If you are considered resident, but not domiciled in the UK, you can choose to use the remittance basis, instead of the arising basis. The arising basis means you will be taxable on your worldwide income in the UK, in the tax year that it arises. The remittance basis means that any income and, or gains generated outside the UK, while you are resident in the UK and that income and gains is not remitted to the UK, is not taxable in the UK in that tax year. If you later bring that income and, or gains to the UK, it becomes taxable in the tax year it is remitted. You only pay tax on your UK earnings.
For the first 7 years, there is no cost to using the remittance basis, other than losing the personal allowance and being taxed on your UK earnings and, or gains. If you are resident for 7 of the past 9 years, there is a £30000 charge and the loss of personal allowances and annual exempt allowance, as well as being taxed on your UK income and, or gains.
If you are resident for 12 of the past 14 years, there is a £60000 charge and the loss of personal allowances, as well as being taxed on your UK income and, or gains. Where you are resident for 16 years or more, you are deemed resident and can no longer use the remittance basis.
You cannot apply in advance for the remittance basis, only by completing a tax return, can you claim remittance basis for the tax year. A tax return is required if you are declaring any foreign income and, or gains or the remittance basis.
To claim the remittance basis, requires the completion of a Self Assessment tax return for each year that the remittance basis is being used. To do this online, requires the purchase of 3rd party commercial software. Tax returns can also be submitted on paper. The residence supplementary page is SA109.
File your Self Assessment tax return online
Using the arising basis would still require the completion of a Self Assessment tax return to declare your foreign income and, or gains.
You will need to review the following guidance at RDR1 to check your residence status and if you can use the remittance basis. If you are eligible to use the remittance basis, then you would only declare the income remitted to the UK.
There is an exemption for small amounts of foreign income remitted to the UK. The guidance at RDR1 9.11 below provides information on this.
Guidance note for residence, domicile and the remittance basis: RDR1
A person who is resident and domiciled or deemed domiciled, is taxed on the arising basis on their worldwide income generated in that tax year.
Where a foreign tax is paid on this income, a Foreign Tax Credit Relief can be claimed.
Foreign interest and dividends are treated in the same way as UK interest or dividends and are entitled to the appropriate tax relief.