UK tax for partial residents

Question

During the 2019/2020 tax year, I worked as a full-time employee in the UK for only 3 months and left the country 1 month after that, in August.

I then moved back home in Romania and continued to work as a freelancer. I also had some capital gains in the meantime. It seems weird to me to report these earnings in the UK, so what is the best way to handle my situation? Can I pay tax only on the money that I earned while I was living in the UK, or do I have to declare myself a tax resident for the whole year?

Answer 1

The short answer is that I am a UK tax resident for 2019-2020. I pass the so-called "sufficient ties" test, but oh boy, there are so many nuances to this that it makes my brain melt. Buckle up!

Tests

You figure out whether you're a tax resident or not by following this very specific algorithm:

1. The 183 days Rule

Did you stay more than 183 days in the UK? Then YES, you are a UK tax resident for that tax year. If not, go to the next step.

2. Automatic Overseas Tests

If you pass any of the automatic overseas tests, then NO, you're not a UK tax resident. Don't go to the next step. Otherwise, do it.

3. Automatic UK Tests

If you pass any of the automatic UK tests, then YES you are a UK tax resident. If not, go to the next step.

4. Sufficient Ties Test

Depending on how many days you spent in the UK, you will be a tax resident if you have more than some specific number of "ties":

• A family tie
• An accommodation tie
• A work tie
• 90 day tie
• Country tie

Whether you have a tie or not depends on a lot of factors. Check out the above links to determine your status for each tie. Then, verify if you have at least the minimum number of ties corresponding to the number of days you stayed in the UK:

If you do, YES, you are tax resident. Otherwise, you are NOT.

My Own Status

Given that:

1. I lived in the UK for 117 days (between 6 April 2019 and 1 August 2019)
2. I have an accommodation tie (I rented an apartment for more than 90 continuous days)
3. I have a work tie (I worked more than 40 days more than 3 hours on each day)
4. I have a 90 day tie (I spent more than 90 days in the UK in either or both of the previous 2 tax years)

I am indeed a UK tax resident for 2019-2020.

Split Year

If you really want to, you can declare a tax year as a "split year" if you lived abroad for a while. My understanding is that this would help you not get taxed twice on your foreign income. However, I don't think the hassle is worth it, unless you roll big money.

Update 16 April 2020

What I originally said in this section is not true. It is not an option that you have, you can't choose whether you want the split-year treatment or not, as per RDMR12010:

If they meet all the conditions of one of the cases of split year it will be applied to them. The individual does not have a choice whether split year treatment applies.

Sources

I excluded many details for the sake of brevity. If you seek a deep understanding of the subject, or your case is fantastically complicated, check out the official guidance provided by HMRC:

• Tax on foreign income: UK Residence
• RDR3: Statutory Residence Test (SRT) notes
• RDRM11520: The SRT: the number of ties
• RDRM12010: The SRT: What is a split year

And these articles on litrg.org.uk:

• What happens when I leave the UK?
• What is a split-year treatment

YMMV

Don't assume that if this was the case for me, you'll also be tax resident if you lived for a similar number of days in the UK. Your mileage may vary, due to various factors:

1. What type of job you had (did it involve cross-border trips, or not?)
2. What kind of accommodation you had, were you a landlord, a tenant, etc.
3. The official guidance set by HMRC might change in the future