Do UK residents pay tax on overseas income and gains?

If you're a UK tax resident, don't assume your overseas income and gains are outside the UK tax net just because they're overseas.

Is overseas income taxable in the UK?

UK residents are taxed on their worldwide income and gains as they arise. It doesn't matter if the money stays in a foreign bank account and never touches the UK. That can include:

1. Rental income from an overseas property
2. Dividends and interest from foreign investments or companies
3. Gains from selling overseas property or shares
4. Income from a business or work carried out abroad

The gov.uk guide to tax on foreign income says residents normally pay UK tax on all their income, whether it is from the UK or abroad.

Is there an exception for people new to the UK?

There is one exception.

If you've just moved to the UK after at least 10 consecutive tax years of non-residence, you may be able to claim a 4-year relief on your foreign income and gains. After that, everything is taxable here.

HMRC's guidance on the 4-year foreign income and gains regime says you must be within your first 4 years as a UK tax resident following at least a 10-year period as a non-UK tax resident. It is available for a maximum of 4 consecutive years from when your UK residence started, and unused years cannot be carried over.

Do you pay tax twice if you've already paid abroad?

And paying tax in another country doesn't mean you're off the hook in the UK. You'll usually still need to report it, though relief for the foreign tax paid is often available, so you shouldn't end up taxed twice on the same income.

The gov.uk guide on being taxed twice says you can usually claim Foreign Tax Credit Relief when you report your overseas income in your tax return. How much relief you get depends on the UK's double-taxation agreement with the other country, and you may not get back the full amount of foreign tax you paid.

What if you don't declare it?

Get it wrong, and you could face a bill for tax you didn't know you owed, plus interest and penalties for not declaring it.

If you have income or gains overseas, check how they should be reported before your next Self Assessment return.

What goes on the return is covered in what do you need to file your Self Assessment tax return. Whether you are UK resident in the first place is in are you UK tax resident if you spend 183 days in the UK, and our international tax page covers residence more broadly.

How overseas income is taxed depends on your residence, the type of income and the country it comes from, so this is general information rather than advice on your position. If you have income or gains abroad, talk to us.