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What is the Personal Allowance for non residents?

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On ‘Gov’ website it says if you live abroad you get a Personal Allowance of £11,850 tax-free UK income each year if you’re a citizen EEA including British passport-holders. I am and I live and work in the EU.

I still have UK bank accounts and UK rental property income, do I Self-Assessment tax returns to declare and pay tax on this income in the UK.

I don’t claim the Personal Allowance because I think that if you claim the Personal Allowance, then all your UK income becomes UK taxable. Is this so?

I receive dividends from private UK companies and from global tracker ‘Accumulation’ funds which will include UK companies but no data exists to separate the UK dividends from the mix.

Would taking up the Personal Allowance create a UK tax liability on UK dividend income?

Also do non-residents pay tax in the UK on money they withdraw from a SIPP if they are not resident for tax in the UK?
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Comments

  • The only way to find out if you are better of claiming a personal allowance or being taxed as you currently are ignoring your disregarded income (UK dividends, interest and state pension) (s811 ITA 2007) is by doing two calculations every year to see which one works out best.

    If you receive a lot of dividends then you are probably making the right decision, but if your dividends are below the personal allowance + dividend allowance you are probably making the wrong decision.

    As non-UK resident you will only be taxed on your UK income - so if the SIPP is a UK pension then it will be taxable in the UK.

    It is probably a good idea to get up to speed with the rules regarding temporary absences abroad as well, or get an accountant that can advise on overseas matters.
  • 00ec25
    00ec25 Posts: 9,123 Forumite
    1,000 Posts Combo Breaker
    hamptons wrote: »
    I still have UK bank accounts and UK rental property income, do I Self-Assessment tax returns to declare and pay tax on this income in the UK.

    ....
    I don’t claim the Personal Allowance because I think that if you claim the Personal Allowance, then all your UK income becomes UK taxable. Is this so?
    totally untrue. The eligibility and existence of a personal allowance has nothing at all to do with whether you are or not liable for tax

    you have UK income, that is what makes you liable to UK tax, whether you claim the allowance or not. If you do claim then read:

    https://www.gov.uk/tax-uk-income-live-abroad/personal-allowance

    if you do not claim it then presumably you are paying UK tax since you have nothing to offset against your rental profits and therefore must have a taxable value upon which you need to pay tax (or are you committing tax fraud by not declaring your UK income ?)
  • 00ec25
    Why are you making accusations of tax fraud? I said I declare my rental income and bank interest and complete a Self Assessment tax return! I also referred to the Gov website you give in your reply.

    My question did not say that the oersonal allowance is in any way rrlated to whether or not you owe tax. My question was whether utilising the personal allowance makes all UK income taxable in the UK i.e. removes any exemptions?

    I did not understand you comments at all, but maybe you can re-phrase your points, or maybe soneone else can kindly help.

    Sibbers123
    Thanks for your answer too. When you ask if the SIPP is a UK pension, I don't know how this is defined. Aren't all SIPPs UK pension vehicles? My SIPP is some funds I pick myself like I imagine mist people who have a SIPP.

    Thanks.
  • 00ec25
    00ec25 Posts: 9,123 Forumite
    1,000 Posts Combo Breaker
    edited 16 October 2018 at 1:01AM
    hamptons wrote: »
    I did not understand you comments at all, but maybe you can re-phrase your points, or maybe soneone else can kindly help..
    likewise. Your English is disjointed

    "do I Self-Assessment " is a question which means do I (need) to do a tax return. It does not mean I do a tax return.
    Therefore I interpreted your wording exactly how you wrote it, as a question which implies you do not do a tax return already, and thus your UK income has not been declared - "do I" is a question, not a statement of what you do
    My question was whether utilising the personal allowance makes all UK income taxable in the UK i.e. removes any exemptions?
    clearly you do not understand the meaning of the word liability.
    Liable in the context of tax means "something is taxable"
    if you are not liable, then there is no tax. I answered your question, you failed to understand it. You have UK income, you are liable for tax. That has no impact at all on what allowances you do or do not claim.
  • hamptons
    hamptons Posts: 25 Forumite
    00ec25
    OK I see why you went off that way. The "do I" and a few odd characters are fat finger typos as I am traveling and the mobile site does not let me edit on my android.
    To be clear as per my follow up I do declare and pay tax on rent and bank interest. But when filing SA I choose not to tick the box claiming the PA. I forgo it because I am under impression (cannot find source now hence posting question here) that non residents who choose to claim UK PA then have to pay tax on all their income in the UK. At moment dividend income is not taxed in UK nor are any (non property) capital gains I make.
    So my question is simply is it true that non resident claiming PA then forgoes the right to not to be taxed on all income as if in UK ?
  • hamptons wrote: »
    So my question is simply is it true that non resident claiming PA then forgoes the right to not to be taxed on all income as if in UK ?

