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    TaxKilnUK tax guidance
    TaxKilnUK tax guidance

    Moving Abroad → UK source income (non-resident)

    UK Source Income While Non-Resident — Disregarded Income, Rental, Pensions

    The UK operates a source-based regime for non-residents. UK source income remains UK-taxable regardless of your residence status: UK rental income (with NRL scheme + Section 24); UK employment income from UK workdays; UK government service pensions (always UK-taxable); UK private pensions (treaty-dependent). Disregarded income (s.811 ITA 2007) shelters most UK investment income (dividends + interest + royalties) — non-residents often pay no additional UK tax on these beyond any withholding at source.

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    Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact HMRC. Read our editorial scope →

    In plain English

    When you stop being UK-resident, you stop being taxed on your worldwide income. But UK source income — income arising from UK property, UK employment workdays, UK pensions, certain UK investments — remains in UK scope by source. The UK then runs two computations and gives you the lower liability under the disregarded income rule (s.811 ITA 2007): full computation including UK dividends/interest etc., vs computation excluding 'disregarded income' but giving credit only for tax actually withheld at source. For most retail non-residents with UK dividend portfolios + UK bank interest, the disregarded income mechanism means: no additional UK tax beyond what's already withheld (usually nil on dividends/interest for non-residents). UK rental income is the most common ongoing UK SA driver — handled via NRL scheme + standard Section 24 mortgage interest treatment.

    How it works

    UK rental income — NRL scheme + Section 24 + ATED

    UK rental remains UK-taxable for non-residents under ITTOIA 2005 Part 3. NRL scheme = procedural delivery (see /moving-abroad/leaving-uk-procedures). Substantive computation = same as for UK-resident landlords: • Section 24 (FA No.2 2015): mortgage interest not deductible as expense; 20% tax credit instead. Hits higher-rate landlords harder. • Personal Allowance often available to non-resident UK/EEA nationals + most treaty residents (s.56 ITA 2007). • ATED (Annual Tax on Enveloped Dwellings) applies if the property is held by a company + value >£500k — annual charge plus loss of capital gains rebasing. Usually a poor structure for individuals. • 60-day NRCGT reporting applies on disposal (see /moving-abroad/nrcgt-and-temporary-non-residence).

    UK employment + self-employment from UK workdays

    Non-residents pay UK income tax only on UK source employment income — which means earnings attributable to UK workdays (ITEPA 2003 s.15). A 'UK workday' = >3 hours work performed in UK. Apportionment commonly uses workday-count formulas. If you're employed by a UK employer and work mostly overseas with occasional UK trips: only the UK workday earnings are UK-taxable. PAYE may continue to apply on the full salary by default — claim via SA + apply for s.690 direction (ITEPA 2003) to limit PAYE to UK-portion. UK self-employment (rare for emigrants but possible for cross-border consultants): same workday-source principle. UK trading via PE may trigger additional Corporation Tax / SA implications.

    UK pensions — government service vs private vs State Pension

    Three regimes: • Government service pensions (civil service, military, NHS pre-2008 etc.): UK-taxable always, regardless of residence (OECD Model Art. 19 — taxable only in paying state). NT code NOT typically available. • Private pensions (occupational + personal): UK-taxable under domestic law (s.579A ITEPA 2003) but most UK DTAs allocate taxing rights to country of residence — apply for NT code via DT-Individual after becoming resident in destination. • UK State Pension: UK-taxable under domestic law; treatment under DTA varies (some treaties allocate to residence country, others to UK). Often nil tax in practice if income below allowances. See /moving-abroad/ni-state-pension-abroad for State Pension claim mechanics.

    UK investment income — disregarded income s.811 mechanism

    Disregarded income (per ITA 2007 ss.811-813) includes: UK dividends from quoted companies; UK savings interest; certain royalties; UK State Pension (in some interpretations); UK purchased life annuity income. The mechanism: HMRC computes (A) the normal liability on ALL UK income including disregarded income; and (B) liability on non-disregarded income only PLUS tax actually withheld on disregarded income. The non-resident pays the LOWER of A or B. In practice: UK dividends paid to non-residents have NO UK withholding (since 6 April 2016 dividend tax credit abolition). UK bank interest is usually paid gross. So (B) = tax on UK rental + UK employment workdays only + zero withholding on dividends/interest. Almost always lower than (A). Result: non-resident pays no additional UK tax on UK dividends or bank interest beyond what's already withheld (usually zero).

    Who this applies to + key conditions

    Statute + manual references

    Primary: ITA 2007 ss.811-813 (disregarded income); ITTOIA 2005 Parts 3-5 (UK rental + dividend + interest source rules); ITEPA 2003 ss.14-15 (UK employment workdays)

    Related: Finance (No.2) Act 2015 s.24 (mortgage interest restriction); Finance Act 2019 Schedule 5A (NRCGT for non-UK-residents — see separate NRCGT page); Taxation of Income from Land (Non-residents) Regulations 1995 SI 1995/2902 (NRL scheme)

    HMRC manual: INTM (International Manual) + PIM (Property Income Manual) + RFIG

    Common mistakes + traps

    Worked example

    Sarah, non-resident landlord in Spain since October 2024, earns £30k UK rental + £8k UK dividends in 2025/26

    Sarah owns a £400k London flat with £200k mortgage at 5% (£10k interest/year). Net rental profit before mortgage interest = £30k - £8k other expenses = £22k. UK dividends £8k. She has NRL1 approval so receives gross rent.

