Tax implication of moving savings from abroad to the UK

kaboo

Dear MSE members,

I am need of some advice to understand if any tax is to be paid on moving my savings from my account in my home country to the UK.

Some background: Me and my wife are foreign nationals and have been living in the UK for the last ~10 years. We now have ILR (settled status). We both have been employed for several years and have paid income tax through the PAYE route. We have some savings in our bank accounts back in our home country. These savings were accumulated over the last 15 years or so. There was some money to start with, then after moving to the UK in the early years we made few transfers to keep some money aside in our home country (dont know why just felt like a better idea to putting your peanuts in the banking system you know). Then we would often take money in cash or again transfer to our accounts whenever we would visit our family - not much like 1k or so just to be able to support our trip there. When we would not be able to spend all of it, the remaining money would be deposited in these accounts before coming back to UK. We also have a large family and often receive gifts for big life events like marriage, child's birth, or important festivals - again they are not very big but since we live in the UK our family gives us money instead of actual gift items that we cannot bring with us. 

So over the span of 10-15 years these savings have accumulated to ~7k for each of us (my wife and me). We are now planning to buy our first house, therefore trying to gather all of our money in one place to make a deposit.   

The question: Would we have to declare this to HMRC when we move this money here? Would there be any tax applicable on these and how much? I can only think of income tax on the small amounts of interest earned while this money has been sitting there! But since I am not of the UK domicile then I only need to pay tax on the income/gain I move to the UK - so can we move total savings minus the interest and avoid the tax?

Does this reasoning sound correct? Anything else that I am missing? 
Thank you, cheers

Jeremy535897

You will become deemed domiciled once you are resident here for 15 out of the last 20 years.
You may already have acquired a domicile of choice here.
You may not want to use the remittance basis at all, particularly if each of you have non-UK interest of under £100 a year.
You would have to be more sophisticated than simply leaving an amount in the overseas bank account equivalent to the interest accrued to avoid being taxed on it.
See https://www.gov.uk/government/publications/residence-domicile-and-remittance-basis-rules-uk-tax-liability/guidance-note-for-residence-domicile-and-the-remittance-basis-rdr1

kaboo

Jeremy535897 said:

You will become deemed domiciled once you are resident here for 15 out of the last 20 years.
You may already have acquired a domicile of choice here.
You may not want to use the remittance basis at all, particularly if each of you have non-UK interest of under £100 a year.
You would have to be more sophisticated than simply leaving an amount in the overseas bank account equivalent to the interest accrued to avoid being taxed on it.
See https://www.gov.uk/government/publications/residence-domicile-and-remittance-basis-rules-uk-tax-liability/guidance-note-for-residence-domicile-and-the-remittance-basis-rdr1

I have lived here for 10 years 4 months in the last 20 years so far. So guessing that not yet deemed domiciled? And following the funky domicile flowcharts on the gov website it seems I would be non-UK domicile. But it does not sound simple at all, for example proving if I want to live or not live in UK permanently (as of now I dont), having/not having ties with my home country (I would like to believe that I do have ties). 
And as you rightly pointed out, doesn't sound like a good idea to use remittance basis for gains of few 100s of pounds. I am actually happy to pay income tax on the interest I have gained, its going to 10s of quids - is that sufficient to do? Estimate from our accounts statements how much interest we have made and declare that in self assessment form? I hope we dont have to pay tax on all the amount transferred. 

I know its not a tax question, but when we use this money to supplement deposit for house purchase - will the reasoning satisfy bank/solicitor/lender that this money is coming from our own account and was accumulated over the years?

Jeremy535897

There is this section that may be relevant in RDR1:

"Less than £2,000 unremitted foreign income and gains arising or accruing in the tax year

9.15 If your unremitted foreign income and gains arising or accruing in the tax year are less than £2,000, you can use the remittance basis without having to complete a Self Assessment tax return. In this case you will:

• be automatically taxed on the remittance basis (unless the rules at paragraph 9.11 apply)
• retain your entitlement to UK Personal Tax Allowances and to the annual exempt amount for Capital Gains Tax
• not have to pay the Remittance Basis Charge (RBC) if you’re a long-term UK resident

9.16 If you do not meet the criteria in paragraphs 9.11 and 9.12, but:

• you’ve less than £2,000 unremitted foreign income and gains
• you choose to be taxed on the arising basis

you should complete a Self Assessment tax return to declare your foreign income and gains. The Self Assessment guidance on our website gives more detail."

9.11 is the £100 exemption. What the above means is that you don't have to complete a self assessment return to claim the remittance basis applies, but you will have to complete one if you actually remit taxable foreign income or gains to the UK.

I imagine that in a total figure of £7,000, the interest will be well under £2,000. Assuming you have no other foreign income or gains, you just declare the amount that is interest, rather than the whole amount remitted. I don't think the personal savings allowance applies in these circumstances. See RDR1 again:

"Mixed funds

9.44 A mixed fund is an overseas fund of money or other property which contains, or consists of:

• more than one type of income or gains
• income or gains from more than one tax year

9.45 A typical example of a mixed fund would be a bank account in which you hold different types of income, such as bank interest, dividends and earnings, or gains. Another example of a mixed fund is an asset you’ve purchased using a mixture of income, gains and capital.

9.46 You do not have a mixed fund if you keep separate accounts for each different form of income, gains and capital from each tax year.

9.47 If you use the remittance basis and you make a remittance from a mixed fund, income and gains are regarded as remitted to the UK in a specified order:

• employment income (including UK employment income)
• untaxed foreign income and gains are regarded as remitted before taxed foreign income and gains and capital
• income and gains and capital from the current year are regarded as remitted before income and gains and capital from each previous year in turn

9.48 There is more information on mixed funds in RDRM35220. If the mixed fund rules apply to your remittances you may wish to consult a professional adviser."

Assuming the solicitor enquires as to the source of the funds, have bank statements and any other evidence ready.

kaboo

Many thanks Jeremy.
So if I understand correctly, if the gain money is in the home country (foreign to UK) and less than £2k - its all ok nothing needs to be done. If we want to move the gain to the UK - we declare the interest in self assessment form. Do we declare all the interest that has been earned over all the years we have been residents in the UK? At which rate would that be taxed at?

I dont think the money in our account would come under mixed funds because we have no income in our home country, only one type of gain that is the interest. 

Jeremy535897

If the interest arising per year is under £2,000, you only declare interest when remitted here. If you have capital and interest (arising since the account was opened) in the account (say capital £6,000, interest £1,000), and you remit £500, that is all treated as interest. If you remit £1,500, only £1,000 is treated as interest, because that's all the interest there is.