Tax on overseas savings
Discussion
Hypothetically speaking, if someone were to open a savings account in a non-EU country, sell a high value item to someone in that country who paid cash into said account, would the account holder have to pay UK tax on the interest earned?
Many foreign banks allow people to open a savings account from their office in London but you cannot make a withdrawal without first activating the account overseas.
Many foreign banks allow people to open a savings account from their office in London but you cannot make a withdrawal without first activating the account overseas.
Simple answer is yes.
However, there are some interesting points to bear in mind.
If the other country has a double taxation agreement with the UK then you get a credit for any tax paid in that other country. For example you would pay 10% non resident witholding tax if you had an account in New Zealand. You wouldn't have to pay the full tax again if you declared the amount in the UK (and yes you are supposed to declare it each year).
Many years ago I had an account in the Isle of Man that didn't actually pay interest until the account was closed - hence nothing to declare each year. And if course you should happen to emigrate and then close the account, not a problem.
However, there are some interesting points to bear in mind.
If the other country has a double taxation agreement with the UK then you get a credit for any tax paid in that other country. For example you would pay 10% non resident witholding tax if you had an account in New Zealand. You wouldn't have to pay the full tax again if you declared the amount in the UK (and yes you are supposed to declare it each year).
Many years ago I had an account in the Isle of Man that didn't actually pay interest until the account was closed - hence nothing to declare each year. And if course you should happen to emigrate and then close the account, not a problem.
There are also different rules for those who are UK Tax Resident AND UK Domicile and those who are UK Tax Resident but NOT UK Domicile.
A UK tax resident/domiciled person is liable to UK tax on their WORLDWIDE income. They will pay whatever tax is legally required on any foreign derived income. Sales of foreign located assets will attract UK Capital Gains Tax and foreign rental income or foreign interest received will be subject to UK Income Tax.
It does not matter if the money generated abroad is NOT brought back into the UK.
A non-domiciled UK tax resident will only be taxed in the UK on their foreign derived income if they REMIT this income into the UK.
As outlined in the previous post, in both cases, credit will be given for any foreign tax already paid on this foreign income PROVIDED the UK has a live Double Taxation Agreement (DTA) with the foreign country/countries involved.
The rules are the same whether the foreign country is inside or outside the EU.
A UK tax resident/domiciled person is liable to UK tax on their WORLDWIDE income. They will pay whatever tax is legally required on any foreign derived income. Sales of foreign located assets will attract UK Capital Gains Tax and foreign rental income or foreign interest received will be subject to UK Income Tax.
It does not matter if the money generated abroad is NOT brought back into the UK.
A non-domiciled UK tax resident will only be taxed in the UK on their foreign derived income if they REMIT this income into the UK.
As outlined in the previous post, in both cases, credit will be given for any foreign tax already paid on this foreign income PROVIDED the UK has a live Double Taxation Agreement (DTA) with the foreign country/countries involved.
The rules are the same whether the foreign country is inside or outside the EU.
Eric Mc said:
There are also different rules for those who are UK Tax Resident AND UK Domicile and those who are UK Tax Resident but NOT UK Domicile.
A UK tax resident/domiciled is liable to UK tax on their WORLDWIDE income. They will pay whatever tax is legally required on any foreign derived income. Sales of foreign located assets will attract UK Capital Gains Tax and foreign rental income or foreign interest received will be subject to UK Income Tax.
It does not matter if the money generated abroad is NOT brought back into the UK.
A non-domiciled UK tax resident will only be taxed in the UK on their foreign derived income if they REMIT this income into the UK.
As outlined in the previous post, in both cases, credit will be given for any foreign tax already paid on this foreign income PROVIDED the UK has a live Double Taxation Agreement (DTA) with the foreign country/countries involved.
The rules are the same whether the foreign country is inside or outside the EU.
If there is a DTA, do you have to pay more to top it up to UK levels of taxation ? Or is that money considered adequately taxed ?A UK tax resident/domiciled is liable to UK tax on their WORLDWIDE income. They will pay whatever tax is legally required on any foreign derived income. Sales of foreign located assets will attract UK Capital Gains Tax and foreign rental income or foreign interest received will be subject to UK Income Tax.
It does not matter if the money generated abroad is NOT brought back into the UK.
A non-domiciled UK tax resident will only be taxed in the UK on their foreign derived income if they REMIT this income into the UK.
As outlined in the previous post, in both cases, credit will be given for any foreign tax already paid on this foreign income PROVIDED the UK has a live Double Taxation Agreement (DTA) with the foreign country/countries involved.
The rules are the same whether the foreign country is inside or outside the EU.
sinizter said:
Eric Mc said:
There are also different rules for those who are UK Tax Resident AND UK Domicile and those who are UK Tax Resident but NOT UK Domicile.
A UK tax resident/domiciled is liable to UK tax on their WORLDWIDE income. They will pay whatever tax is legally required on any foreign derived income. Sales of foreign located assets will attract UK Capital Gains Tax and foreign rental income or foreign interest received will be subject to UK Income Tax.
It does not matter if the money generated abroad is NOT brought back into the UK.
A non-domiciled UK tax resident will only be taxed in the UK on their foreign derived income if they REMIT this income into the UK.
As outlined in the previous post, in both cases, credit will be given for any foreign tax already paid on this foreign income PROVIDED the UK has a live Double Taxation Agreement (DTA) with the foreign country/countries involved.
The rules are the same whether the foreign country is inside or outside the EU.
If there is a DTA, do you have to pay more to top it up to UK levels of taxation ? Or is that money considered adequately taxed ?A UK tax resident/domiciled is liable to UK tax on their WORLDWIDE income. They will pay whatever tax is legally required on any foreign derived income. Sales of foreign located assets will attract UK Capital Gains Tax and foreign rental income or foreign interest received will be subject to UK Income Tax.
It does not matter if the money generated abroad is NOT brought back into the UK.
A non-domiciled UK tax resident will only be taxed in the UK on their foreign derived income if they REMIT this income into the UK.
As outlined in the previous post, in both cases, credit will be given for any foreign tax already paid on this foreign income PROVIDED the UK has a live Double Taxation Agreement (DTA) with the foreign country/countries involved.
The rules are the same whether the foreign country is inside or outside the EU.
And the UK won't refund foreign tax isf the foreign tax is greater.
200bhp said:
Is there a threshold at which CGT has to be paid?
Is there a DTA with Australia?
Every year a UK individual has a general Capital Gains Tax allowance. For tax year 2010/11 this was £10,100. For 2011/12 it is £10,600Is there a DTA with Australia?
Yes there is a DTA with Australia. There are DTAs with most countries. However, you can check for the most up to date list of countries with the HMRC website.
Eric Mc said:
sinizter said:
Eric Mc said:
You normally pay the difference
And the UK won't refund foreign tax isf the foreign tax is greater.
Fair as usual then.And the UK won't refund foreign tax isf the foreign tax is greater.
I understand the practicality, I still don't consider it fair.
sinizter said:
Eric Mc said:
sinizter said:
Eric Mc said:
You normally pay the difference
And the UK won't refund foreign tax isf the foreign tax is greater.
Fair as usual then.And the UK won't refund foreign tax isf the foreign tax is greater.
I understand the practicality, I still don't consider it fair.
It is logistically impossible for sovereign governments to actually transfer collected tax amounts to and from other countries so that citizens can be reimbursed. Even the EU can't manage it. Imagine trying to do the same with Botswana or Venezeula.
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