Generally, if you are a UK resident, you have two methods of assessment that can apply when it comes to your foreign income. The first would be to be assessed on the arising basis which means you are assessed in the UK on your worldwide income in full. The second would be to elect to be assessed on the remittance basis, which means your UK liability is assessed on the foreign income that isn’t taxed in the UK and you remit to the UK.
If in any tax year, you are a UK resident, but are one of the following:
- Not ordinarily resident in the UK or
- Not domiciled in the UK
Then to minimise your income tax liability, you may elect to be assessed under the remittance basis. However, if you choose to elect the remittance basis, you may be liable to the £30,000 or £50,000 remittance basis charge (RBC).
There are various conditions that need to be met to determine whether or not you need to pay the RBC. If you meet the following then you may need to pay the RBC:
- Resident in the UK
- Not ordinarily resident
- Not domiciled in the UK
- You have elected to use the remittance basis in the current tax year
- You have an amount greater than £2,000 of foreign income that you have not remitted to the UK
- You will be older than 18 at the end of the tax year.
There are two levels of RBC that you may be required to pay. If you have been a UK resident for 7 out of the last 9 years, then you will be required to pay a £30,000 levy. But under new legislation, if you are a UK resident for 12 of the 14 tax years then the RBC is £50,000.
If you would like more information about the remittance basis vs. arising basis and if you are required to pay the RBC, please contact us where a tax specialist will answer your questions.