Understanding your tax residence status is fundamental, as it dictates which part of your worldwide income and gains you must pay UK tax on. The rules governing this are known as the Statutory Residence Test (SRT).
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The SRT is a complex set of rules, but it is structured in a logical way to determine your status for a given tax year (which runs from 6 April to 5 April).
The flowchart below provides a high-level overview of the test, which we will then break down in more detail.
The Statutory Residence Test (SRT) Flowchart
The test is applied in the following order:
1. The Automatic Overseas Tests
If you meet any of the following four conditions, you are automatically a non-UK resident for that tax year.
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The First Test:Â You were resident in the UK for one or more of the previous three tax years, and you spend fewer than 16 days in the UK in the current tax year.
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The Second Test: You were resident in the UK for none of the previous three tax years, and you spend fewer than 46 days in the UK in the current tax year.
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The Third Test: You work full-time overseas over the tax year (averaging 35 hours per week), with no significant breaks, and you spend fewer than 91 days in the UK in the tax year. Crucially, you must have fewer than 31 days spent working in the UK.
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The Fourth Test: You died in the tax year. Specific rules apply if you were a non-resident the previous year and spent fewer than 46 days in the UK before death.
2. The Automatic UK Tests
If you did not meet any Automatic Overseas tests, then check if you meet any of these Automatic UK tests. If you do, you are automatically a UK resident.
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The First Test: You spend 183 days or more in the UK in the tax year.
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The Second Test:Â You had only one home, that home was in the UK, and you lived in it for at least 30 days in the tax year.
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The Third Test:Â You worked full-time in the UK for any period of 365 days, with no significant break, and more than 75% of the total work days in that period were in the UK.
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3. The Sufficient Ties Test
If you are not automatically overseas or a UK resident, you move to the third and most complex stage: the Sufficient Ties Test. This involves two steps:
Step 1: Determine Your Connection Factors to the UK
There are five potential “ties”:
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Family Tie:Â A spouse, civil partner, or minor children are resident in the UK.
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Accommodation Tie:Â You have a place to live in the UK that is available to you for a continuous period of at least 91 days, and you spend at least one night there in the tax year.
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Work Tie:Â You work in the UK for at least 40 days in the tax year (a “work day” is 3+ hours of work).
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90-Day Tie:Â You spent more than 90 days in the UK in either of the previous two tax years.
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Country Tie:Â You spent more time in the UK than in any other single country in the tax year.
Step 2: Compare Your UK Days to Your Ties
The number of connection factors (“ties”) you have is compared against the number of days you spent in the UK during the tax year. Your UK residence status in previous years also affects the thresholds.
The table below shows how many ties are “sufficient” to make you a UK resident based on your days spent in the UK and your residency in the previous years. UK Tax Residence Rules.
| Days spent in the UK in the tax year | If you were NOT a UK resident in any of the previous 3 tax years | If you were a UK resident in ONE or MORE of the previous 3 tax years |
|---|---|---|
| Fewer than 16 days | Always non-resident (Automatic Overseas Test) | Always non-resident (Automatic Overseas Test) |
| 16 to 45 days | At least 4 ties are needed to be a resident | Always non-resident |
| 46 to 90 days | At least 3 ties are needed to be a resident | At least 4 ties are needed to be a resident |
| 91 to 120 days | At least 2 ties are needed to be a resident | At least 3 ties are needed to be a resident |
| 121 to 182 days | At least 1 tie is needed to be a resident | At least 2 ties are needed to be a resident |
| 183 days or more | Always resident (Automatic UK Test) | Always resident (Automatic UK Test) |
Example: If you were a UK resident last year and spent 100 days in the UK this year, you would need to have at least 3 of the 5 connection factors to be considered a UK resident this year.
Why Is This So Important?
Your tax residence status determines the extent of your liability to UK tax:
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UK Residents are generally liable to UK tax on their worldwide income and gains.
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Non-UK Residents are generally only liable to UK tax on income arising from a UK source (e.g., UK property or work done in the UK).
Conclusion
The Statutory Residence Test is intricate, and small changes in the number of days you spend in the UK or your personal circumstances can alter your status. Getting it wrong can lead to unexpected tax liabilities and penalties.
This guide is for general information only. You should seek professional advice tailored to your specific circumstances to determine your UK tax residence status accurately.
Article Source:Â Buzzacott – How Is My UK Tax Residence Status Determined?
