Navigating your tax obligations as a UK expat can be daunting. In this article, we’ll cover three key topics to help you understand them.
1. UK Expats with a UK Pension Living Abroad Have No UK Tax Liability
If you are a UK expat living abroad, the good news is that you may not need to pay UK tax on your UK pension income. This applies if you are a tax resident in another country with a Double Taxation Agreement (DTA) with the UK. For example, as an expat living in Spain, the UAE or Canada, you can benefit from these arrangements. Under a DTA, the country in which you are a tax resident generally has the right to tax your pension income instead of the UK. This means that you will not face double taxation on your pension.
These are the steps to take:
1. Check the DTA between the UK and your country of residence. Let’s use the following case study as an example:
- Person A is a UK expat living in Canada and receives a pension from the UK. As the UK has the right treaty with Canada, he can apply to have UK tax stopped, so he pays tax in Canada only. This is because he is registered as UK tax non-resident.
2. Inform HMRC that you are a non-UK resident for tax purposes. You can do this by submitting the Form P85 (Leaving the UK) found on GOV.UK.
3. Ensure you register as a tax resident in your new country, and file additional forms in the UK to stop tax withholding on pensions.
By following the steps above, you can ensure that your UK pension income is taxed appropriately in your country of residence, without having to pay UK tax.
2. UK Tax Returns: When Do Visits Count as “Exceptional Circumstances”?
It’s common for UK expats to return to the UK for short visits, often for family reasons or emergencies. However it is crucial to understand when these visits could impact your UK tax residency status.
Guidance from HMRC shows what constitutes “exceptional circumstances” under the Statutory Residence Test (SRT). According to GOV.UK, days spent in the UK due to exceptional circumstances are ignored when determining your residency status.
So what qualifies as exceptional circumstances? HMRC defines these as situations beyond your control, such as natural disasters, medical emergencies, and travel restrictions due to pandemics. Bear in mind that the maximum number of days that can be ignored due to exceptional circumstances is 60 days per tax year. Routine visits (such as family engagements) and holidays do not count as exceptional circumstances.
If you’re still unsure how your UK visits will affect your tax residency, review the SRT guidelines on GOV.UK or contact us!
3. How to Pay HMRC Without a Unique Taxpayer Reference (UTR)
One issue you may face as a UK expat is how to pay your UK tax bill if they you don’t have a Unique Taxpayer Reference (UTR). To do so, you should send a cheque to HMRC with a covering letter explaining your situation, ensuring you include your National Insurance number and reason for payment.
Here’s an easy guide on how to pay HMRC by post:
- Write a cheque payable to “HM Revenue and Customs only” followed by your National Insurance number.
- Include a covering letter explaining your situation and providing identifying information, including:
Your full name
National Insurance number
The reason for your payment (e.g., Self Assessment payment).
- Send your cheque and letter to the following address:
HMRC
Direct
BX5 5BD
Hopefully you now have a clearer understanding of your tax obligations as a UK expat living abroad. Remember: if you have a UK pension and live abroad, take advantage of double taxation agreements to avoid paying unnecessary UK tax. When visiting the UK, be aware of the rules around exceptional circumstances. Finally, if you need to pay HMRC but don’t have a UTR, follow the correct process by sending a cheque through the post.
