Overseas Income/Personal Allowance

[Pommy]

Hi.
I am a dual UK and Australian citizen; I lived in Australia from 2012 to October 18th 2016, and landed on UK soil on the 20th October 2016. I was a UK resident from the 20th October 2016 to the 5th April 2017. My only home while I lived in Australia was in Australia, I had no ties with the UK at all. When I returned to the UK my only home was here in the UK. So for tax year 2016 to 2017, I was in the UK for a total of 168 days, do I need to file a tax self assessment form for tax year 2016 to 2017 as I had £2300 in overseas income while here in the UK.

My next question is a follow on, I have a very small income here in the UK, I have a disability; my total UK income for tax year 2017 to 2018 was £6000, and my overseas income received while here in the UK was £2400. So my total combined worldwide income was £8400. Am I required to file a self assessment form for tax year 2017 to 2018 even though my total worldwide income is well below my personal tax allowance, but I did receive income from overseas?

Many many thanks for any feedback.

Pom.

[AGoodman]

You will almost certainly be UK tax resident for the year - either under the Second Automatic UK test (see page 18 of RDR3) or Sufficient Ties test.

You probably qualify for split year treatment - perhaps Case 4 - so only income arising after your arrival that need be taken into account.

It's then a case of working out if you have any tax liability, which depends on the type of income (there were generous savings and dividend allowances in 2016/17) and whether you have used your personal allowance.

No, I don't believe there is any need to file a return for 2017/18 in your situation. Generally (but not exclusively) you only need file a return if you have a liability and you are well within the personal allowance.

[Pommy]

AGoodman many thanks.

You're reply, the opposite to what I have been told by a tax expert. I keep getting conflicting answers from different sources.

Less than 183 days in the UK - None tax resident. I spent 168 days in tax year 2016 to 2017. Has the tax expert got this wrong.

Overseas income recieved in a tax year. You have to disclose the overseas income by completing a self assessment tax return. Even though no tax is owing. Has the tax expert got this wrong as well?

In tax year 2016 to 2017 my total worldwide income was only 7800 pounds Sterling. But I was an Australian resident for 197 days. I did complete an Australian tax return declaring UK income from savings interest. Do I need to file a self assessment tax return for tax year 2016 to 2017.

Thanks again.

[maths]

I tend to agree with AG.

You are likely to fall UK resident for the whole of 2016/17 tax year under the second Automatic UK residence test. However, if this is the case then split year treatment may apply, probably under Case 4.

If you therefore resident but qualify for split year treatment this means you only are exposed to UK tax on income/gains arising on or after possibly 20 October 2016.

If your total worldwide gross income for the whole of the tax 2016/17 falls below the personal allowance (to which you are entitled) then no UK tax liability arises and hence no need for tax return.

If however if total income for tax year 2016/17 exceeded personal allowance and a liability in principle arises then a tax return would be needed as you would probably wish to claim both split year treatment and double tax relief.

[Pommy]

Maths many many thanks for your reply...

I am no way disputing what AGoodman has scripted, his advice is very much appreciated. Now you have also replied with a similar logic, I am realising what needs to be done.

Just to clarify, For both tax years 2016/17 and 2017/18, my total worldwide income (Australia and UK) was well under my personal UK tax allowance.

2016/17 - £2300.00 in Overseas Income and £5500.00 in UK income A total worldwide income of £7800.00

2017/18 - £2400.00 in Overseas Income and £6000.00 in UK income A total worldwide income of £8400.00

So I do not need to file a self assessment return for either years? That's my thinking. My logic was that due to my low income there was no need to file one either tax years; and I have never filed a self assessment form before, never needed to, always been PAYG on low income.

But I received a letter from the HMRC on Saturday. Title - Information about your offshore income or gains. From the Offshore Unit Customer Compliance Team.

I can only assume the Australian Tax Office have notified HMRC of my savings account in Australia as I gave them my National Insurance Number. Also while I lived in Australia I kept all my savings in an Offshore account with Nationwide International. When I returned to the UK I closed this offshore account as I no longer needed it. I only opened it because I could not open a savings account in the UK while living in Australia. I included all this information in my Australian Tax Return.

The letter.

I am writing to you before the introduction of the new requirement to correct certain offshore tax non compliance. You still have the time to check that you have declared all of your offshore income or gains that you may have to pay UK tax on. If you have any overseas income or gains that you find that you have not declared you must tell us by the 30th September 2018. If you do not we may charge you need financial penalties.

These penalties start at a minimum of 100% of the tax due, old penalties were from 0% to 30%. People hold assets overseas for many reasons, however personal circumstances change. For example you may have recently inherited or dispose of offshore assets and changes to tax laws may mean advice you got in the past is no longer correct.

Please check that your tax affairs are up to date and complete. To make sure this new requirement and penalties do not apply to you.

If you.

1 - Are satisfied you have fully declared your offshore income or gains then you do not need to do anything.

2 - A re unsure whether you have declared all of your income or gains that you may have to pay UK tax on, I recommend you seek professional tax advice.

3 - Find that you need to bring your tax affairs up to date as t could be easier than you think.

Thanks for all your help.

[maths]

The exchange of information amongst tax authorities is designed to identify residents of country X who have failed to disclose income/gains to X's tax authorities arising outside of X on which X levies a tax charge.

In your case you appear to have no UK tax charge on either your UK or overseas income; you therefore have nothing to declare.

As my earlier post indicated, if to avoid any UK tax charge required you to obtain split year treatment then you would have needed to file a tax return and lodge claims as appropriate.

I suggest you re-check with your other tax adviser the comments made in response to your post.

[AGoodman]

If all is under your personal allowances (I assume you have included pensions in your numbers) then you are fine.

Rather nice of HMRC to send these letters out a month before the deadline...

[Pommy]

AGoodman.

Thanks buddy.

You were correct, I was deemed a UK tax resident for 2016/17 tax year; the year I arrived back from Australia, I checked the test.

I have no pensions. All my income for the past few years has been under my personal allowance. Combined worldwide income, UK and Australia does not and has not exceeded my personal UK tax threshold. 16/17 and 17/18.

I just thought as some of this savings interest income was sourced outside the UK, then the HMRC would need to know this, so in essence you notified them by way of filling out a self assessment form. I know you are notifying the HMRC of income outside the UK but declaring no tax is owed to the HMRC.

I seen this today, if my savings income/interest had exceeded or ever did exceed £10k, then the HMRC states a Self Assessment File must be lodged.

https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return

• your income from savings or investments was £10,000 or more before tax

Crazy ruling though, with the £11,850.00 personal tax threshold, another £6k should your income be solely from savings interest and you are required to self assess over £10k. Talk about a waste of time. Anyone submitting a self assessment file will owe no tax anyway should the income be solely from savings interest between £10k and £17,850k.