Personal allowance for non-residents
Written by Ray Coman
Typically, a non-UK resident will only be taxable on UK rental profits. A generous tax relief available for a UK landlord is the personal allowance. However, not all non-residents will be entitled to it.
Not entitled to a UK personal allowance
Resident but not national within the EEA
British and EEA nationals
A national of the Britain or the EEA area is entitled to a UK personal allowance. Generally, a British passport holder or citizen is regarded as a national for tax purposes.
Double tax treaty
The Double Tax treaty of most countries will entitle many other people to a UK personal allowance. A list of tax treaties can be read here: Digest_of_Double_Taxation_Treaties.
Most commonly a person will be entitled to the allowance if N and R. This means that the personal allowance is available to individuals who are both a national and a resident of the territory. However often, it is only a requirement to be resident. This is designated by the symbol R.
Not entitled to a UK personal allowance
The two largest economies, USA and China, are both notable exceptions. Where the Digest indicates “no”, only a resident of that country who is a UK or EEA national will be entitled to the allowance. A “no” is designated to many other countries in Africa, South America and the Middle East: Saudi Arabia, Mexico being two of the larger examples. The list of “nos” includes many British Overseas Territories, such as the Cayman and British Virgin Islands. Residents of other low tax jurisdictions such as Qatar, Brunei, Bahrain and Hong Kong are also barred from the UK allowance.
Resident but not national within the EEA
The Double Tax treaty Digest explains that EEA citizens (i.e. nationals) are entitled to the UK Personal Allowance. However, some individuals may be resident of an EEA country without being a citizen. In this case, it will be necessary to check through the country listing to see whether the Double Tax Agreement permits a UK personal allowance. An allowance would not, for instance, be available to a resident of Sweden, Spain, Poland, Norway, Liechtenstein, Iceland, Hungary, Greece, Germany, Crotia, Bulgaria, unless the individual is also a national of an EEA country.
Summary
The determinants of UK personal allowance entitlement can be complex and are prone to change. It is worth checking the digest and this manual to confirm whether the UK allowance is applicable. Two people with apparently similar circumstance may have different eligibility.
Comments
You do not need to fill in form R43 if you are also filling in a Tax Return
I am a British passport holder and have moved to the UAE. I have rental income from the UK from 2 properties.
I fill in Self Assessment forms SA100, SA 105, SA109. My income is more than 2500£ per annum. Do I still need to fill in R43 to claim my personal allowance?
If you are both national and resident of Thailand you are eligible to receive the UK personal allowance. However, according to the double tax agreement between the UK and Thailand, you will only be liable to UK tax on certain types of government pension, such as a local authority pension. Article 19 Governmental Services of the double tax agreement explains this. A privately arranged pension would not be taxable in the UK for a person resident in Thailand and not the UK.
On the basis that you hold British nationality, you should select box 16. This is because you are claiming personal allowance on basis of being a British passport holder and not on the basis of any double tax agreement. In that case do not select box 15.
You have correctly identified that if you have technically, if your gross rents are under £10,000 and net rents are under £2,500 you contact HMRC to request that rents are added to your PAYE code. However, since most non-residents do not have employment earnings taxed at source this facility would not be available.
Form R43 is for claiming a refund. Likely you would be in a refund position if you had tax withheld at source by your letting agent. This would occur if you have not joined the non-resident landlords scheme.
In general I would espouse claiming a refund via a Tax Return as a non-resident landlord. There is currently no facility for filing an form R43 online about which I am aware. A postal form could take months for HMRC to process and the refund will likely take considerably longer if claimed using this (legacy type) form.
It is very unlikely that you should not select the domiciled tab. You have correctly identified that this is only useful to individuals claiming the remittance basis which you have stated you are not.
a) Residency - We ticked box 9 as yes and stated 365 days in our overseas home (NZ).
b) Personal allowances
- i) Are we correct to tick yes to both boxes 15 and 16? We both hold both NZ and UK passports, but are not making a claim for the remittance basis. We were 365 days resident in NZ.
- ii) If only one of boxes 15 or 16 should be ticked, does it matter which one we choose? Either seems to entitle us to the £12,500 personal allowance.
- iii) Presumably we need not separately complete an R43, which only seems to apply where property income is less than £2,500?
c) Domicile tab - Presumably we should leave all defaults 'no', as we're not claiming for the remittance basis.
Please help!! Thank you :-) Alison
What you have been advised is not correct.
If you are non-resident, your liability to income tax is limited to UK rental property and UK employment earnings. You would not usually be required to pay UK tax on Chinese income.
You entitlement to personal allowance is separate. The double tax agreement between the UK and China does not provide for a personal allowance. Therefore, you would only obtain a personal allowance if a British national or EU citizen.
