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View the related Tax Guidance about Remittance basis

Remittance basis ― overview

Remittance basis ― overviewThis guidance note introduces the remittance basis of taxation that could be accessed prior to 6 April 2025 by certain UK resident individuals and explains what ‘remittance basis’ means. It contains links to guidance notes that discuss the concepts in more detail.This guidance note discusses the legislation which applies from 6 April 2008 only, however if foreign income or gains are remitted in the current year that arose prior to 6 April 2008 then the old rules must be used, which were mostly based on case law. Understanding the old rules also remains relevant as it may be necessary to rework the history of a taxpayer’s accounts in order to determine what has been remitted in a current year. For the earlier rules and transitional provisions, see RDRM36000–RDRM36470 and Simon’s E6.332AA–E6.332B.This guidance note does not cover trusts. For the interaction between remittance rules and non-resident trusts, see the Non-domiciled and deemed domiciled settlors and Non-domiciled and deemed domiciled beneficiaries guidance notes. See also RDRM33590–RDRM33596.For more on non-resident trusts generally, see the UK tax position of non-resident trusts guidance note.Abolition of the remittance basis for foreign income and gains arising on or after 6 April 2025From 6 April 2025, the remittance basis of taxation is repealed as a consequence of the removal of domicile as a connecting factor for tax purposes. This is replaced with a regime linked to the number of years of UK residency, which is colloquially referred to as the foreign income and gains

Automatic remittance basis

Automatic remittance basisBefore reading this note, it is recommended that you read the Remittance basis ― overview guidance note to familiarise yourself with the wider remittance basis regime.Most individuals who chose to use the remittance basis for tax years prior to 6 April 2025 had to make a claim under ITA 2007, s 809B. See the Remittance basis ― formal claim guidance note.However, in three cases, the remittance basis was given automatically. These were where, in relation to a given tax year prior to 6 April 2025, the individual met any of the following tests:•they had unremitted foreign income and gains totalling less than £2,000•they were under 18 at the end of the year, no more than £100 of UK taxed investment income, and no other UK taxable income, and do not remit any relevant income or gains to the UK *•they have been resident in the UK for not more than six out of the last nine years, have no more than £100 of UK taxed investment income, no other UK taxable income, and do not remit any relevant income or gains to the UK ** Note that these latter two automatic remittance basis cases are affected by the abolition of income tax at source on UK interest from 2016/17 onwards and HMRC has adopted a relaxed approach to the application of the automatic remittance basis in these cases, as discussed below.The three cases of automatic remittance basis are discussed further below, but first this

Non-domiciled and deemed domiciled beneficiaries (before 6 April 2025)

Non-domiciled and deemed domiciled beneficiaries (before 6 April 2025)This guidance note explains the tax treatment of deemed domiciled and non-domiciled beneficiaries of non-resident trusts before 6 April 2025. The domicile rules are abolished from that date and domicile is no longer a relevant factor in how beneficiaries of non-resident trusts are taxed for 2025/26 onwards. IntroductionThe tax position of non-domiciled and deemed domiciled beneficiaries of non-resident trusts is a complex landscape mapped by successive changes in the law. Before 2008, UK resident but non-domiciled beneficiaries were protected by a cost-free remittance basis option for income tax and, like non-domiciled settlors, they were exempt from attribution of capital gains within the trust. Major changes in 2008, 2017 and 2018 have incrementally brought non-domiciles into the regime under which UK domiciled beneficiaries of non-resident trusts are taxed.Changes introduced in 2008 scaled down some of the advantages of long-term non-domiciled status. The remittance basis charge was introduced to impose a cost on accessing the benefits of the remittance basis. See the Remittance basis ― overview guidance note in the Personal Tax module. At the same time, changes were made to the taxation of non-domiciled beneficiaries of non-resident trusts to bring their benefits from the trust within the scope of capital gains tax.Notwithstanding the imposition of a charge for the use of the remittance basis, public and political opinion continued to oppose the non-domiciled advantage. As a result, F(No 2)A 2017 introduced the concept of deemed domicile for income tax and capital gains tax

