UK Income Tax

Individuals who are resident and ordinarily resident are generally subject to UK income tax on their worldwide income. Residency is based on fact in accordance with the following rules:

• an individual is deemed resident if he or she spends 183 days or more in the country during the tax year;
• if visits to the UK over four consecutive tax years average 91 days or more per year, an individual is regarded as resident from the beginning of the fifth year. However if the visits were planned from inception then the individual may be regarded as resident from the beginning of the visits.

The territorial limitation on an individual’s liability to tax depends on two further factors, those of ordinary residence and domicile. Under UK Law, an individual’s domicile is the country considered to be his/her permanent home, or domicile of origin, even though he/she may be currently resident in another country. Ordinary residence is not defined in the legislation but is generally considered to be based on an individual’s present and future intention as regards his/her presence in the UK. Generally, if individuals are considered resident as a result of repeated visits over four consecutive tax years averaging 91 days or more in each tax year, they are deemed to be ordinarily resident. Resident individuals who are not ordinarily resident are taxable on compensation attributable to UK workdays, wherever paid, and on compensation attributable to overseas workdays, to the extent the income is paid or received in the UK.

Residents who are not domiciled in the UK, employed by a non-UK employer and who perform their duties wholly outside the UK are taxed on compensation from that employment only if it is remitted to the UK.

The UK uses a self assessment system and taxpayers must file their tax return by 31 January following the end of the assessment year. The income tax rates for 2006/2007 are 10% on income up to £2,150, 22% on income between £2,151 and £33,300, and 40% on income in excess of £33,300.