I have a British passport and have been working in China since August 2019. I let out a property in the UK, however this year my accountant has told me that I need to pay tax on the full amount and that were I to claim a personal allowance, I would need to pay tax on my Chinese income too.
I recently discovered that a British National Overseas is not entitled to the UK personal allowance. This regulation was not obvious hence the reason that it took me a while to understand that regulation. If you are also British nationals you will be entitled to the personal allowance.
It is common for the NRL1 form to take a while for HMRC to approve. Until you receive the NRL approval from HMRC, your letting agent has followed the correct approach by deducting tax at source. If the letting agent was slow to implement the update, this poses a cash flow implication only.
Usually letting agent adds tax withheld since the start of the tax year on the next statement.
However, if this has not happened, tax withheld will be deducted from any tax payable on your Tax Return which you are obliged to file as a non-resident landlord of UK property.
If tax withheld is greater than your tax liability, you will be refunded via your Tax Return.
Note that as it is the start of a new tax year, you have the opportunity to file a Return for the recently past tax year.
You do not ned to file need to file R43 in addition to SA100, SA105 and SA109. The SA100, SA105 and SA109 are all components of what is more commonly referred to as a Tax Return.
My wife and I have a property in London and we let it out for the tax year 2020-21.
We have NRL1 approved by the HMRC and so we are supposed to receive rental income gross. However our letting agent made an error and incorrectly deducted tax from our rental income for two months during the tax year. This problem was fixed already and we received gross rental income now.
My wife and I hold a BNO passport.
We are about to file SA100, SA105 and SA109 to report our rental income to HMRC (first year tax return). Our respective share (50%) of rental income during the tax year was less than the UK personal allowance so we don't expect a tax liability arises.
We will claim UK personal allowance and also a refund on tax deducted (incorrectly) by our letting agent. Do we need to file R43 in addition to SA100, SA105 and SA109?
Thanks
Thank you. I have re-read the Income Tax Act 2007, section 56 which states that an individual meets the condition of eligibility to a personal allowance if any time in the tax year, a national of an EEA state. I have have also read the following about BNO which states that a BNO is "not considered a UK national by the European Union."
https://www.gov.uk/types-of-british-nationality/british-national-overseas
As such, I will have to concede that a BNO is not entitled to the personal allowance.
I maintain that the HMRC guidance stating a British passport holder is entitled to a personal allowance is confusing and should be updated.
When the UK acceded to the European Communities, the UK notified the other Contracting Parties, by means of its 1982 Declaration, of the categories of citizens to be regarded as its nationals for the purposes of Community law. The Declaration does not include "British national (overseas)".
You can refer to the judgement of Case C-192/99 of the European Court of Justice. Also, the Brexit withdrawal agreement has also reiterated the validity of the 1982 UK Declaration.
The form you have provided a link to is for an R40 which is used as a claim for tax repayments. Usually, I do not an R40, as I prefer to use the Tax return, even for refund claims. I have looked through the guidance and I cannot find any reference to BNO's not being entitled to a personal allowance. I will therefore restate my opinion that as a British passport holder you are entitled to the personal allowance. Please forward only relevant guidance with specific mention of BNO eligibility if you have an opinion to the contrary.
I had the same thought with you so I started to look at the paper work required.
I found this form which is a must go path to claim the allowance.
If we use the guide from there, BNO doesn’t entitle Personal Allowance.
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/869946/R43_Notes_2020.pdf
Do you agree?
My opinion remains that a British passport holder is entitled to the UK personal allowance. This is clear on the HMRC website. I have not found any published material suggesting to the contrary. There is a HMRC representative in an 'HMRC Community Forum' suggesting that BNO are not British nationals for the purpose of personal allowance, but that person was not able to provide any proof. You could try AccountingWeb to see if any other accountants disagree with me. Unless and until I have it on better authority, I would be prepared to file a Tax return on that basis.
i saw that you tried to clarify with HMRC on whether BNO holder who is non-resident in UK would be entitled for personal allowance.
just want to confirm if the discussion with HMRC changed your view on the entitlement please.
You are still entitled to the personal allowance as an EU citizen. That has not changed as a result of Britain leaving the EU.
I used to live in the UK and now settled in Poland but still have a property in the UK and I'm renting it out.
Do you know if the personal allowance rules are the same in 2020/21 as it was the previous year e.g. 19/20. Am I still entitled to deduct it from the income?
I have been in discussion with HMRC on this matter via the following forum. https://community.hmrc.gov.uk/forums/customerforums/ifp/010a86df-530d-eb11-b5d9-00155d9c7393
I have queried the matter with their technical department as the HMRC Guidance is not specific on British National Overseas. There is not a specific reference to a legislation. Until I have heard back my opinion remains that a British passport holder is entitled to the UK personal allowance which is clearly stated on the HMRC website.