    1. Step 1 — UK rental computation (Section 24): Rental profit £22k. Mortgage interest £10k NOT deducted as expense. 20% tax credit = £2k off final liability.
    2. Step 2 — Personal Allowance: Sarah is UK national + EEA resident → PA £12,570 available (s.56 ITA 2007 + DTA).
    3. Step 3 — Computation A (all income): Rental £22k + Dividends £8k = £30k. Less PA £12,570 = £17,430 taxable. Tax: rental £9,430 @ 20% = £1,886 + dividends £8k — first £500 (dividend allowance) free, £7,500 @ 8.75% = £656. Total before Section 24 credit = £2,542. Less £2,000 mortgage interest credit = £542.
    4. Step 4 — Computation B (disregarded income excluded): Rental only £22k. Less PA £12,570 = £9,430 @ 20% = £1,886. Less £2,000 credit = -£114 → £0 liability + zero withholding on dividends.
    5. Step 5 — Lower of A (£542) or B (£0). Sarah pays £0 UK tax on the dividends + £0 on rental (Section 24 credit covered the rental liability).

    Outcome: Sarah's UK tax liability for 2025/26 = nil under s.811 disregarded income mechanism. Spanish tax on the worldwide income separate computation (typically with FTC for any UK tax paid, none here). UK SA still required because UK rental exceeded thresholds; SA109 confirms ongoing non-resident status.

    How this connects to the rest of the framework

    Statutory Residence Test →

    Non-residence under SRT is the precondition for s.811 disregarded income + NRL + workday source apportionment to apply.

    Leaving-UK procedures →

    NRL1, SA109 split-year, NT code via DT-Individual are the procedural mechanics for delivering this page's substantive tax treatment.

    NRCGT + temporary non-residence →

    UK property income covered here; UK property gains covered there — same source basis, separate computation regime.

    April 2025 IHT reform + LTR →

    UK source income tax is independent of IHT residence test — being non-resident for IT doesn't end IHT exposure on UK situs assets or worldwide LTR exposure.

    UK government pension trap →

    UK government service pension is a parallel category of UK source income — Article 18 UK-Ireland DTA 1976 reserves taxing rights to the UK regardless of Irish residence.

    UK-AU DTA 2003 →

    UK-AU DTA 2003 Article 13 preserves UK taxing rights over gains on UK land — UK source income rules continue to apply for AU-resident landlords; Articles 17/19 split private vs government pensions.

    No foreign tax credit asymmetry →

    Gulf zero-tax residence creates asymmetric exposure: UK source income (rent, UK-government pensions, UK-employment days) remains UK-taxable but no Gulf tax exists to credit — the corridor's defining trap.

    Frequently asked questions

    What happens if I miss the Self Assessment deadline?+
    The Self Assessment deadline is 31 January (online filing) for the previous tax year. Miss it and HMRC apply an automatic £100 penalty. Beyond that: £10 per day from 3 months late (capped at £900), 5% of tax due at 6 months late, and another 5% at 12 months late, under Schedule 55 of the Taxes Management Act 1970. If you have a genuine reason (serious illness, bereavement, technical issue with HMRC's systems) you can appeal with evidence; HMRC accepts reasonable excuse appeals in most genuine cases.
    Do I need an accountant or can I file Self Assessment myself?+
    Legally you can file Self Assessment yourself via gov.uk for free, most simple sole-trader returns (single income source, basic expenses) are realistic to self-file. An accountant adds real value when: your trading profit is above £40,000 (extraction-strategy decisions matter), you have multiple income streams (PAYE + self-employment + property + dividends), you've crossed the £90,000 VAT threshold, you're considering incorporation, or you have an HMRC enquiry. Expect to pay £400-£1,500/year for a typical sole-trader accountant; the cost is itself a deductible expense.
    How do payments on account work?+
    When your Self Assessment tax bill exceeds £1,000 for the first time, HMRC requires payments on account toward NEXT year's tax. Half the current bill is due 31 January (alongside the current bill); the other half is due 31 July. So your first January after crossing the threshold can hit with a double-bill: last year's balance + first payment on account. Adjust via Form SA303 if you expect next year's income to drop substantially. Payments on account don't apply if more than 80% of your tax is collected via PAYE.
    Will I pay UK tax on UK dividends as a non-resident?+
    Usually no. UK dividends are 'disregarded income' under ITA 2007 s.811. The mechanism gives you the lower of (a) full computation including the dividends or (b) computation excluding them + credit only for tax actually withheld. Since UK dividends to non-residents have NO withholding (dividend tax credit abolished 6 April 2016), the (b) computation almost always wins. Effective UK tax on UK dividends for a non-resident = nil in most cases.
    What if my UK employer continues to pay me while I'm working abroad?+
    Only earnings attributable to UK workdays remain UK-taxable (ITEPA 2003 s.15). Foreign workdays for a non-resident are NOT UK source even if the payroll is UK. Apply for a s.690 direction (ITEPA 2003) so PAYE is applied only to the UK-portion of your salary — avoids cashflow hit + year-end SA refund. Direction takes 4-8 weeks to process. Document workdays meticulously.
    Are UK government pensions UK-taxable wherever I live?+
    Typically yes. The OECD Model Treaty Article 19 (mirrored in most UK DTAs) allocates exclusive taxing rights to the paying state for government service pensions (civil service, military, NHS pre-2008, certain teachers + police). NT code is usually NOT available for these. Exception: if you become a national of the country of residence AND a resident, some DTAs reallocate — check the specific treaty.
    Can I claim the UK Personal Allowance as a non-resident?+
    Available to: UK nationals; nationals of EEA countries (post-Brexit, EEA carve-out retained for PA purposes); residents of countries with DTAs containing a non-discrimination clause; British Overseas Territory citizens + Commonwealth citizens; Crown servants + their spouses. Claim via SA109 box 16. If you don't qualify, your UK liability is computed without PA — UK rental income from £1 is taxable.

    Free + regulated-body resources

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