Budget 2008 > Individuals > Remittance basis - £30,000 annual charge

Remittance basis - £30,000 annual charge

From 6 April 2008, any UK resident adult (aged 18 and over) who has been resident in the UK for seven out of the past ten tax years, will have to pay a £30,000 charge to elect to be taxed on a remittance basis.  The remittance basis means that income and gains arising overseas are taxed in the UK only when, and if, they are brought into the UK.  If an individual’s unremitted foreign income and gains are less than £2,000 in the tax year, or the individual is aged under 18 at the end of the tax year, then the charge is waived.

The £30,000 charge is in addition to any tax due on UK income and gains or any foreign income and gains that have been remitted into the UK during the tax year.  It takes the form of a tax charge on unremitted income and gains rather than a stand alone charge.  Therefore, individuals paying the charge will choose what foreign, unremitted income or gains the £30,000 is paid on.  As a result this will not be taxed again when, or if, it is eventually remitted to the UK.  There will be ordering rules that determine which untaxed, unremitted foreign income or gains will be treated as remitted first.  As the £30,000 charge will be classified as either income tax or capital gains tax, it should be treated as such for the purposes of any Double Taxation Agreements to provide relief against any tax which might be levied in the individual’s country of domicile on the same income.  The charge will also be available to cover Gift Aid donations that would otherwise be classed as excessive and hence lead to a tax liability.

If the £30,000 charge is paid from an offshore source directly to HM Revenue & Customs, it will not itself be taxed as a remittance.  However, if this is repaid at a later date for any reason, it will be treated as a remittance on the date of the repayment.