Personal Income Tax in the United Kingdom

Find out about the payment of taxes in the United Kingdom...

Income Tax

UK income tax is chargeable on any UK source income received by an individual in the UK if they are UK resident. Foreign income is subject to UK tax where the individual is either:

  1. domiciled in the UK;
  2. not domiciled in the UK but the income is remitted to the UK; or
  3. not domiciled in the UK but the individual chooses to be taxed on the arising basis of taxation.

For the 2013/14 tax year, the starting rate of income tax is 20 percent for the first taxable slice of income up to £32,010, 40 percent between £32,011 and £150,000 and 45 percent over £150,000. A table is on the tax tables page with more detail on UK personal tax rates.

Basis of Taxation

For individuals the UK tax year runs from 6 April in one year and ends on 5 April in the following year.

The UK operates a system of independent taxation.

In determining an individual’s liability to UK tax it is first necessary to consider their residence and domicile status.

Residence: Statutory Residence Test

The Statutory Residence Test (“SRT”) came into force from 6 April 2013.

The SRT is designed to provide straightforward tests that enable individuals to be clear on when they will become a UK resident and what actions are required for them to break UK residence.

Broadly the SRT looks at a person’s history of residence in the UK and level of connectivity with the UK.

Residence: Domicile

Domicile is a general law concept and is distinct from nationality and residence. In very broad terms, an individual is regarded as domiciled in the country they consider their ‘home country’ (often the country where they have their long term permanent home).

UK Tax Position

If an individual is UK resident but non-UK domiciled, they can be taxed in the UK either on the ‘remittance basis’ or on the ‘arising basis’.

An individual can decide each year (after the end of the relevant tax year) whether to be assessed on the remittance basis or the arising basis.

Arising basis

If no election is made for the remittance basis to apply, the individual will be assessed on their worldwide income and gains as they arise.

Remittance basis

If an individual elects to be taxed on the remittance basis, they will be subject to UK tax on:

  • UK source income and the proceeds from gains on assets situated in the UK; and
  • non-UK source income and the proceeds from gains on assets situated outside the UK only to the extent that the income or proceeds are remitted to or used in the UK.

The remittance rules are fairly complex, but in simple terms income or gains are remitted to the UK when the funds are transferred into the UK or used to pay for goods or services in the UK.

It is necessary to elect for the remittance basis to apply. This election must be made on an annual basis on the individual’s UK tax return.

Information supplied by PriceWaterhouseCoopers PWC, 1 Embankment Place, London, WC2N 6RH Contact: Mike Curran | Tel: 0207 213 8190 | e-mail or Dipan Shah | Tel: 0207 804 0685 | e-mail