Created by: Katherine Locke | 3 December 2018

New to Paying Taxes in the UK? Here is what you need to know

Taxes aren’t the sexiest subject on the planet, but if you are new to the UK, you will need to have an overview of how the tax system works and what you need to do to make sure you are on the right side of the law.  Fines for non-payment of taxes can be hefty and in the worse cases, can even carry a prison sentence.

Here is how to avoid any nasty surprises.

The good news is that, if you are employed, your taxes should be deducted automatically from your wages.  This is known as your Income Tax. Other forms of income, on which you may have to pay tax, include your pension, interest on your savings and certain benefits.

It gets a little more complicated, however, if you are self-employed or have other taxable assets.  For example, if you have made a profit selling other assets, such as a house or shares. This is known as Capital Gains Tax.  You may also have to pay tax on any income you are receiving from overseas. For example, if you are letting out a property, or have a pension from overseas.  

The rules here become a little more confusing and much will depend on whether you have resident status or not.  As a general guide, if you are a UK resident, you will be required to pay tax on all your income – whether it is from the UK or abroad – but, if your permanent home is abroad, there are certain exceptions.

There are two easy ways to check if you are considered a resident or not.  You are automatically considered a resident:

  • If you spent 183 days or more in the UK during the tax year.
  • Your only home is in the UK and you have lived in it for 91 days in total.

You are considered a non-resident if:

  • You have full-time employment abroad.
  • You spent fewer than 16 days in the UK during the tax year.

There is a danger that you may end up being taxed twice – that is in the UK and abroad.  Certain countries have a double taxation agreement with the UK to avoid this situation occurring.  You can find out which counties are included in the agreement here (link to https://www.gov.uk/government/collections/tax-treaties).

There are different rules again if you are self-employed – that is you work or yourself and do not have an employer.  If you are self-employed, you need to fill out a Self-Assessment tax return. If you are self-employed, you need to keep records of your income and expenditure to include on the form.  There are specific rules and deadlines in place, which you will need to be aware of. There is plenty of advice here (link to https://www.gov.uk/self-assessment-tax-returns), but if you are in any doubt, it may be worth talking to a professional who can advise you.  

It is true that tax can be a complicated subject if you are new to the UK.   It is worth remembering that the UK tax year runs from April to April (that is currently 6th April 2018 – 5th April 2019) and you are allowed a certain amount of tax-free income, depending on your status.  This is known as your Personal Allowance and is different for married or single people.

There are plenty of organisations that can offer advice (including the Citizen’s Advice Bureau). As with all financial matters, it is better to be informed and on top of it than inadvertently running up a huge tax bill.

Uk Tax Employed Income Resident