Personal taxation

Basic principles

As a general principle, if an individual is resident in the UK in any tax year, he/she will be subject to UK tax laws. However, the basis on which the individual is subject to UK tax will depend on not only whether the person is ‘resident’ here but also whether they are ‘ordinarily resident’ here. In certain circumstances one also needs to consider the person’s ‘domicile’.
 
The UK tax year runs from 6 April to the following 5 April. A reference to a 2008/2009 fiscal period refers to the personal tax year 6 April 2008 to 5 April 2009.

Residence

• is in the UK for more than 183 days in a tax year.
• visits the UK regularly and on average for more than 90 days a year over a four year period;
• arrives in the UK intending to stay for at least 3 years;

Ordinary residence

In addition to residence status for a particular tax year, an individual’s chargeability to UK tax may, in some circumstances, be determined by reference to whether he/she is regarded as habitually or ordinarily resident here - i.e. their ordinary residence status. An individual’s ordinary residence status would depend upon their intentions in coming to the UK, the accommodation they occupy and the length of their stay.
 
An individual would normally become ordinarily resident from the day of their arrival where they intend to stay in the UK for three years or more, or where they either own or lease accommodation in the UK for three years or more in the year of arrival. Otherwise, an individual will become ordinarily resident from the beginning of the tax year during which such accommodation is acquired or during which they decide to stay in the UK for three years or more, or following the third anniversary of their arrival in the UK.

Domicile

A person’s country of domicile is broadly the country that they consider to be their permanent home. The concept of domicile is quite distinct from that of residence. A country of domicile is sometimes referred to as the person’s ‘homeland’. Even if you have not lived in your homeland for many years, this does not prevent you from being domiciled there.

Taxation of employment income of non-UK domiciliaries

If a person is resident and ordinarily resident in the UK, he/she is liable to UK tax on total income from an employment if the duties of that employment are performed at least partly in the UK. This applies whether or not the income is remitted to or paid in the UK.
 
However, if the employee has a separate employment with a non-UK resident employer, the duties of which are performed wholly outside the UK, the individual will be liable to UK tax only if the income is remitted or paid to the person in the UK.
 
If the employee is resident but not ordinarily resident in the UK, he/she will be liable to UK tax on the part of the employment income relating to duties performed in the UK, wherever paid. If the employee works outside the UK, employment income for that work is generally taxed only on the amount remitted to or paid in the UK.

Changes to the taxation of non domiciliaries took effect from 6 April 2008. Broadly, in order to maintain the benefits of the remittance basis for non-domiciliaries, a £30,000 annual fee must be paid by those non domiciliaries who have been resident in the UK for seven out of the last nine tax years.

Taxable income

Taxable income includes all income and benefits. The rates of personal taxation are shown in the table to the right, together with the level of personal allowances. These are amounts that each individual is able to earn before becoming liable to taxation.

Detached duty relief

Where an overseas national is seconded to the UK to work for the UK entity for a period which is less than two years, he can take advantage of detached duty relief. This allows the individual’s employer to provide accommodation, travel and other similar benefits tax free. These would normally be taxable items on individuals not qualifying for detached duty relief.

Personal tax rates & allowances

Please contact Gerry Collins if you would like to start doing business in the UK.