    No it's not true. If you're not resident in the UK, you don't pay UK tax on non-UK-sourced income, whether or not you claim the personal allowance.
  • hamptons
    hamptons Posts: 25 Forumite
    Thank you LondonInvestor!

    A follow up question. On the Gov website page I refer to in my opening post, and also linked in 00ec25's post, it does not speifically say if non-residents pay UK tax on dividend income from UK companies. I get dividends from a private Limited company and have some fund investments that are global trackers which will include a mix of UK companies (but no data identifying the amount of dividends from UK holdings).So are UK dividends taxable income in the UK for non residents?

    The Gov page also says non-resident's normally pay tax in the UK on UK Pensions. I think State Pension will be UK taxed, but what about a SIPP (comprising tracker funds)? When the time comes and I start making withdrawals will I have to tax in the UK if I am non resident?
  • londoninvestor
    londoninvestor Posts: 1,351 Forumite
    Sixth Anniversary Combo Breaker
    edited 16 October 2018 at 9:41PM
    hamptons wrote: »
    Thank you LondonInvestor!

    A follow up question. On the Gov website page I refer to in my opening post, and also linked in 00ec25's post, it does not speifically say if non-residents pay UK tax on dividend income from UK companies. I get dividends from a private Limited company and have some fund investments that are global trackers which will include a mix of UK companies (but no data identifying the amount of dividends from UK holdings).So are UK dividends taxable income in the UK for non residents?

    EDIT as I was wrong on this part in the original:

    This is where it does start to get complicated if you claim the Personal Allowance. If you do, then some UK-sourced investment income does become taxable that wouldn't have been taxable if you didn't claim the PA. What that means is defined here, but for you, it sounds like basically it's savings interest and dividends. (Your UK rental income is taxable whether or not you claim the PA.)

    Note that dividends from funds would be UK-taxable if and only if the funds are UK-domiciled - it doesn't matter where the companies are that it invests in.
    hamptons wrote: »
    The Gov page also says non-resident's normally pay tax in the UK on UK Pensions. I think State Pension will be UK taxed, but what about a SIPP (comprising tracker funds)? When the time comes and I start making withdrawals will I have to tax in the UK if I am non resident?

    You've skipped over an important word on the gov.uk page :)
    gov.uk wrote:
    If you’re not a UK resident, you don’t usually pay UK tax on your pension. But you might have to pay tax in the country you live in. There are a few exceptions - for example, UK civil service pensions will always be taxed in the UK.

    However, at that point, if you claimed the PA, you would be taxed on the state pension because it's "disregarded income". So it might be a harder decision to make once you reach state pension age.

    Also, this page doesn't really seem to cover the complications of SIPPs - in that case I believe whether it's taxed as UK income depends on the terms of any double tax treaty between the UK and your country of residence.
  • By the way, as some overall context, there was a proposal in 2014 to restrict non-residents' use of the Personal Allowance. (link to original consultation)

    That was never taken forward, but perhaps it's that that left you with the impression that claiming your PA would cause you to be taxed on all your income as if you were a resident.
  • hamptons
    hamptons Posts: 25 Forumite
    LondonInvestor thank you for taking the time. Very helpful.

    "but for you, it sounds like basically it's savings interest and dividends"

    Also directors' dividends from shareholding of a private UK Limited company, so is that taxed in the UK if the PA is claimed?

    Dividends from UK companies is listed as a "disregarded income" but disregarded from what isn't clear. UK company dividends is my biggest income so that is the main criteria for making my choice on using the PA or not.
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