Taxable portion of salary attributable to duties performed:
The normal UK tax position set out above may be affected, in certain cases, by double taxation agreements. Tax credit relief may be given in the UK for any foreign tax paid.
Domicile and remittance
Domicile is normally acquired at birth and is difficult to change; it can be thought of as the individual’s ultimate home.
Automatic remittance basis
In the following circumstances the remittance basis is given automatically to resident, non-domiciled individuals:
- Where an individual’s unremitted foreign income and gains for the year (or the UK part of a split year) are less than £2,000; or
- Where an individual has no UK income or gains other than up to £100 of taxed investment income, no foreign income or gains are remitted and the individual is either under 18 years of age throughout the year and/or has been resident in not more than 6 of the previous 9 tax years.
Where the remittance basis applies automatically there is no loss of personal allowances and no charge levied on longer term residents (see below).
Remittance basis claim
A resident, non-domiciled individual may otherwise elect for the remittance basis to apply. Where a claim is made, the individual loses entitlement to personal allowances and the capital gains tax annual exemption.
An individual who elects for the remittance basis and is aged 18 or over in the tax year is subject to a remittance basis charge, of either £30,000 or £50,000 if they have been a long term resident. The applicable charge levied is as follows:
- Where an individual has been resident in at least 12 of the 14 preceding tax years, the remittance basis charge is £50,000.
- Where an individual has been resident in at least 7 of the 9 preceding tax years (but not resident for 12 of the preceding 14), the remittance basis charge is £30,000.
The remittance basis charge may be regarded as income tax or capital gains tax for the purposes of double taxation agreements.
Non-domiciled individuals can bring funds to the UK in order to invest in qualifying trading companies and partnerships without the remitted funds being taxable. Critical among the necessary conditions are the need to acquire newly issued shares or make a loan to a qualifying company.
A resident individual who is not taxed on the remittance basis will be taxed on the arising basis of taxation, taxable in full on worldwide income and gains.