Meeting any of the following four automatic residence tests will result in the taxpayer being deemed a UK resident for income tax purposes:

1. They were in the UK for at least 183 days during the year of assessment (with some exceptions for, for example, transit);
2. For at least 91 days during the year of an assessment the individual’s only home was in the UK;
3. The individual worked full-time (at least 35 hours per week on average) in the UK for a period of 365 days with no significant breaks from UK work and all or part of that period falls within the year of assessment; or
4. An individual dies during the year of assessment and was automatically resident for each of the previous three years of assessment and had a home in the UK.

Meeting any of the following four automatic non-resident tests will result in the taxpayer being deemed a non-UK resident for income tax purposes:

1. The individual was UK resident in one or more of the three prior tax years and they spent less than 16 days in the UK in the current year of assessment;
2. The individual was not UK resident in one or more of the three prior tax years and they spent less than 46 days in the United Kingdome in the current year of assessment;
3. The individual worked outside the UK full-time during the current year of assessment, and they spent less than 31 days working in the UK (>3 hours per day) and they spent less than 91 days in total in the UK in the current year of assessment; or
4. An individual dies during the year of assessment and was not UK resident in any of the two prior tax years and they spent less than 46 days in the UK prior to their death.

The ‘Sufficient Ties Test’ is satisfied where an individual is neither automatically resident nor non-resident in the UK but has sufficient ties to the UK to make them a resident. Legislation establishes the following a ‘sufficient ties’:

1. Family
2. Accommodation
3. Work
4. 90-days or more spent in the UK in either of the previous two years of assessment
5. The UK is the country in which an individual spends most of their time.

Where an individual has been UK-tax resident for at least one of the preceding three years all ties must be considered; otherwise the country tie can be ignored. The number of days spent in the UK is generally the most influential/important element of this test.

Capital Gains Tax

Gains and losses on the disposal of capital assets are subject to separate capital gains taxation rules. The capital gain or loss on an asset is generally determined to be the proceeds from disposal less the cost of the asset plus qualifying subsequent expenditure on the asset. Additional relief and exemptions are available, for example on the disposal of a primary residence.

Dividends and Interest

Dividends are taxed at the basic (8.75%), higher (33.75%) and additional (39.35%) rates, subject to various allowances and exemptions.

‘Savings income’ is taxed at a starting rate of 0% subject to a maximum of £5,000. Interest falls under this catergorisation.

Wealth Taxes

There are no wealth taxes in the UK.

Social Security Contributions

All employees, employers and self-employed persons must pay National Insurance Contributions (‘NICs’). Employees pay 8% up to £50,270 (excluding the personal allowance) and 2% above that. Employers contribute 15% on employees’ earnings exceeding £5,000 per year. Self-employed individuals pay NICs at 6% and 2% on the same income bands as employees.

Tax Administration

The UK operates a self-assessment system. Most taxpayers do not need to submit a return where their tax liability has been settled entirely at source (e.g. via Pay As You Earn (PAYE) payroll taxes); where this is not the case HMRC will issue a return to the taxpayer for submission. Taxpayers are taxed individually and married taxpayers (or those in civil partnerships) will file individual returns.

Returns must be filed and any liability paid by 31 January following the end of the tax year. The filing deadline is 31 October following the tax year for paper returns.

Individuals who do not pay at least 80% of their taxes via source payments must make provisional payments during the year of assessment, on 31 January during the tax year and 31 July following the tax year. Any final tax due is payable by the usual deadline of 31 January after the year of assessment.

Where returns are filed late and where tax is paid late HMRC levies an automatic penalty subject to a maximum of 200% of the undeclared tax. Late payments of tax also incur interest. In some circumstances non-declaration may result in a fine or imprisonment.

There is a Requirement to Correct (RTC) any errors that come to light in respect of tax. Failure to Correct (FTC) an error within the statutory window may result in additional penalties, including ‘naming and shaming’ as well as financial penalties and interest.