What is split-year treatment?
Normally, if you are resident in the UK for any part of a tax year you will be taxed as a UK resident for the whole of the tax year.
However, there are special rules which may apply to you if you either leave the UK to live or work abroad, or come from abroad to live or work in the UK. These special rules split the tax year into a UK part, when you are taxed as a UK resident, and an overseas part, when you are taxed as a non-UK resident.
After 5 April 2013, these special rules are contained in law, under the Statutory Residence Test ('SRT'). The detailed guidance can be found on the GOV.UK website in RDR3.
If the special rules apply, the UK income tax you pay because you are resident in the UK is calculated on the basis of the period you are living here rather than the whole of that tax year. This has the effect of splitting the tax year into resident and not resident periods for the purposes of calculating the tax due.
For example, if you are eligible for split-year treatment and you come to the UK on 1 July 2018, your residence position for the purposes of calculating your income tax liability in 2018/19 will be as follows. You will be treated as not resident for the period from 6 April 2018 to 30 June 2018 and you will be treated as a UK resident for the period from 1 July 2018 to 5 April 2019. Income you receive before 1 July 2018 may not be taxable in the UK, if it does not arise in the UK.
You are only eligible for split-year treatment for a tax year if you are UK resident under the Statutory Residence Test (‘SRT’) for that tax year and you arrive or depart from the UK in that year. You can only split a particular tax year once.
There are five broad sets of circumstances in which split-year treatment may apply to you. In each of the following cases, there are other conditions that you must meet:
- you come to live or work full-time in the UK
- you start to have a home in the UK and continue to have a UK home until the end of the following tax year
- you start full-time work overseas
- you are the partner of someone who starts full-time work overseas
- you leave the UK to live abroad.
You can find more detail on whether or not you meet the conditions for split-year treatment within the guidance on the GOV.UK website.
There are also special rules, which allow split-year treatment for the capital gains of people who come to, or leave, the UK part way through a tax year.
These special rules have been put into law as part of the Statutory Residence Test (‘SRT’) with effect from 6 April 2013. The rules for capital gains tax and income tax are the same. You can find more details on whether or not you meet the conditions for split-year treatment within the guidance on the GOV.UK website.