How to calculate tax residency for clients with ties to the UK

The UK’s Statutory Residence Test assesses whether someone is a resident for tax purposes. For many, the answer will be clear-cut: they are not resident if they meet the criteria of the automatic overseas test, and are resident if they meet the criteria of the automatic UK test.

When a client does not meet the criteria of either test, agents need to find out more about their clients’ lives to work out whether they have sufficient ties to the UK to be considered a resident for tax purposes. 

Automatic overseas test

Someone is likely to be considered non-UK resident if they are working overseas and spending little time in the UK – there are minimal allowances that account for periods where non-residents might visit family in the UK and even work in the UK for short periods. 

Automatic UK test

Spending more than 182 days in the UK or working all year in the UK makes someone a UK resident for tax purposes. Those who predominantly work in the UK, or who own and spend time in homes in the UK but not overseas, are also likely to be UK resident.

Sufficient ties test

If neither the overseas or UK tests apply, the sufficient ties tests can settle residency questions. 

• Family tie: The individual's spouse, civil partner, cohabiting partner, or minor child is a UK resident.
• Accommodation tie: The individual has accommodation available in the UK for at least 91 days and spends at least one night there. Accommodation at a close relative's home is usually not counted for stays of fewer than 16 nights in a tax year.
• Work tie: The individual works in the UK for more than three hours a day on at least 40 days.
• 90-day tie: The individual has spent more than 90 days in the UK in either or both of the previous two tax years.

If an individual was a UK resident in one of the previous three tax years, and spends more days in the UK in the current tax year than they do in any other country, this may also be considered a tie – this is called a ‘country tie’.

If someone doesn’t meet the requirements for any of the automatic overseas, automatic UK or sufficient ties tests, they’re not considered a UK resident for the tax year. 

Case study: Alex

• Alex has lived and worked in the UK for the past five years.
• He moved to France in February 2023 for a new job with a French company.
• He bought a house in France, where he lives. His wife and family spent a month living with him in France over summer.
• Alex also still owns a house in the UK, and his wife and children live in that house for the remainder of the year.
• He returns to the UK to visit his family occasionally, and has spent 17 days in the UK.
• Even though he’s working full-time in France, he occasionally consults for UK clients. He keeps meticulous records for invoicing purposes, which show that he has worked more than three hours for UK clients on 53 days.

Alex is a UK resident, based on the sufficient ties test.

• Family tie: His wife and children are UK residents.
• Accommodation tie: He owns a house in the UK and spent at least one night in that house.
• Work tie: He occasionally works for UK clients.
• 90-day tie: He spent more than 90 days in the UK in the previous tax year.

With those four ties to the UK, and having been a tax resident in the previous three tax years, Alex only needs to spend 16 days in the UK to be considered a UK resident. So while he might feel pretty dislocated, HMRC knows Alex’s home is where his heart is!

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