Filing a Tax Return in the UK: A Guide for Residents and Non-Residents

The United Kingdom’s tax system, administered by His Majesty’s Revenue and Customs (HMRC), is rigorous but offers opportunities for efficient tax planning. Understanding when and how to file a tax return is essential for both UK residents and non-residents with UK-related income. This guide explains the Self Assessment tax return process, who needs to file, and how to optimise tax obligations, correcting common misconceptions about UK tax laws.

Who Needs to File a Tax Return in the UK?

Contrary to the notion that everyone must report all income regardless of source, UK tax obligations depend on residency status and the type of income earned. Below are the key points:

·        UK Tax Residents: If you are a UK tax resident (determined by the Statutory Residence Test, typically based on spending 183+ days in the UK or other residency criteria), you are taxed on your worldwide income and gains. However, you only need to file a Self Assessment tax return if you have:

• Untaxed income, such as self-employment income, rental income, or income from savings/investments exceeding the Personal Savings Allowance (£1,000 for basic rate taxpayers in 2025).

• Income not fully taxed through the Pay As You Earn (PAYE) system, such as foreign income or capital gains above the annual exempt amount (£3,000 for 2025/26).

• Specific circumstances, such as being a company director, partner in a partnership, or claiming certain tax reliefs (e.g., SEIS/EIS investments).

• HMRC may also require a tax return if they issue a notice to file.

·        Non-Residents: Non-residents are only required to report and pay tax on UK-sourced income, such as rental income from UK property or earnings from UK employment. They are not obligated to report foreign income unless it is remitted to the UK and they are eligible for specific reliefs (e.g., under double taxation agreements). Non-residents with UK income may need to file a tax return if the income exceeds certain thresholds or is not taxed at source.

·        Exemptions: Employees or pensioners whose income is fully taxed through PAYE (e.g., salary or pension with no additional income sources) typically do not need to file a tax return unless requested by HMRC. Similarly, individuals with savings interest below the Personal Savings Allowance or dividends below the Dividend Allowance (£500 for 2025/26) may not need to file.

Why File a Tax Return?

The Self Assessment tax return is HMRC’s mechanism for collecting income tax and National Insurance contributions from individuals, including self-employed individuals, company directors, and those with untaxed income. Filing a tax return allows you to:

• Report untaxed or under-taxed income, such as self-employment earnings, rental income, or foreign dividends.

• Declare capital gains, such as from selling property or investments, above the annual exempt amount.

• Claim tax reliefs or allowances, such as business expenses, pension contributions, or SEIS/EIS reliefs.

• Ensure compliance with HMRC and avoid penalties for late filing or underpayment.

  
  

For tax residents, the tax return also accounts for foreign income and gains, particularly after the abolition of the non-domicile regime in April 2025. Under the new residence-based system, new UK tax residents can benefit from a 4-year Foreign Income and Gains (FIG) relief period, during which foreign income and gains are exempt from UK tax if not remitted to the UK. Filing a tax return is crucial during this period to declare remittances and optimise tax liability.

Key Deadlines for Filing a Tax Return

The UK tax year runs from 6 April to 5 April. Key deadlines for the 2025/26 tax year are:

• Register for Self Assessment: By 5 October 2026, if you need to file for the first time (e.g., new self-employment or untaxed income in 2025/26).

• Paper Tax Returns: By 31 October 2026, for those filing a paper return (not recommended due to complexity and delays).

• Online Tax Returns: By 31 January 2027, for online submissions, which are more common and allow corrections until the deadline.

• Pay Tax Owed: By 31 January 2027, for any tax due for the 2025/26 tax year, plus payments on account (if applicable) for the following year.

  
  

Late filing or payment incurs penalties, starting at £100 for missing the filing deadline, plus interest on unpaid tax.

Tax Planning Opportunities

The UK tax system offers several ways to optimise tax liabilities:

• Personal Allowances: Utilise the Personal Allowance (£12,570 for 2025/26, income tax-free) and other allowances like the Personal Savings Allowance or Dividend Allowance.

• FIG Relief: For new tax residents, structure finances to maximise the 4-year FIG relief period by keeping foreign income and gains offshore.

• Business Reliefs: Self-employed individuals and company directors can deduct allowable business expenses, reducing taxable income.

• Investment Reliefs: Schemes like SEIS and EIS offer income tax and capital gains tax reliefs for investments in qualifying UK start-ups.

• Double Taxation Agreements: Non-residents or residents with foreign income can benefit from treaties to avoid double taxation.

  
  

Why Seek Expert Advice?

Filing a tax return can be complex, especially for entrepreneurs, high-net-worth individuals, or those with international income. Errors or missed opportunities can lead to penalties or overpaid taxes. Foundry Accounting experts can assist with:

• Accurate Filing: Preparing and submitting your Self Assessment tax return to meet HMRC requirements.

• Tax Optimisation: Structuring finances to maximise reliefs, allowances, and the 4-year FIG relief period.

• Compliance: Ensuring adherence to UK tax and residency rules, including for non-residents with UK income.

• Strategic Planning: Advising on long-term tax strategies, especially for those on visas like the Innovator Founder Visa or pursuing ILR.

  
  

Contact Foundry Accounting for tailored guidance on filing your tax return and optimising your tax obligations in the UK.