Residence and why it matters

The tax rules say that you are treated as resident in the UK if:

• You are physically in the UK for 183 days or more (half the year) during the tax year (from 6 April to 5 April); or
• You visit the UK on average for 91 days or more (three months) a year over a four year period.

This is important to understand because if you fall into either of these categories, you will usually have to pay UK income tax on your worldwide income (depending on your ordinary and domicile positions – see below). You may also need to pay UK Capital Gains Tax on worldwide gains.

You will count as being present in the UK for a day if you are physically here at midnight on that day. Generally speaking you will therefore count days of arrival, but not departure, and day trips will not count providing you have left before midnight.

However, for this purpose you will not be considered present for a day if you are only here at midnight because you are ‘in transit’. The rules about being in transit are complex, but in essence they cover the situation where someone is simply ‘passing through’ the UK – for example changing planes when travelling between two other countries.

‘Split year’ tax treatment – Residence for UK tax purposes

Strictly speaking, if you are considered to be a UK tax resident, it is for the whole tax year.  This is because the tests described above look at your presence over the whole tax year.

However, by concession, HMRC will accept a ‘split-year’ treatment for individuals coming to the UK to work (or leaving the UK to work abroad).  Consequently, if work is the reason why you have come to (or left) the UK you are only taxed in the UK from the date you arrive here.  ‘Work’ for this purpose can be either employment or self employment.  If you have come to the UK for any other reason, then the concession will not apply and you will be considered UK tax resident for the whole tax year.

Concessions are a set of rules that HMRC say they will follow providing your circumstances match those set out in its terms. Because concessions have no basis in law they do not have to be followed.  Therefore you can ask that the strict statutory (legal) basis be used.  HMRC state that the only circumstance when they will not agree to the application of a concession is if is being used for tax avoidance purposes.

However, whether or not the concession applies in law, many double tax treaties that the UK holds with other jurisdictions include a clause which would have the same effect and is legally binding on HMRC in respect of income – but not necessarily capital gains.

Even if you are only treated as being tax resident for part of the tax year, you should be entitled to the full personal allowance for that year, as a UK resident.