Whether or not you are required to pay tax on money transferred to the UK depends on a number of factors. These can include the size of the transfer, how the funds were derived, whether you are a resident or non-resident of the UK and the tax treaties the UK has in place with the country you are sending money from. Read on to learn about the tax implications of transferring money to the UK as we answer questions such as do you pay tax on bank transfers to the UK? And, do you pay tax on inheritance money from overseas?
Do I Have to Pay Tax on Money Transferred to the UK?
There are a number of factors influencing whether or not you pay tax on bank transfers to the UK (whether you receive money from abroad using a bank, a currency broker or via a multi-currency account). These factors include residency status, where is it transferred from, whether it’s income or savings, is it inheritance. We will write about those in detail below and supply several links to resources in which you can read more about tax when transferring money into the UK. Please note that this is for your information only and is not tax or other form of financial advice.
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1. Residency Status
Your residency status in the UK is the first major factor influencing whether or not you will have to pay tax. If you are deemed a resident of the UK then chances are you will have to pay tax on your foreign income (note the term ‘income’ as how the money is derived is another important factor we’ll touch on later, savings will not be taxed though interest earned on savings could). If you are deemed a non-resident of the UK then you will not need to pay UK tax on your foreign income. Though if you have a permanent residency elsewhere, you’ll likely have to pay tax in this jurisdiction.
The government’s Statutory Residence Test (SRT) is the determining factor of your residency. Full information on the SRT is available on the .gov website but the major points to note are:
- If you’ve been in the UK for 183 or more days you’ll be a UK resident. There is no need to consider any other tests.
- You are deemed a non-UK resident for the tax year if you were resident in the UK for one or more of the 3 tax years before the current tax year, and you spend fewer than 16 days in the UK in the tax year.
- You are deemed a non-UK resident for the tax year 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.
- If you work full-time overseas, you are deemed a non-UK resident for the tax year if you spend fewer than 91 days in the UK.
The UK tax year begins on 6th April, running until 5th April the following year.
2. Income or Savings?
Generally speaking, when you are transferring your own existing assets to yourself (repatriation of funds or assets), there are no tax implications of transferring money to the UK.
Overseas income however is likely to be taxed (if you are deemed a resident of the UK).
This could be income derived as follows:
- Overseas salary.
- Overseas pension.
- Overseas rental income.
- Profit from running a business overseas.
- Gains from selling an asset (such as an overseas property or shares held abroad).
- Interest on savings (savings are OK but interest earned is deemed as income).
The UK has a number of tax treaties in place with countries from all over the world, explaining the double taxation rules on a number of different income streams including pensions, property and dividends. If you are concerned about double taxation you should certainly engage a specialist tax adviser before setting up an international cross-border payment (please note that Customs fees and VAT are a differently topic altogether, and discussed on a different page).
Do You Pay Tax on Inheritance Money From Overseas?
Inheritance tax can be a little confusing but it comes down to where the person who has passed is domiciled.
If the person who lost their life is permanently domiciled out of the UK, then Inheritance Tax would only be paid on their UK assets (if any), for example property or bank accounts in the UK. Though if the person you are inheriting assets from has lived in the UK for 15 of the last 20 years or had a permanent home in the UK during any of the last 3 years of their life, they will be deemed UK-domiciled and normal UK inheritance tax rules will apply.
So if a family member passed who had no UK assets and was not domiciled in the UK, you would have no requirement to pay UK tax when transferring inheritance money from USA to UK, for example.
Best Way to Receive Funds (Dedicated Assistance)
If you want to transfer funds abroad or retrieve funds from abroad, we recommend using a specialist service for that. The benefits are the best foreign exchange rates compared to banks, but moreover – a dedicated currency expert that will help you finalise the transaction and follow up on it. These money transfer services will not provide advice in regards to tax, but are able to connect you with tax advisors and help you execute the process in an optimal manner.
Tax Limits for UK Non-Domiciled Persons
If you are resident in the UK but not domiciled in the UK (e.g. a migrant coming to the UK for work who is permanently domiciled in another country) then there are certain tax free allowances:
- When foreign income is under £2,000.
- When foreign employment income is under £10,000 and tax is already paid in the country it was earned (or none if that country had a 0% income tax rate).
- When foreign investment income is under £100.
So there are no tax implications of transferring this money to the UK.
The Remittance Basis
The remittance basis is worth a special mention – it applies to individuals who are a resident of the UK but are not domiciled in the UK. It’s a fixed sum paid to HMRC that can prevent having to pay tax in the UK on all of your overseas earnings. The remittance basis is charged as follows:
- If you are non-domiciled in the UK but have been a resident in the UK for seven out of the last nine years you will have to pay a £30,000 annual charge when claiming the remittance basis.
- If you are non-domiciled in the UK but have been a resident in the UK for twelve of the last fourteen tax years, you will have to pay a £60,000 annual charge for the remittance basis.
When the remittance basis is paid it grants individuals the opportunity to only pay tax on money that is transferred to the UK as opposed to tax on all overseas earnings. Therefore, the remittance basis is only appropriate for individuals who have overseas income in which they know tax on the income would exceed either £30,000 or £60,000, depending on their residency status in the UK. Remember, there are still tax implications of transferring money to the UK, the remittance basis just prevents UK-non domiciled residents from having to pay UK tax on all overseas income.
Transferring Money From UAE to UK Tax
The general purpose of those looking to transfer money from UAE to UK is to repatriate an overseas salary, or savings from abroad. Therefore if an individual is employed full-time in the UAE then the UK residency rules for overseas workers would apply.
You’ll be a non-UK resident for the tax year if you work full-time overseas over the tax year and:
- You spend fewer than 91 days in the UK in the tax year
- The number of days on which you work for more than 3 hours in the UK is less than 31
- There is no significant break from your overseas work
Therefore, you can expect to pay tax on money transferred from the UAE to UK is you spend more than 91 days in any given tax year in the UK.
Transferring Money From Spain to UK Tax
Transfers from Spain to the UK are generally for property purposes, whether it’s selling a property in Spain or collecting rental income on a property in Spain. Therefore individuals should expect to pay tax in the UK on this if they are deemed a UK resident.
Final Word – Do I Have to Pay Tax on Money Transferred From Overseas to UK?
The general rule of thumb is quite simple – if the money being transferred from overseas to the UK is part of your existing assets then there should be no tax implications of transferring money to the UK. If the money being transferred is regarded as overseas income then you likely will have to pay tax if you are regarded as a UK resident. Non-domiciled UK residents have the ability to opt for the remittance basis, though whether this is suitable totally depends on your own unique circumstances. Individuals who are planning on transferring a substantial amount from overseas should consult a financial planner who is well-informed about the UK regulations regarding overseas remittances and UK taxes.
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NOTE: The contents of this post do not constitute tax or financial advice and are provided for general information purposes only. While we have aimed to collate accurate and up-to-date information, MoneyTransferComparison will not accept liability for any direct or indirect loss arising from a reliance on the information provided here. All individuals with a requirement to transfer money abroad should seek specific advice from tax professionals in the relevant local jurisdiction to ensure that all applicable taxes are paid.