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Thanks for your question
Usually a position for UK tax would arise when you spend more than 183 days in the UK (when not resident) and 90 days a year when resident.
Even if you just spend 48 weeks x 4 in the UK - this totals 192 days - and whilst I appreciate you would have scope to lessen this, the residency rules have changed this last tax year.
As you clearly plan to remain out of the UK to live and conduct your main work, HMRC has to consider you under the new residency statutory tests.
So will you
1) Own any property/rent any property for your use when in the UK
2) have any family ties in the UK, such as partner/children
If you can advise this, then I can answer more fully.
Thank you for your response.
I have no partner or children in the UK - my partner lives with me in Jersey. I do have parents and 4 siblings, plus a number of nieces and nephews, in the UK. When working there I will stay with family members - mainly my parents - and won't rent any property.
Regarding the number of days per time I will visit, I would be likely to arrive on Thursday and depart on Saturday - with specific flight times in mind this would be less than 48 hours at a time (though over 3 different days).
Thanks for your response
That's great that you have no direct ties, which does not involve you being considered for UK tax on all income (UK and abroad)
However as this income will arise in the UK, it will remain liable to tax in the UK, so you will need to set yourself up as self employed with HMRC and I have added a link here for you to do this.
And this is irrespective of whether you spent 10 days or all 365 days in the UK.
But to remain just liable for UK tax on the UK income then make sure no more than 90 days are spent in the UK (and 48 weeks x 2 = 96 days so do keep a count to stay under 91 days)
If a UK citizen (so you do not need to be treated as resident) you remain entitled to UK personal tax allowances (currently £9440 tax free a year then 20% between £9441 and £42475) ) But there might be some National Insurance to consider, if this income is more than £5725 a year
(And this is net self employment - so turnover less expenses)
So be prepared to automatically expected to pay Class 2 National Insurance (rate of £2.70 a week) which contributes towards a state pension.
Of course if your net income from this freelance work will be less than £5725 a year, then you can apply for what is known as a small exception certificate, due to the low level of earnings, and remain exempt from Class National Insurance.
Then there is Class 4 National Insurance and this is calculated and charged at the same time as tax, and the first £5825 is National Insurance free, and any amount between £5725 and £42475 is liable to 11%
HMRC ask for self assessment tax returns to be completed after each 5th April, to declare income for the previous year ( so for 2014 self assessment the income earned from 06/04/2013 to 05/04/2014) and then any tax and national insurance due is paid by the following 31st Jan (so in this example by 31/01/2015)
If you have more than 90 days in the UK, then you will have to declare ALL income, but if less than just the UK income arising.
But if you do have a tax liability, then due to the double taxation treaty that we have with the Channel Islands, you can then declare to them the UK tax suffered, so you are, in essence, not charged tax twice on the same income.
So note that you will be required to declare the income/expenses and tax suffered to the Jersey tax authorities.
Now onto your question regarding expenses. I am afraid the flights will be a personal cost, and not business related expense, as this will merely put you in the place to undertake your freelance work, rather than having been incurred during the process of providing your trade.
Allowable costs would be advertising, phone costs, web site, internet costs, stationary, travel expenses to visit clients, banking costs etc etc
Do feel free to ask any follow up questions, but it would be appreciated if you could rate (or accept) the level of service I have provided
Thanks and good luck
Thanks for this. It may time a little time for me to digest to come up with follow up questions - how long do I have to submit questions to you?
I do have one question in the meantime: if I do go over the 91 days (but remain under 183), what are the consequences of that? i.e. can it result in what does that mean in double taxation on my UK and / or Jersey income?
You take the time you need - as there was a lot of information, but the simplified version is that you are going to be liable to UK tax on this UK earned income (but I have also given you full instructions how to proceed with this fact!)
If you exceed 91 days but less than 183 then as you are (I assume) UK born and bread citizen (although clearly not fully domiciled) then you will be treated as liable to tax on your worldwide income, so instead of you declaring all income to Jersey with any UK tax suffered, you will then declare all income to the UK (HMRC) with any Jersey tax suffered.
Even if you rate/accept now, the question will remain open for any future points you wish to raise with respect to my answer.
Hi again Sam
Thank you again for your advice. I just wanted to check a few things with you to make sure I understand correctly, and also have some further questions.
As I understand it:
1. Regardless of the level of the income or how many days I spend in the UK, if I earn anything in the UK I must register as self- employed and will be liable for UK tax.
2. If I spend 90 days or less in the UK then I will be classed as non-resident and will be liable for UK tax only on income earned in the UK. I should declare this tax to the Jersey authorities so that I will not be double taxed.
3. If I spend over 90 days and up to 183 days in the UK, I will be classed as resident and must declare all income earned worldwide. I would then need to declare my UK tax paid to the Jersey authorities.
4. As a UK citizen, and regardless of how many days I spend in the UK, I will be entitled to allowances of up to £9440 at 0%, thereafter (up to £42,475) taxable at 20%.
5. If my UK income is over £5,725 (turnover less expenses) I must also pay National Insurance contributions.
Do I have that all right?
Also, I do need some further clarification on a few issues:
a. You have advised (I think) that if I spend over 90 days in the UK, I become liable to HMRC on my worldwide income and should declare the UK income, expenditure and tax paid to the Jersey authorities. I also understand from you that there is a double taxation treaty. However, if I spend for example 270 days - which would be well over half my time - in Jersey, will the Jersey authorities not also demand tax on my Jersey income? How does this work?
b. You mentioned both Class 2 and Class 4 NI contributions. Are both payable, then? i.e. £2.70 p.w. as a flat rate, plus 11% on everything from £5,725 to £42,475?
c. If I spend over 90 days in the UK, does whatever NI rates are payable apply to my worldwide income - i.e. including my Jersey income?
Many thanks again, and I look forward to your response.
Thanks for your follow up questions
Your statements 1 through to 5 are correct.
a) In the instance you provide, which happens with frequency, then HMRC would either
i) tax you on your worldwide income and then you declare all the tax suffered against your Jersey liability (so full double taxation comes into play for your Jersey position) OR
2) Would agree to just charging you on your UK income
But this would be up to HMRC to determine which direction they wish to take this, and this is something you would need to discuss with them as I have seen both instances used. Because the complication arises as you are Resident in the UK for enough days to become fully liable in the UK and are a UK citizen but, clearly spend more time elsewhere and have a domicile (through choice) in Jersey.
b) Yes - there are two sets of National Insurance for self employed individuals, this was to being the charge in line with employed individuals. But the Class 2 flat rate, contributes towards a basic state pension and the Class 4 is paid into the government coffers for health care, schools. fire services etc
But I do apologise I advised 11% on everything from £5,725 to £42,475 when in fact its £7755 to £42475 at 9%
c) No - you only are liable to National Insurance on the self employed income NOT the Jersey income , and the Jersey income is NOT added to the UK freelance work to establish how much National Insurance is due.
Thanks for your reply. It looks as if, to be sure to avoid being taxed doubly on my Jersey income I need to stick to visiting the UK for 90 days or less. I can do distance working from Jersey for UK based clients to help me keep the days down.
So I can make sure I keep the appropriate records: what evidence will HMRC want of the number of days I have spent in the UK in a year?
Usually HMRC accept at face value the information provided on the self assessment tax return, but for safeguard measures, I would advise keeping flight tickets/ferry tickets (and any online documents if you book online) this will then outline the times you were in the UK should they be asked for.
Many thanks for getting back to me. You have made my situation much clearer for me so I can make an informed decision on how to proceed. I'm very happy with the service you have provided and would recommend it to others.
Have a great weekend,
You are very welcome, and you have a great weekend too.