How Can Someone be Treated as a UK Resident for Tax Purpose?

Residential status affects the extent to which an individual is liable to tax in the UK. Income which arises in the UK is generally taxable in the UK. Residential status is important to determine if the foreign income is taxed in the UK.

For a resident individual, the income that is earned around the world will be taxed in the UK. Most people who were born in the UK and have lived in the UK most or all their lives will be resident in the UK.

Other factors like an individual’s connection in the UK, number of working days in the UK, etc helps to determine the UK residential status of an individual.  

Determining the Residential Status-Overview

Step 1: Have you resided in the UK for minimum of 183 days during the applicable tax year? (First automatic UK test). If so, you will spend that entire year as a resident of the UK. If not:

Step 2: Look into the three automatic overseas tests. You will not be a resident of the UK for that year if just one of these conditions is met. If this doesn’t produce a result:
Step 3: Examine whether you pass the second or third automatic UK tests. You will be considered a resident of the UK for the tax year if just one of these conditions is satisfied. If this doesn’t produce a result:
Step 4: Consider the sufficient ties test. If you meet this, you will be UK resident for that year. If you do not meet this test, you will not be UK resident for that year.

The Three Automatic Overseas Tests

You need to look at the following three Automatic Overseas Tests if you didn’t pass the UK residency test as mentioned in Step-1 above.

Note that you will not be a UK resident for the tax year if just one of these conditions is met.

First Automatic Overseas Test

If you spent not more than 15 days in the UK in the tax year, and for one or more in the previous three tax years before the current tax year you were UK resident, then you will be non-resident of the UK for that tax year.

Second Automatic Overseas Test

If you were resident in the UK for none of the 3 tax years before the current tax year and spend fewer than 46 days in the UK in the tax year, then you will be non-resident of the UK for the tax year.

Third Automatic Overseas Test

If you were full time employee outside the UK and:

• Spend no more than 90 days in the UK throughout the tax year,
• Spend less than 31 days working for more than three hours in the UK, and
• Do not take a significant break from your overseas employment,

then, you will be considered as a non-resident of the UK for that tax year.

Who can use the Automatic Overseas Test? 

The Automatic Overseas Test can be used by both employees and self-employed people. However, it does not apply to voluntary work or anybody working on board, for example, vehicles, airplanes, or ships.

The Automatic UK Tests

If you didn’t pass the UK residency test following the Step-2 as mentioned above, now you need to look at the Automatic UK Tests.

Note that you will be considered a UK resident for the tax year if just one of these conditions is satisfied.

Second Automatic UK Test

You will be a resident in UK if you have, or have had, home in the UK for all or a part of the tax year, and all of the following conditions apply:

• You had a home in the UK for a period of consecutive 91 days,
• When you have a home in the UK, minimum 30 of these 91 days falling in the tax year and for at least 30 days you’ve been present in that home at any time during the year.
• You had no overseas home at any time during the year, or if you had a home outside of the UK, you were present there for less than 30 days in the tax year

To check this test, you should consider each home separately if you have two or more homes in the UK. You only need to meet this test in one of your UK homes.

Third Automatic UK Test

You’ll be UK resident for the tax year if

• You are working full-time for any period of 365 days in the UK which falls in the tax year,
• More than 75% of the 365 days in the year include more than three hours of work which also include the work you do in the UK for more than 3 hours.
• At least one day that must be in both the tax year and the 365-day period is a day on which you work in the UK for more than three hours.

To check this test, you should consider each home separately if you have two or more homes in the UK. You only need to meet this test in one of your UK homes.

The Sufficient Ties Test  

This test includes day-counting rules and other connection criteria that should only be taken into account if the residence status cannot be confirmed with certainty by the first two tests listed above.

There are five “tests” that assess how closely you are connected to the UK and how likely it is that you would be treated as a UK resident for tax reasons.

If you were not a UK resident, you must determine if you have any of the following during any of the three tax years preceding the one you are considering:

• UK Resident Family
• UK Employment of minimum 3 hours more than equals to 40 days in the tax year
• Accommodation in UK is available to you for a continuous period of 91 days.
• Present in the UK for more than equal to 91 days in either of previous two tax years.
• Present in the UK for more than equal to present in other single country.

When non-resident throughout the three prior tax years:

When resident at any time in the three prior tax years:

Split Years

Under the statutory residence test, if you become a UK resident part way through the tax year, you will be resident for the entire tax year.

For the entire year, you can be either a UK resident or a non-resident.

However, special rules apply when an individual arrives or departs the UK during the year, dividing the tax year into parts where you are a UK resident and parts where you are not.

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