Introduction to capital gains tax

Introduction to capital gains taxIn general terms, a charge to capital gains tax arises when a chargeable person makes a chargeable disposal of a chargeable asset. The disposal may produce a profit (known as a gain) or a loss.See Checklist ― calculation of capital gains and losses for issues to consider when reporting client gains and losses.A number of changes to capital gains tax rates for individuals were announced in Autumn Budget 2024:•the rates that apply to most assets increased from 10% to 18% and from 20% to 24% for disposals taking place from 30 October 2024 onwards•carried interest subject to capital gains tax is taxed at a flat rate of 32% in the 2025/26 tax year irrespective of the individual’s unused basic rate band and is excepted to be subject to income tax from 2026/27 onwards•the rates that apply to gains subject to business asset disposal relief and investors’ relief are increased from 10% to 14% for disposals in the 2025/26 tax year and to 18% for disposals from 2026/27 onwardsFA 2025, ss 7–9, 12Chargeable personA chargeable person could be an individual, a trustee, a personal representative or a company, although companies are subject to corporation tax on chargeable gains not capital gains tax. For further discussion, see CG10700 and Simon’s Taxes C1.102. Exempt persons include, amongst others, charities (so long as the gain is applicable and applied for charitable purposes) and local authorities. See CG10760.Gains arising in respect of UK situs assets to UK

Double remittances

Double remittancesThis guidance note explains the concept of double remittances, which is where foreign income and gains are not taxable in the UK when they are originally remitted to the UK and are then re-remitted at a later date. The guidance note discusses the situations in which this might arise and whether the later re-remittance is taxable.The issue of double remittances has been highlighted by CIOT in its correspondence on the matter with HMRC. The relevant points from this exchange are discussed in the guidance note below, but for those wishing to read the source material the time line is:•26 March 2025: CIOT briefing•4 April 2025: HMRC response to the CIOT briefing•23 April 2025: CIOT response to HMRC’s letterAn outline of the remittance basis can be found at the Remittance basis ― overview guidance note.The commentary below builds on the meaning of remittance in ITA 2007, s 809L and it is assumed that readers are familiar with the When are income and gains remitted? guidance note.Abolition of the remittance basis for foreign income and gains arising on or after 6 April 2025From 6 April 2025, the remittance basis of taxation is repealed as a consequence of the abolition of domicile as a connecting factor for tax purposes. This is replaced with a regime linked to the number of years of UK residency, which is colloquially referred to as the foreign income and gains regime (FIG regime). Although this is not a statutory term, it is a

Remittance basis and foreign currency bank accounts

Remittance basis and foreign currency bank accountsForeign currency bank accounts are central to the operation of the remittance basis. See in particular the Remittance basis - setting up foreign accounts guidance note, but also the Remittance basis - mixed funds and When are income and gains remitted? guidance notes.Fundamental change to foreign exchange gains from 6 April 2012From 6 April 2012 foreign currency gains or losses made by individuals, trustees and personal representatives on the withdrawal of funds from foreign bank accounts are exempt for capital gains tax purposes. Generally speaking, this is welcome news for taxpayers and their advisers since:•gains on foreign currency accounts will not be taxed, and•the complexities of the previous regime have been swept awayHowever, if there is a loss on foreign currency, then there is no relief for that loss.See Example 1.Rules for tax years up to and including 2011/12The remainder of this guidance note discusses the position in tax years 6 April 2008 to 5 April 2012.For the purposes of the other remittance basis notes in TolleyGuidance, it was assumed for simplicity that there were no foreign exchange (FX) differences to be taken into account. In reality this is not the case. Some key issues relating to FX on foreign currency bank accounts in the tax years from 6 April 2008 to 5 April 2012 are covered below.Important note regarding links to legislationThe legislative links in these rest of this guidance note are for reference

