Determining your UK tax residency status can be a daunting task. The guidance in the statutory residence test doesn’t make for light reading and as always with tax the language used isn’t exactly user friendly.
In this article we are simplifying the process needed to determine your own UK tax residency status when taking a statutory residence test.
What Is The Statutory Residence Test?
The UK’s statutory residence test is a set of questions and criteria that will help to determine an individuals UK tax residency status. This is needed because an individuals UK tax residency status is the main factor that determines how and where they are taxed.
Broadly speaking a UK tax resident will pay tax on their worldwide income. This means that even where the income is arising outside of the UK, HMRC will want to know about it and potentially apply tax to it, whereas if you are Non UK tax resident then the UK tax authorities will usually only look to tax you on any of your income that actually arises here in the UK.
The statutory residence test it therefore very important for individuals who have foreign income and spend time outside of the UK as they will need to determine their UK tax residency status before they will be able to calculate how much tax to pay.
Step 1 – Were You In The UK More Than 183 days?
The way a “day” is determined throughout the framework does vary, at times it will refer to a working day rather than a calendar day but broadly speaking you will be considered to have spent the day in the UK for tax purposes if you are present in the UK at midnight at the end of that day.
If you spent more than 183 days in the UK on this basis during a tax year then the statutory residence test will be very simple and you will be a UK tax resident for that particular tax year.
If you do not meet the first test then you will need to progress to step 2.
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Step 2 – Take Automatic Overseas Tests
The second step of the statutory residence test involves checking to see if your personal circumstance result in HMRC automatically considering you to be a non resident for tax purposes. Again this will be based on the number of days you spent in the UK during a tax year but also depend on your UK tax residency status in previous years and whether you were working full time overseas.
The 3 automatic overseas tests are:
- You’ll be non UK resident in the tax year if you were resident in the UK for one or more of the three years prior to the current tax year and you spent fewer than 16 days in the UK in the tax year
- You’ll be non UK resident for the tax year if you were resident in the UK for none of the three tax years prior to the current tax year, and spent fewer than 46 days in the UK in the tax year
- You’ll be a non UK resident for the tax year if you worked full time overseas over the tax year and:
- You spent fewer than 91 days in the UK in the tax year
- The number of days on which you work for more than 3 hours or more in the UK is less than 31
- There is no significant break from your overseas work
Step 3 – Automatic UK Tests & Sufficient Ties Test
As you can imagine you are potentially worth more in tax revenue to the UK tax authorities as a UK tax resident rather than a non resident so the third step is to test again for anything that would give you a UK tax residency status.
Much like the automatic overseas tests, there are also 3 automatic UK tests. These are:
- You will be UK resident for the tax year if you spend 183 days or more in the UK in the tax year (This is the same test from step1 and if you have made it to step 3 is actually redundant at this point)
- You’ll be UK resident in the tax year if you have, or have had, a home in the UK for all or part of the year and the following all apply:
- there is or was at least one period of 91 consecutive days when you had a home in the UK
- at least 30 of these 91 days fall in the tax year when you have a home in the UK and you’ve been present in that home for at least 30 days at any time during the year
- at that time you had no overseas home, or if you had an overseas home, you were present in it for fewer than 30 days in the tax year
3. You’ll be UK resident for the tax year if all of the following apply:
- you work full time in the UK for any period of 365 days which falls in the tax year
- more than 75% of the total number of days in the 365 day period when you do more than 3 hours of work are days where you do more than 3 hours of work in the UK
- at least 1 day which has to be both in the 365 day period and the tax year is a day on which you do more than 3 hours work in the UK
If you have failed all of the automatic overseas tests and the automatic UK tests as well then the final step is to consider your ties to the UK which in conjunction with the number of days that you spent in the UK will determine your UK tax residency status.
The sufficient ties section of the statutory residence test looks at:
- Family ties
- Accommodation ties
- Work ties
- 90 day ties
- Country ties
|Days spent in the UK (where individual was UK resident in 1 of last 3 tax years)||UK ties needed|
|16-45||At least 4|
|46-90||At least 3|
|91-120||At least 2|
|Over 120||At least 1|
|Days spent in the UK (where individual was not UK resident in any of the last 3 tax years)||UK ties needed|
|91-120||At least 3|
|Over 120||At least 2|
I Don’t Understand The UK Tax Residency Status And Statutory Residence Test
If you’re still having trouble understanding how the UK statutory residence test applies to you or you just want to build on your existing knowledge then check out the additional courses on international tax from The Accounting & Tax Academy now.