UK Treatment of Foreign Income
If you receive income outside of England, Scotland, Wales and Northern Ireland, you may be required to pay UK income tax and declare this via a self-assessment tax return. UK taxpayers must ensure they are compliance with how the UK tax system treats this income. Declaring the income incorrectly can lead to unintended penalties or double tax and that’s where advice from your accountants can make all the difference.
What Is Foreign Income?
Foreign income is any income received from outside of the UK. HMRC treats the following as foreign income:
Wages if you work abroad
Foreign investment income for example, dividends and savings interest
Rental income on overseas property
Income from pensions held overseas
Even if foreign tax has already been paid on this income, you may still be required to declare this to HMRC and could be entitled to Foreign Tax Credit Relief to prevent double taxation.
Are you Required to Pay UK Tax on Foreign Income?
This would be dependent on your UK tax residency status. If you are a resident in the UK, you are generally required to pay UK Income Tax on your Worldwide income which would include income earned outside of the UK.
If you are not a UK tax resident, you typically only pay UK tax on income sourced within the UK itself.
Reporting Foreign Income to HMRC
Depending on the foreign income received, HMRC will usually require the income to be reported via a self-assessment tax return. Within this return, overseas income, gains and foreign tax will all need to be reported to ensure the relevant relief is able to be claimed.
There are different taxation rules depending on the country the income was received from, this process can be lengthy.
Not reporting this income can lead to HMRC opening a Worldwide Disclosure Facility (WDF) in which HMRC can claim penalties and interest on the undeclared income. At Cheylesmore Accountants, we have assisted many clients with foreign income tax returns and ensured the income was reported correctly and efficiently.
Double Taxation – Reliefs
The UK has tax treaties with many countries designed to prevent you from being taxed twice on the same income. These Double Taxation Agreements (DTAs) allow you to either offset the foreign tax you have already paid against your UK liability or claim relief via the Foreign Tax Credit Relief system.
The relief is not automatically applied and is required to be claimed via your tax return within the relevant section. As accountants in Coventry, we can help you navigate through the complex international rules and ensure you don’t overpay. We will provide you tailored advice dependent on your individual circumstances whether it is via telephone call, in person, email or text – we cater to your needs.
Why This Is Important for You
Worldwide income reporting isn’t just about ticking the right boxes, it is ensuring that the information submitted complies with residence rules, benefits, reliefs, exchange rates and documentation requirements.
Whether you’re moving back to the UK after time abroad, earning income from overseas clients, or managing international investments, Cheylesmore Accountants are well-positioned to help. Our team of accountants in Coventry and dedicated tax experts can guide you step-by-step through reporting requirements, ensuring a comprehensive breakdown and correct return to submitted to HMRC.
If in doubt as to whether you are required to declare your foreign income, contact Cheylesmore Accountants to ensure your declaring your income in the most tax-efficient manner and you are compliant.
