Income from foreign NRE account

Urgent help needed.I am stuck on the following. How much offshore income did you not tell HMRC about the tax year ending 2023. What is the amount of chargeable transfers you did not tell HMRC What is the amount of gains you did not tell HMRC How much unpaid tax is due How much interest is due .Thanks.

I needed clarification on Advance Tax provision. If in one year I have income in India form Capital Gain which is not recurring income or in next year there would not be such income, still I need to pay advance tax in Uk based on my earlier income?

Hi ukcitizen,

Yes, the interest will still be liable to taxation in the UK. If tax has been paid on the interest in India, you can claim tax relief in the UK but the amount depends on whate rate of tax is applied here.

Thank you.

Hi ukcitizen,

Yes, this needs to be declared in the UK. You can see guidance here:

Tax on foreign income

Thank you.

Hi,

Yes, the money needs to be declared in sterling. You can see more information here:

Exchange rates from HMRC in CSV and XML format

Thank you.  

Hi suresh,

Offshore income, is any income or capital gains, arising outside the UK. As a domciled UK resident, you are taxable on your world-wide income. Any foreign income or gains, chargeable transfers, should be declared on a Self Assessment Tax Return. You will need to convert the undeclared income into pounds sterling.  

You can check interest and penalties at:

HMRC interest rates for late and early payments

Thank you.

Hi HMRC, On your reply to ukcitizen's query on the loss on the total value of savings due to change in currency exchange rates, can I enquire, if by 'yes it will be liable to taxation in the UK', you simply mean that the gain OR loss must be declared in the UK? Or do you mean that one must pay income tax in the UK in GBP, on the interest earned in INR, by converting it to GBP, even if the total value of the principal + interest in GBP from the start of the tax year to the end of the tax year has fallen due to the change in the currency exchange rate from the start of the tax year till the end of the tax year ? For example (all figures for illustrative purposes): At the start of the tax year my deposit in the Indian account was say INR 80,000, which as per the GBP:INR exchange rate at the time was say GBP 1000 (1 GBP: INR 80); and at the end of the tax year, the deposit plus interest is INR 84,000 (5% per annum interest), but due to the rise in GBP against INR (ie change in exchange rate to 1 GBP: 100 INR), this total (principle + interest) is now only equal to GBP 840. I have made a loss therefore of £160 on the total value of my savings, if assessing it in GBP from start till end of the tax year. In other words, there is no net gain. Are you saying that despite making this loss, I must pay tax on the interest received which in this example was INR 4000, by converting it to GBP and I should ignore the fact that I have actually made a loss? Thanks.

Hi Pleasehelp Me,

To confirm you are correct.
You are liable to tax on the actual interest received based on the conversion to sterling.
Please see guidance here:
Tax on foreign income
Thank you. 

Hi HMRC Admin 25, Thanks for your response to my query. Can I ask you to provide the reason for your answer please, with references? The link you have provided is a very wide ranging general page on tax on foreign income. But having gone through it all, it doesn't provide any reasons for your answer to my question. Fundamentally, this seems illogical and would be open to reasonable challenge since you are saying that regadless of making losses, a UK resident, whose gains will rightly be judged in pound sterling in each financial year no matter where those gains are made, must pay an 'income tax', even for the years where he has made a loss in the financial year when considered in pound sterling. Given the position doesn't seem logical, there must be a reason for your position, that is clearly written down somewhere in a legal instrument, HMRC written guidance or have a legal precedent that one can refer to. Can I please request you to provide specific reasons for your reply, with references to applicable specific guidance/legal instruments. The applicable legal text or HMRC guidance must clearly illutrate applicable taxation rules for the specific case above where one has made a loss in the financial year due to currency rates changing, despite earning interest in a foreign currency. To me, an interest payment by itself cannot be seen as a gain, if in the financial year, the UK resident has made a net loss when his overall saving (principle + interest) is consdiered in pound sterling. If you cannot provide a reason together with references backing your reasoning, then can you please let me know how I can formally raise this query with HMRC in a way in which I can get a response? I have asked the same question by letter to HMRC several times, but the replies never include any answers to my queries, just links to very general broad based webpages like the one you have provided. I know this sounds like quite a strong message - it isn't intended in a negative sense. It's just that it has been very difficult getting any information from HMRC through other channels, and I feel strongly that any claims to taxation must be backed by a clear rule. Many thanks for your help.

