Why is residency important?

If you are regarded as a non-UK resident, you will not have to pay UK income tax on non-UK source income or capital gains tax on both UK and non-UK assets[1].

Since April 2013, residence is determined solely by the Statutory Residence Test (SRT). Those returning to the UK for extended periods over the year should be familiar with the rules to ensure that they do not inadvertently become UK resident with the negative tax consequences this entails.

How does the SRT work?

The test works in the following order of priority:

  • automatic overseas tests - if any of these tests are satisfied, you will be non-UK resident. If none of these tests are satisfied, then consider if you are automatically UK resident (see below);
  • automatic residence tests - if any of these tests are satisfied, you will be UK resident. If none of these tests are satisfied, then consider the sufficient ties test (see below);
  • the sufficient ties test will determine residency based on a combination of the number of "ties" you have with the UK and the number of days spent in the UK.

Automatic non-residence

You will be automatically non-resident if:

  • you spend fewer than 46 days in the UK in the tax year and were not UK resident in all of the previous three tax years; or
  • you spend fewer than 16 days in the UK in the tax year and were UK resident in one or more of the previous three tax years; or
  • You work sufficient hours overseas (average 35-hour week)  and spend fewer than 91 days in the UK of which less than 31 are days spent working for more than three hours. You take no breaks from overseas work of 31 days or more (excluding annual, sick or parenting leave).

Many individuals will rely on the fact that they are working full-time overseas to secure non-residency, but the restrictions on the number of UK work days can easily be breached and should be carefully monitored.

Automatic Residence

If you are not automatically non-resident, you will be automatically UK resident if:

  • you spend 183 days or more in the UK; or
  • you work sufficient hours in the UK (average 35-hour week); or
  • you have a home in the UK (for at least a 91-day period and you are present at that home for at least 30 days in the tax year) and, if you have an overseas home, you spend less than 30 days there in the tax year.

Sufficient Ties Test

If you are not automatically non-resident nor automatically UK resident, you will need to consider the "sufficient ties" test, which will determine how many days you can spend in the UK, depending on the number of ties you have from the list below (and whether or not you were UK resident in any one of the previous three tax years).

Decide how many ties you have from the list below. You will have a tie if you:

  • have UK resident family (a spouse, partner or, subject to limited exceptions, a minor child);
  • have accommodation available in the UK for a continuous period of 91 days which you have used for at least one night;
  • work in the UK for more than three hours on 40 or more days in the tax year;
  • spent more than 90 days in the UK in either of the previous two tax years;
  • spend a greater number of days in the UK in the tax year than in any other country (this only applies if you were resident for any of the previous three tax years).

Days spent in the UK

UK resident for none of previous three tax years Days in UK UK resident for one or more of previous three tax years
Not Resident 0-15 Not Resident
Not Resident 16 - 45 Resident if 4 ties
Resident if 4 ties 46 - 90 Resident if 3 ties
Resident if 3 ties 91 - 120 Resident if 2 ties
Resident if 2 ties 121 - 182 Resident if 1 ties
Resident 183+ Resident

[1] note that there are anti-avoidance rules in respect of "temporary non-residents" which may mean that gains and certain types of income realised during a period of non-residence lasting less than 5 years may become chargeable on return to the UK. In addition, the government is currently consulting on extending capital gains tax to non-residents disposing of UK residential property from 6 April 2015.