Check out new HMRC tool to check `how` to register for self-assessment [link].
You must tell HMRC by 5 October after the end of the tax year, if you need to send a tax return and you have not sent one before.
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Foreign gains under remittance basis
What happens when gain accrues in one year and is remitted in a later year
When will be the gain chargeable to UK tax?
A chargeable (i.e. taxable) gain is treated as accruing in any tax year in which any of the foreign chargeable gains are remitted to the United Kingdom (TCGA92 Sch1 1(2)).1
Will annual exemption limit available on capital gains remitted in a later year?
The annual exempt amount may not be deducted from chargeable gains to which paragraph 2 of Schedule 1 applies (foreign gains of non-UK domiciled individuals accruing in one year and remitted in later year). 2
Can I go back and change the tax return from arising basis to remittance basis and vice versa?
If a remittance basis claim is made within a return a request to revoke the claim can be made no later than 12 months from the statutory filing date i.e. within the amendment window.3
Alternatively, if you need to make a remittance basis claim it can be done within 4 years.4
You can read about foreign losses under remittance basis on this blog.
Source:
Taxation of UK Mutual funds
A simplified guide to HMRC rules for individual investors.
The tax rules aim to put the investor broadly in the same position as if they had invested in the fund’s assets directly (rather than investing in the fund)2.
Income
Investors may receive dividend distributions and/or interest distributions3:
- Dividend distributions are treated in the same manner as any other UK company dividend.
- From 6th April 2017 interest distributions are paid gross and taxed in the same way as interest income from a bank4.
In case of an accumulating fund (instead of distributing dividends or interests it re-invests them in the fund) amounts reinvested are taxed as income (dividend or interest) accruing to investors in the same way as if they had been distributed. Remember to deduct these on sale when computing capital gains tax5.
Disposal
A sale will give rise to capital gain6.
Units are treated as shares in a company and capital gains tax is computed in a similar way7.
Bonus
- In India tax rates for equity and debt funds differ, its not the case in UK.
Source:
Budgeting for the tax bill and Interest on early payment of tax
Pay corporation tax early and get a better interest rate from HMRC than from banks.
1.0 Budgeting
A usual question is how to budget for the tax bill at the end of the year.
HMRC has helpfully created a calculator (Link) which can estimate the amount of money an individual should save to pay their tax bill.
2.0 Saving mechanism
Now the question arises how to save this money.
2.1 Self-Assessment (Income tax) – No interest is paid for early payment. So in case an individual client wishes to save for their tax bill it is advisable to save in a bank where they can earn some interest before tax is due. Remember to pay payment on account.
2.2 Corporation tax – Yes, interest is paid for early payment but the earliest date HMRC will pay interest is from 6 months and 13 days after the start of your accounting period. Currently HMRC is paying interest at the rate of 5% w.e.f 14 Aug 2023 (source). It is difficult to find a interest bearing account giving such good rate. Please note this interest income is taxable.
Source:
For Corporation tax
What happens when £2k threshold remittance basis user remits funds to the UK
An example of how remittance from `mixed funds` are dealt.
Charge is on full amount remitted in the tax year even though client may not be claiming remittance basis in that in the year of remittance1.
Foreign investment income (interest and dividends) is taxed as non-saving income, when remittance basis applies2.
Taxed as non-saving income means no personal saving allowance or dividend allowance is available. Plus, no starting rate for interest3, dividends taxed at normal rates (currently 20%, 40% and 45%) and not at the special rates applicable to dividends (currently 8.75%, 33.75% and 39.35%)4.
Below is a simple example demonstrating the concept of `Mixed funds`, in practice bank accounts will need to be analyzed line by line to be classified as per ITA 2007 section 809 Q (3).
Example: A client who first came to the UK, say on 6th April 2019 has been not being declaring foreign income in their tax returns as it was £2k threshold.
Client had only foreign interest income which was saved in two Bank accounts say Account A and Account B5.
Detail of foreign interest income:
| Tax Year | Account A | Account B | Total |
| 2020 | £1,500 | £400 | £1,900 |
| 2021 | £2,000 | £400 | £2,400 |
| 2022 | £1,500 | £400 | £1,900 |
2021’s income declared to HMRC as it was over £2k. In tax year 2022-23 client remitted c£20k to UK from Account A.
As interest income is saved in same account as the capital, both Account A and B now have `mixed funds`.
Client’s total income since he has been UK tax resident in Account A = £1,500 + £2,000 + £1,500 = £5,000.
Less income on which tax already paid £2,000.
Taxable income on remittance £5,000 – £2,0006 = £3,000.
Bonus
1. The rate of exchange that should be used when declaring the remittance is the actual rate of exchange on the date of remittance into the UK7.
2. Remember to claim FTCR or DTAA relief like NRE relief as well.
3. Please remember if there are different sources of income eg. Foreign interest, dividends or capital gains, ITA 2007 sec 809Q (3) prescribes the order in which they are treated as remitted to the UK.8
Notes:
1. Tolley Income tax 60.5
2. ICAEW Text book Pg 331
3. RDRM31140
4. HS 264 Point 3.1
5. Remittances distinguished account-wise – LITRG website.
6. Tolley Tax computations 23.1 Notes (e).
7. RDRM31190
8. For mixed funds see RDRM35210 et seq
Roy Accountants 