you were resident in the UK for one or more of the three tax years before the current tax year; or
➣ you were not UK resident in the previous three tax years, and you spend less than 46 days in the UK; or
➣ you were in the UK for less than 91 days and you work full-time work abroad (this includes self-employed work)
For the purposes of this test, work abroad is considered to be “full-time” if it is on average at least 35 hours per week over the whole tax year. There is a particular method of calculation to work out the average overseas work hours.
Where some employment duties are performed in the UK you can spend up to 30 working days per year in the UK without overturning non-resident status.
If you do not qualify as automatically non-resident under the tests outlined above then the next step is to consider whether you would be considered to be automatically UK tax resident.
Automatically UK Resident
You will be automatically UK tax resident for a tax year if :
➣ you spend at least 183 days in the UK during the tax year: or
➣ your only home is in the UK for more than 90 days during the tax year and you occupy that home for at least 30 days. If you have more than one home or have a home overseas, further conditions apply: or
➣ you are in full-time work in the UK for a continuous 365 day period (not necessarily coinciding with the tax year)
Sufficient Ties Test
In many cases it is possible to not meet the conditions of any of the automatic non-resident tests or the automatic resident tests. If that applies, you need to consider a series of further tests known as the “sufficient ties test”.
Taken together, the number of your ties with the UK and the days spent in the UK will decide your tax residence status.
Here is an overview of how the UK ties and UK days tests work together :
The UK Ties
Family Tie :
You have a UK family tie if you have
• a spouse
• a civil partner
• someone with whom you are living as a partner
• a minor child
who is resident in the UK.
A minor child who is only resident in the UK because they are in full-time education in the UK will not be considered a connecting factor provided they spend fewer than 21 days in the UK outside term time. A half term holiday will count as term time for these purposes.
Accommodation Tie :
You have a UK accommodation tie if :
You have ‘available accommodation’ for a continuous period of at least 91 days in the tax year, ignoring any gaps of fewer than 16 days.
Available accommodation is widely defined and can include a home in the UK, holiday home, the home of a relative, a temporary retreat or similar and could include the use of a hotel if the same hotel is always used.
Work Tie :
You have a UK work tie if you spend at least 40 days working in the UK, where a working day is defined as three hours.
90-day Tie:
You will have the 90 day tie if you spent more than 90 days in the UK in at least one of the previous two tax years.
Country Tie :
This only applies when you leave the UK.
You will have the UK country tie if the UK is the country where the greatest number of days has been spent.
Day Counting - The Midnight Rule
For day counting purposes, days spent in the UK at midnight are counted as UK days.
However an anti-avoidance provision will apply to individuals who manipulate this rule to attempt to qualify for non-resident status, despite spending considerable time in the UK and having substantial ties.
Exceptional Circumstances
Days spent in the UK as a result of exceptional circumstances will not to be counted as UK days - up to a maximum of 60 days.
Exceptional days will usually be days spent in the UK due to circumstances beyond your control - such as an air strike or being unexpectedly hospitalised. Choosing to be in the UK for medical treatment or for family emergencies would not be considered exceptional as this is your choice.
The definition of exceptional days was extended where travel was disrupted due to COVID-19 restrictions in 2019/20 and 2020/21.
A recent trbunal case has highlighted the narrow scope of "exceptional" as viewed by tax law. There is a good commentary on this recent development by Macfarlanes solicitors at the link below :
Split Year Treatment
Tax residence always relates to whole tax years and the tests described above will decide if you are resident or not resident in a tax year.
However, where you are emigrating from the UK or are moving to the UK, in the year of departure from or arrival in the UK it is possible to split a tax year between periods of residence and non-residence. The split year treatment applies where you :
• start to work full-time overseas
• accompany your spouse or partner who is working full-time overseas
It also applies if you :
• leave the UK to live abroad and you move your home there within six months of your departure and do not return to the UK for more than 15 days for the rest of the relevant tax year; or
• you come to the UK to live here and your only home is in the UK; or
• you come to work full-time in the UK; or
• you acquire a home in the UK and continue to be resident in the UK in the next tax year.
Need Help?
Do you need help with any of the issues discussed on this page?
If you need assistance with UK tax filing we can complete and file a return for you with all tax calculations taken care of.
We can agree a fixed fee in advance.
Contact us for details
Why tax residence is important
It is important to understand your tax residence status, or potential status, as it detemines the extent of your UK tax liability.
In outline, the UK will seek to tax -
• the worldwide income and gains of a person who is UK tax resident
• the UK income and gains of a person who is not tax resident.
There are exceptions to this general rule but understanding your potential exposure to UK tax may allow you to plan your affairs so as to minimise the tax payable.
In a period on tax residence, having a foreign domicile may reduce your UK tax liability and there is more information on our Expat FAQs page.