Tax Glossary

Remittance Basis

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Last updated on:
March 17, 2024

The remittance basis of taxation is an option available to UK residents who are not domiciled in the UK, allowing them to pay UK tax only on their UK income and gains, and on the foreign income and gains they bring into the UK. If you opt for the remittance basis, you do not pay UK tax on your foreign income and gains that you keep outside the UK.

However, choosing the remittance basis has significant implications:

  1. Loss of Tax-Free Allowances: You will lose your personal allowance for Income Tax and your annual exempt amount for Capital Gains Tax.
  2. Annual Charge: After you have been a UK resident for a certain number of years, you'll have to pay an annual charge to use the remittance basis. This charge is £30,000 if you've been resident in 7 of the previous 9 tax years, and £60,000 if you've been resident in 12 of the previous 14 tax years.

It's crucial to weigh the benefits of the remittance basis against these costs. While the remittance basis can reduce your UK tax liability on foreign income and gains, the loss of tax-free allowances and the potential annual charge can offset these benefits.

It's also important to keep detailed records of your foreign income and gains, as well as any amounts you bring into the UK if you're using the remittance basis, to ensure compliance with UK tax laws.

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