Remittance basis ― overview with employment focus

Remittance basis ― overview with employment focusKey points•provided certain conditions are met, Overseas Workday Relief (OWR) can be an extremely valuable form of tax relief for non-domiciled individuals who perform employment duties both in the UK and overseas•Up to 2024/25 OWR is only available in the tax year of arrival and subsequent two tax years following a three year period of non-residence•OWR is generally calculated by reference to the percentage of days an individual spends working overseas•a bank account which qualifies for the special mixed fund rules allows for all offshore transfers to be treated as one single transfer for the year and all remittances as one single remittanceAbolition of non-UK domicile basis of taxation from 6 April 2025The non-UK domicile basis of taxation is withdrawn from 6 April 2025, From that date, OWR is replaced with a new system of foreign income relief. Details of the new relief qualifying conditions, and of the transitional provisions for those who do not qualify under the changed rules, are provided in the separate Overseas workday relief and Abolition of the remittance basis from 2025/26 guidance notes. Introduction ― the remittance basisThe default position for employees who are resident in the UK for tax purposes is that they are chargeable to income tax on their worldwide income and gains. Where an individual is not domiciled in the UK, they may be eligible to claim the remittance basis of taxation. For an individual who has been UK resident for

Determining residence status (2013/14 onwards)

Determining residence status (2013/14 onwards)STOP PRESS: The remittance basis is abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. The legislation is included in FA 2025. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.IntroductionResidence is one of the key factors you should consider when deciding whether, or to what extent, an individual is liable to tax in the UK. The other key factor is domicile.Residence refers to the individual’s tax status on a year by year basis and domicile is the place which a person regards as their true home. See the Domicile guidance note.This guidance note explains the statutory residence test (also known as the SRT), which applies from 6 April 2013. It applies for income tax, capital gains tax, inheritance tax and corporation tax (to the extent that the residence status of individuals is relevant to the latter two taxes). The statutory residence test is not used for national insurance purposes.For the implications of residence status on UK taxation, see the Residence ― overview guidance note.If the individual comes to the UK or leaves the UK but is classed as resident in that tax year under the statutory residence test, it may be possible to split the tax year into periods of UK residence and non-residence. For a discussion of split year

Tax on UK resident beneficiaries of non-resident trusts ― overview

Tax on UK resident beneficiaries of non-resident trusts ― overviewThis guidance note outlines the UK tax treatment of UK resident beneficiaries of non-resident trusts. It considers how to identify whether a distribution is of income and capital and where it is income, how the different types of interest are treated. It outlines how the transfer of assets abroad code applies and how capital gains of the trust could be attributed to a beneficiary under TCGA 1992, s 87. It also outlines the changes made from 6 April 2025 and directs the reader to more detailed guidance.IntroductionUK resident beneficiaries of non-resident trusts are subject to UK tax on payments or benefits received from the trust. They are liable for income tax on income distributions from the trust and they may also be liable to income tax or capital gains tax on payments of capital from the trust.In contrast to UK settlors of non-resident trusts, the liability of beneficiaries is determined by the extent of their entitlement or the amounts actually paid to them. They have no UK tax liability in a year in which they have not benefited from the trust. See the Tax on UK resident settlors of non-resident trusts (to 5 April 2025) guidance note.This guidance note provides an overview of the tax treatment of both income distributions and capital payments, and provides links to more detailed material.Income or capitalIn order to establish which tax provision applies, one must first determine whether the payment or entitlement is of

Remittance basis charge or assessment of worldwide income and gains

Remittance basis charge or assessment of worldwide income and gainsSTOP PRESS: At Spring Budget 2024, the Chancellor announced that the remittance basis would be abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.This guidance note explores whether those who are entitled to use the remittance basis should do so. Before this question can be answered, the individual needs to understand:•the scope of the remittance basis•whether they have to make a claim for the remittance basis, and•whether they have to pay the remittance basis charge for making a claimThe decision as to whether to use the remittance basis is made on an annual basis. If an individual chooses not to use it, then they are taxable in the UK on their worldwide income and gains using the arising basis of assessment, as if they were resident and domiciled in the UK.This means the individual must declare all their overseas income and gains in the year in which they arise, even if none of it is brought into the UK.Who can use the remittance basis?Certain individuals are taxable in the UK on their UK income and gains alone, and pay UK tax on foreign income and gains only if these are remitted (brought) to the