Thanks you for sending me this link. The HMRC comment came as something of a shock.
In neither of the links the HMRC representative provided does it state that individuals with British National (Overseas) status in UK passports are not entitled to the UK Personal Allowance.
I cannot only find the guidance which states that a British passport is eligible to the personal allowance.
I have asked HMRC to find the legislation that makes this distinction about British Passport holders.
Are you absolutely sure about this? HMRC's forum has been asked this same question many times and the official reply is always along the lines of "Individuals with British National (Overseas) status in UK passports are not entitled to the UK Personal Allowance."
Many thanks
Ian
You have mentioned that your wife is a British citizen. If she also a British passport holder, she will be entitled to a UK personal allowance.
The form R43 is used to claim personal allowances if you wife is not resident in the UK. However, as a non-resident landlord she is required to file a Tax Return. That Tax return (refrred to as SA100) would include residency pages (referred to as SA109.) The basis of her claim for personal allowance would be stated on those Tax Return (SA109) pages. Therefore it is not necessary to also send in a form R43. Based on what I understand from your explanation, her only UK income is from rental income and those rental profits are less than the personal allowance. On that basis, she would not have a UK tax liability.
Thanks for your helpful site! My partner is a British citizen but has been resident in Hong Kong for 3 years. She has completed the self-assessment form each year and declared rental income on a Uk property. The amount is well under personal allowance. This year, for the first time, she has been charged nearly 2000gbp in tax. Tax not deducted at source - she has NRL1 approval. I assume this is to do with the SA109 form? Will she now need to complete and return form R43? I assume the 2000 will need to be paid upfront and then reclaimed? Thanks very much.
Tick box 1 and box 16 of the S109. https://assets.publishing.service.gov.uk/government
/uploads/system/uploads/attachment_data/file/872779/
SA109_English_Form.pdf
Mostly Tax Returns are filed online, so answer the online questionnaire accordingly. The PDF above is for illustrative purposes only.
The personal allowance for non-residents is abated once total income exceeds £100,000, just as it does for UK residents. However, there are typically only two types of income which are subject to UK tax: rental income and employment earnings where your work benefits the UK entity. If your employer is not resident in the UK and you have not had UK PAYE tax deducted from your pay, this is a strong indication that the employment earnings will not be taxable. Further information can be read here: https://comanandco.co.uk/hiring-a-uk-worker-from-overseas
Investment income (such as dividend and interest) and non-UK employment income is disregarded. Therefore, if your income is not rental income is is unlikely that it will count towards the personal allowance abatement threshold.
I am a UK national resident for 30 years in Poland. I have rental income from a property which my wife and I own in London. As both my wife and I earn more than £100 000 pa are we eligible for Personal Allowances? I would add that our earning are from work outside the UK and our UK sourced revenue is only from rental income from one flat and well below 30 000 in total pa.
On the SA109 supplement to the tax return you should tick box box 16. https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/786916/sa109_notes_2019.pdf
I cannot advise on how this works if you are using the HMRC online tools or a third party software to file your Returns.
You are still within four years of the end of the relevant tax years, (i.e. before 5 April 2021 for 2016/17.) Therefore you would need to make a claim for over payment relief. This claim would include a copy of your passport as proof of nationality (or old passport if it expired in any of the related years.) More information can be found here: https://www.gov.uk/hmrc-internal-manuals/self-assessment-claims-manual/sacm12005
As you will see from the link below as you are both resident and national of Egypt, you are entitled to a UK personal allowance. This is under the terms of the double tax treaty.
https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm10340
I have sent you a message privately, if you would like me to deal with HMRC on your behalf to try and resolve the matter.
It is likely to do with entries on your Tax Return.
My name is Abdelkader.
I am Resident / National of Egypt.
I bought my first property in UK in 2015 and another one is 2016.
In in 2017 my first property became Joint ownership with my spouse.
In 2018, my second property became Joint ownership with my spouse also.
I have been sending tax returns since 2015.
Every year I was told by HMRC that my income is too low to pay taxes.
In 2019 I noticed that I have been answering question 8 on SA100 wrong since I am not UK national nor UK resident.
I contacted HMRC yesterday and I was told that I must pay £2,697!
I was also told that I can apply for allowance.
My spouse was told that she must pay £436!
I want to know if I am subject to allowance or how can reduce (or eliminate) my/my spouse tax bills (£2,697 + £436).
