Who It's For
This is primarily for those who are resident in the UK but are not 'domiciled' here. Domicile is a legal concept. It generally refers to the country that a person counts their permanent home or has a significant connection with.
Choice
If you're eligible, you can choose to use the remittance basis each tax year. This choice is fundamental . It establishes how you're taxed.
Foreign Earnings and Gains
Normally, if you reside in the UK, you are taxed on all your income and gains, whether they come from within the UK or from abroad. But if you use the remittance basis:
- Subject to tax only If Brought to the UK: You pay on your foreign income and gains only if you bring them ('remit' them) into the UK.
- Not Taxed If Kept Abroad: If you keep your foreign income and gains outside the UK, you're not taxed on them.
UK Income Tax/Gains
You still pay your tax liability on any income and gains you make in the UK.
Trade-Off
While the remittance basis can save you from paying UK tax on foreign income or gains that you keep outside the UK, there can be downsides:
- Loss of Tax-Free Allowances: You might lose some of these.
- Remittance Basis charge: After you've been in the UK for a certain number of years, you might have to pay a yearly charge to keep using it.
Reporting and Records
You need to keep good records and report correctly on your tax return if you decide to use the remittance basis.