The remittance basis for taxing overseas income has been modified for low income overseas workers coming to the UK. These changes only apply to individuals who are resident but not domiciled in the UK, and they apply from 6 April 2008.

Choice of remittance or arising basis
UK residents are taxed on their worldwide income and capital gains as they arise in each tax year. However, if you are not domiciled in the UK or not ordinarily resident in the UK in any tax year, you can make a claim to be taxed only on the amount of foreign income and gains that you actually bring in or remit to the UK. This is called the ‘remittance basis’ of tax.

If your unremitted foreign income or gains are less than £2,000 in a tax year, the remittance basis applies by default and you do not lose any entitlement to UK personal allowances or your capital gains tax annual exemption. In other cases, you do lose these allowances unless you choose to be taxed on an arising bases instead.

When you have been long-term resident in the UK (ie, here for seven out of the preceding nine tax years) and are aged 18 or over, you have to pay a remittance basis charge of £30,000 each tax year in order to continue using the remittance basis.

Low UK income – no self-assessment tax return
If you have no UK income or gains other than up to £100 of income taxed at source, and you make no remittances of any foreign income into the UK in that tax year, there is no requirement for you to file a UK tax return.

New income tax exemption
A new income tax exemption applies if you are resident, but not domiciled, in the UK in a tax year, with foreign earnings of £10,000 or less and foreign bank interest of not more than £100 – as long as these amounts are fully taxed abroad. Providing that you are not liable to higher rate tax in the UK, or already required to file a UK tax return, your foreign income will not be subject to any additional tax in the UK.

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