Thanks
As per the following HMRC article, you get a UK personal allowance if you are a British passport holder:
https://www.gov.uk/tax-uk-income-live-abroad/personal-allowance
Does this pension money need to be declared to HMRC? If it is added to annual rental profit it will exceed our joint personal allowance limit.
Prior to the handover, Hong Kong citizens could register as a British overseas national. A British overseas nation had the right to a passport and provided you hold a passport you would be entitled to the UK personal allowance.
I advise that you and your husband is resident in the European Economic Area, therefore you both are entitled for a UK personal allowance on your UK rental Income.
I am resident in Germany and I have a rental income from a Uk property. Am I entitled the UK personal allowance? My husband on the other hand is the owner too of the same property, but resident in Italy? Is he entitled?
Thanks
Regards
I advise that you are a UK National therefore, you are entitled to UK personal allowance on your rental income from your UK property.
You will need to check your Israeli tax position with a tax adviser in Israel. Probably the UK rental income will be treated as foreign income in Israel and exposed to local taxes. However, you would need to check the position in Israel as I can only advise on UK taxation.
August 2017
working as a hospital doctor employee earning a salary.
I became an israeli National with an israeli passport.
I consider myself a dual national & will one day return to
the uk.
I intend to buy a property in the uk & rent it.
As a new resident in israel(aliyah) I do not pay any israeli taxes on income derived in the uk.
I will pay uk taxes on income derived in the uk
Can I claim the personal allowance in each country
against the income derived in each country?
£12,500 in the uk & 2.25 points in israel.
Thanks
If you are a UK national or EEA citizen you are entitled to a personal allowance. If you are not, the entitlement is determined by reference to the double tax treaty.
In that treaty a "no" means that you are not entitled regardless of your nationality. For instance, "no" means even if living in the country where you hold nationality, the allowance is unavailable.
No that is NOT correct. Read the section Not entitled to a UK personal allowance that was written by yourselves!
As you are British, you will be entitled to the UK personal allowance.
Rental profits on property situated in the UK remain taxable in the UK regardless of where you are resident.
The consultancy income is not as straightforward. If you have a permanent establishment in the UK, you would be liable to UK tax:
https://comanandco.co.uk/hiring-a-uk-worker-from-overseas#Permanent_establishment
and here:
https://www.gov.uk/hmrc-internal-manuals/international-manual/intm264020
Based on your brief explanation, i could not offer an opinion and a public forum would probably not be a suitable place to discuss the matter.
I cannot advise on your liability to Cyprian tax. However, as a non-resident you would not be liable for any employment or trading income made outside the UK.
I am British.
I also have various earnings in the UK - some of it rental earnings from a property, but some arising from consultancy work carried out for UK firms - which taken together total not more than £12,000 each year. These UK earnings go into UK bank accounts. Am I (i) entitled to the full UK personal tax allowance on all of these UK earnings and (ii) are these UK earnings potentially liable for tax in Cyprus?
If you do not have a British passport or Spanish citizenship you would not be entitled to the personal allowance.
On a separate note, ensure you consider your entitlement to Principal Private Residence relief when you dispose of your property.
Certain Hong Kong citizens were able to obtain British overseas nationality before the changeover and are therefore entitled to a UK personal allowance. If you have a British passport you can claim the allowance, however a UK allowance is not available if you only have Chinese nationality.
I cannot advise on the Andica, or any other software, including HMRC online tools. However, the source document is referred to as the SA109. It is the Residence supplement to the SA100 form (a.k.a Tax Return.) The supplement notes can be located here: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/786916/sa109_notes_2019.pdf
Since you are UK national you would tick box 16 and not box 15.
Your personal allowance should be applied. You do not need to complete a for R43. If the personal allowance has been applied there should be no need to reclaim tax on the basis of rental income alone.
If you require assistance with making a claim for over payment relief for any of the previous four tax year, send me a message directly and I will try to assist.
I wasn't expecting to have to pay any tax, but now wondering if I'm missing something.
Quoting Ray Coman, FCCA, CTA:
You would not be entitled to the UK allowance unless you are a British or EEA National.
Provided having British nationality can be proven by way of a passport you would be entitled to the personal allowance.
You could be getting 20% tax withheld at source because you have not yet joined the non-resident landlords' scheme. The letting agent or accountant should be able to assist with joining the non-resident landlord scheme.
As a national of the UK, you are entitled to a personal allowance.
I am a non - resident British passport holder; dual British/Turkish, living in Turkey with a property I rent out in the UK. Am I entitled to a personal allowance?
Thank you
Your friend will not be entitled to a personal allowance unless he or she is also a British passport holder or an EEA citizen.
Many thanks
I am Chinese with British passport, I moved to South Africa in 2011. I have some rental income from UK. Am I entitled the UK personal allowance? Thanks
Regards