Guidance

Dual residents 2023 (HS302)

Updated 6 April 2024

Overview

If you live in the UK and another country and both countries tax your income, you’re a dual resident.

You can claim full or partial relief on UK tax if the 2 countries have a double taxation agreement (DTA) that allows you to do so.

A DTA is an agreement between 2 countries. It’s there to make sure you do not pay tax twice on the same income. You need to look at the particular terms of your DTA to find out if you can claim relief from UK tax.

To check if your country has a DTA with the UK, go to Double Taxation treaties: non UK resident with UK income.

You can claim relief on the following types of income:

• interest from bank and building societies
• royalties
• most work pensions
• annuities
• UK dividends

You cannot claim relief if you live in the UK and in a country that does not have a Double Taxation Agreement with the UK or one of the following countries:

• Antigua
• Belize
• Brunei
• Greece
• Grenada
• Kiribati
• Malawi
• Montserrat
• Myanmar (Burma)
• St Kitts
• Sierra Leone
• Soloman Islands
• Tuvalu

In this case, you can only claim relief from UK tax by getting credit for the foreign tax you pay on your overseas income. Do not fill in the claim form.

Types of relief

Full relief

You can claim full relief from UK tax where the DTA provides for this. You may have to pay tax on the income to the country you live in, depending on its DTA with the UK.

Partial relief

You can claim partial relief from UK tax where the DTA provides that the UK tax attributable to income is lower than the normal domestic rate. For example, if the UK’s basic rate is 20%, and your country’s DTA with the UK is 15%, you can claim 5% relief.

Credit relief

You can claim credit relief if your income is taxable in both the UK and the country you live in. Your country of residence will give you credit for the tax you’ve paid on your UK income, against its own tax. You need to claim back the tax you’ve paid from the country you live in.

Residence tie-breaker rules

To find out which of the 2 countries you’re a resident in, for the purpose of claiming relief, you need to check your DTA’s tie-breaker rules.

These rules are a series of tests. Once you’ve satisfied one of the tests, you do not need to continue with the rest of them.

Permanent home

This is accommodation that’s always available for your personal use for the year in question. You do not have to own it. If you’ve a permanent home in both countries, move to the ‘centre of vital interests’ test. If you do not have a permanent home in either country, move to the ‘habitual abode’ test.

Centre of vital interests

You’re a resident of a country where your social, domestic, political and cultural links are greater. For example, you set up home in another country and keep your home in the UK where you lived, worked and where your family and possessions can, with other factors, show that your centre of vital interests remain in the UK.

Habitual abode

This shows which of the 2 countries you live in regularly, normally or customarily. The test considers the frequency, duration and regularity of stays that are part of your settled routine for each country. If you cannot determine if you have a habitual abode in either country, or you have a habitual abode in both countries, move to the ‘nationality’ test.

Nationality

Generally, you’re resident of a country where you’re a national. However, it’s possible to have dual nationality or be a national of neither country. The DTA may give the tax authorities the information they need to agree if this test is met.

If the tie-breaker tests show you’re not a UK resident, you can usually claim relief from UK tax.

If the tie-breaker tests show you’re a UK resident, you will need to pay UK tax on your worldwide income and gains. You may be able to claim relief from tax in the other country, if your DTA with the UK allows you to do so.

Certificate of overseas residence

If you want to claim relief from UK tax on your UK income, and the country you live in has a DTA with the UK, you will need this certificate. To get one, contact your country’s tax authority.

The certificate of overseas residence must show that it regards you as resident, under their domestic laws, for the period in question.

You must attach the certificate to your claim form and send it in with your tax return.

United States of America

The US taxes its citizens on their worldwide income, wherever they live, so if you live in the US, you do not need a certificate of overseas residence.

You’re a US resident if:

• you’ve a substantial presence, permanent home or habitual abode in the US

• no country other than the UK treats you as a resident

Substantial presence test

This shows how often you’re in the US over a certain period. You will have a substantial presence if you’re in the US:

• for at least 31 days of the calendar year in question

• for the year in question and the 2 years before that and all 3 years add up to at least 183 days

If you spend part of a day in the US, count it as a whole day.

For the purpose of the example below, a day spent in the US, in the following year under test, counts as 1/3rd, and a day in the year before that counts as 1/6th.

Example

Geetha spends 48 days in the US in 2019, 250 days in 2018 and 365 days in 2017. A day spent in the US in 2018 and 2017, counts as 1/3 and 1/6 respectively. In 2019, the calculation is as follows:

2019 48 days x 1/1 = 48

2018 250 days x 1/3 = 84

2017 365 days x 1/6 = 61

Total = 193

Geetha passes both parts of the substantial presence test. She’s a resident in the US, under the country’s domestic law.

How to claim relief

If you want to make a claim:

• for full tax relief from the UK, fill in section 3(c) of the claim form
• for partial tax relief from the UK, fill in section 3(d) of the claim form

UK Real Estate Investment Trusts (UK-REITs)

You may be able to claim relief if you get a property income dividend and you live in a country that has a DTA with the UK. To claim full relief, fill in section 3(c) of the claim form and section 3(d), to claim partial relief.

UK dividends paid after 6 April 2016

The Dividend Allowance, introduced from 6 April 2016, means you won’t have to pay tax on the first part of your dividend income, no matter what non-dividend income you have. In 2022 to 2023, the dividend allowance is £2,000.
Dividends within your allowance will still count towards your basic or higher rate bands, and may therefore affect the rate of tax that you pay on dividends you receive in excess of the £2,000 allowance. You will pay tax on any dividends you receive over £2,000 at the following rates:

• 7.75% on dividend income within the basic rate band
• 33.75% on dividend income within the higher rate band
• 39.35% on dividend income within the additional rate band

If you have not paid tax because you’re within the Dividend Allowance then you cannot claim Foreign Tax Credit Relief (FTCR) on that income.

Depending upon the terms of the particular DTA, the dividend article of a DTA might restrict the maximum rate of UK tax applicable (usually 15%)

For more information go to the guidance on tax on dividends.