Do I have to file UK tax return?

Do I have to file a return even if no tax is payable?

Simplest way to find out, is to use the tool on gov.uk website. Always keep a print of the result for record.

But sometimes, as all automated tool sometimes do, this tool may not give the answer as expected.

Recently I had an enquiry.

An Individual has no UK income but has rental income in India of c£4k per annum. Does he need to file his UK tax return, even if his total income is less than personal allowance.

Question 1 – Whether this individual will get personal allowance?

Our case – Individual is an Indian national but he lives in the UK.

Fortunately, he is a UK tax resident thus he was eligible for personal allowance.

Simply, an individual is UK tax resident if he was in the UK for more than 183 days in that tax year. If your case is different refer to RDR3 Booklet of HMRC.

HMRC guidance to check eligibility of personal allowance in different cases of tax residency and nationality is given in RDRM10300+

Question 2 – Whether he needs to file a tax return even if no tax is payable?

Starting point is that It’s the individual’s responsibility to inform HMRC if he has any income tax or capital gains tax to pay1 within 6 months of the end of the assessment year i.e. by 5th Oct2

But individual is not required to inform HMRC, if after taking in account all income for the tax year he is not liable to pay any tax.3

Please be aware there may be situation where you have to file tax return even if there is no tax payable, example:

  1. Where HMRC sends you a notice to file a return; or
  2. In case where you have capital gains which are less than the capital gains allowance but:
    a. the total amount you sold the assets for was more than 4 times your allowance; and
    b. you’re registered for Self-Assessment
  3. You need to claim a refund
  4. File a loss return
  5. Claim relief for charitable donations, pensions
  6. Pay Class 2 NICs and others.

Keeping the above in view, it may still be advisable to file a tax return as if you make a mistake, penalties are lower for inaccuracies than failure to notify.

Source:

  1.  TMA 1970 sec 7 (1)
  2. TMA 1970 sec 7 (1C)
  3. TMA 19790 sec 7 (3) and (7)

Acknowledgement

Bonus material

Income tax was introduced in Britain temporarily during the Napoleonic wars in 1799 but became a permanent feature in 1842, in anti-tax United States in 1913 and in the bastion of income tax – Sweden in 1932.

Source: User guide to Economics by Ha-Joon Chang