Please advise on disclosure of foreign income abroad. If I had £100k (1cr in rupees ) saving in a fixed rate bond at 10%I would make £10k (10 lacs rupees) in interest and pay 20% tax of £4K (4lacs in rupees ) If I pay the capital gains tax in uk . My fixed rate bond of £107k will auto renew the following year with a new interest rate say again 10% so capital gain will be of £107K- £4k = £103K because I have already paid the tax in uk ! Also what Happens to the PSA of £1000 .Also exchange rates have changed.

 Hi Pleasehelp Me,


You are liable to tax on the interest that has been generated on the account.

Whilst he captital itself has fluctuated due to conversions rate, you have received a benefit by way of earning interest in the account and this  is taxable income.

Whether tax is actually due or not is dpendant on the amount received and your overall level of income.

Thank you.
 

Hi Suresh Patel,

Capital Gains Tax arises from the disposal of assets, such as property or shares.  

Whereas, interest from savings accounts attract Income Tax.

If you are resident in the UK and use the arising basis, you would need to declare the gross interest and tax deducted, in pounds sterling, in the foreign section of an online Self Assessment tax return or the supplementary page SA106, when submitting the SA100 tax return. To avoid double taxation, you can claim a Foreign Tax Credit Relief against the foreign tax paid. You can see more information here:

Self Assessment: Foreign (SA106)

Thank you.

Hi HMRC team, I’ve declared my worldwide disclosure upon receiving a letter from hmrc that I need to pay tax on interest earned on my NRE Indian account deposits ( which I wasn’t aware of to declare in UK until then). So my accountant has filed it from 2015 to 2018 with penalties in 2019 and hasn’t claimed 15% credits as my accountant may not be aware of this I believe, and from 2019 I’ve been declaring foreign income in my self assessments and my NRE account is opened less than 10 years ago. So can I claim 15% credits for all those previous years from 2015 to till date? And also whether I can get back any amount from penalties I paid by adjusting 15% credits? Please advise. Thanks San

Hi santhosh Kk,

Late filing and late payment penalties, can only be appealed in writing -

Self Assessment: appeal against penalties for late filing and late payment

You cannot add up all of the credit together and claim in one tax return.  You need to claim each year in each tax.  

The tax returns for 2021 to 2022 and 2022 to 2023 can be amended to claim the relief.  For tax year s2019 to 2020 & 2020 to 2021, you will need to submit in writing, an overpayment relief claim.  

The guidance on submitting an OPR claim, can be found here - SACM12150 - Overpayment relief: Form of claims

OPR claims in the wrong format will be rejected.

Thank you.

Hi HMRC, I have a question on declaration of NRE interest rate. Is the tax spare provided from the date of first account opening or first deduction made from tax? The double taxation treaty says "10 fiscal years after the deduction in computing taxable income or exemption from, or reduction of, Indian tax is first granted to the resident of the United Kingdom or to the resident of India, as the case may be, in respect of that source." I haven't claimed 15% tax spare previously, based on the above if I claim it on 2022-23 tax return, will the 10 year countdown start from 2022-23?

Hi Gaurav

Uk residents, who are also domiciled in the UK, are taxable on their world-wide income.  

This includes interest arising from NRE accounts, even if the interest is not taxable in India.  To overcome this, the UK / India DTA allows for a notional tax credit, known as 'tax sparing relief'.  

This relief only lasts for 10 years, from the time the reduction was granted. The 10 year relief period would commence from the tax year the account was first created.  

The fact that you have not claimed the relief does not alter the date that the relief is first allowed.  

Thank you.

Hello HMRC. I didn't know I had to declare my savings account interest in the UK as I was filling my tax returns in India. I have been living in the UK since Dec 2017. What do I need to do to correct this? I have never filled SA as I am employed and taxes are deducted before salary is paid. I want to be compliant and do not to be seen as someone who is evading taxes. I would be grateful for your advice. I look forward to your help. Thank you. Kind regards.

Hi,
Please refer to:
Tax on foreign income
Thank you.

Hello HMRC - I have another question on NRE interest income in UK tax return. You mentioned that "The 10 year relief period would commence from the tax year the account was first created.". My current NRE account is more than 10 years old. Does this mean that if I open a new NRE account now, the countdown of 10 year would start on the new account from this year and therefore, any income in it would be eligible for 15% tax relief?

Hi Gaurav

If you open a new account, the 10 year tax ‘spared’ relief would commence from the date the new account is opened.

Thank you