When do I become a UK non resident

[Farang99]

It doesn't matter if you are a UK resident or not - if you have income from UK you will pay UK tax on it. I have two pensions, both of which are taxed at UK rate in UK before transfer to my account here.

[JB300]

Yeah, would only do that as long as it took to sell the property without having to pay any CGT & was joking (saber rattling) about claiming JSA, have never claimed a penny in benefits as I'm from the old school that would only claim them because they needed them, not because they can.

You have to pay CGT on a house for any periods that you have not occupied it as your main residence for the time you have owned it. There is a calculation that allows you to eliminate a portion of the capital gains tax due for any periods that you have rented it, which is complex to say the least.

If you are renting then you have told the tax authorities that you are renting and therefore they already know it cannot be your main residence and that you have not been occupying it, so it will be impossible to try to claim that it was your residence when selling, and get full CGT exemption.

In summary, even if you only own one house and you go back to live in it, you owe CGT on the gains pro rated for any periods that you were not living in it, with a reduction in tax owed (not elimination of tax owed) for periods that it was let to tenants. Added: working abroad would excuse you from the CGT for the period you were working as long as the house wasn't let.

Just a heads up, as I too wasn't aware of this until recently.

EDIT: here's a link to start you off on working out how much CGT you would be liable for

http://www.theguardian.com/money/2014/aug/21/capital-gains-tax-on-let-property

Thanks, for some reason I had it in my head that I just needed to live in the property for 6 months to re-establish primary residency, which (IMHO) is fair as it's never been rented out to provide income but is rented out so I don't have to pay all of the utilities/council tax bills whilst living 9,000 miles away (I'm Lucky if I'm breaking even on all of the bills I paid whilst it was empty for 3 years... Final straw was with the council tax guys who told me that I had to pay as I wasn't actively looking to rent the house out, couldn't claim the single persons allowance as I'd admitted my gf stayed there a few nights a week & couldn't claim single allowance as she's the only person living there because everything is in my name).

To the poster who asked why would you declare yourself non-UK resident, in my case it was a no brainier, I could either pay 40% tax (plus 11% NI) or pay approx 11% tax (Singapore).

What's interesting (to me) is that now I've retired & left Singapore I'm not a tax resident anywhere (have been a non-digital nomad since end of Jan) so I'm assuming that by default, I'm tax resident in the UK, but I fail the UK residency test so surely can't be.

Edited December 13, 2015 by JB300

[chiang mai]

It doesn't matter if you are a UK resident or not - if you have income from UK you will pay UK tax on it. I have two pensions, both of which are taxed at UK rate in UK before transfer to my account here.

Perhaps you should be reclaiming that tax or at least getting Revenue to change your tax coding?

I receive two pensions from the UK, both are paid gross, no tax is deducted and the Revenue made that happen for me.

[Ricardo]

It doesn't matter if you are a UK resident or not - if you have income from UK you will pay UK tax on it. I have two pensions, both of which are taxed at UK rate in UK before transfer to my account here.

So you then make an annual-return to HMRC, which includes your personal-allowance & the income/tax-already-deducted, so that you then get a partial-refund of the tax deducted-at-source, after the end of each tax-year ?

[Eneukman]

It is d_mn complicated! It's beyond the realms of simple internet forum advice because relaible advice would need full details of your finances, personal status, travel history etc and you aint gonna be prepared to post that in public!

If you can't put in the reading (and re-reading) you'll need to pay for advice unfortunately.

You will still be paying tax/doing tax returns in respect of any UK source income (unless you have a simple situation, like pension-only); achieving non-resident status does not remove the need to pay all taxation. Indeed my first question would be why do you need to attain non-resident for tax purposes status anyway? If you had CGT liabilities in the UK or substantial investment income arising in the UK, or substantial earnings here in Thailand I could understand the need, but for the average expat who retires here with insubstantial income-earning assets and a pension there is no benefit - indeed there are disadvantages in areas of health access and banking.

[Retired Chartered Accountant]

Actually I don't want to become a non resident

I just want to know when I become one because my next question was about if I am entitled to the NHS still?

I still sort of a have a UK address all my post goes to my sisters house

Sent from my SM-G900F using Tapatalk

I retired and moved to Thailand 10 years ago. At that time, I signed a form claiming non-resident status for income and capital gains taxes. Before leaving the UK, I telephoned the Inland Revenue (as it was at that time) to ask when I would become non-resident for tax purposes. They told me that it would be from the day I left the UK permanently.

There are certain conditions, however, such as you cannot spend more than an average of 90 days in the UK over a certain period nor stay in the UK for more than 180 days at a time (in any one tax year?).

If you have not signed the appropriate form, HMRC will continue to regard you as being resident in the UK for tax purposes. There are benefits for me in claiming non-resident status (no capital gains tax to worry about and no UK income tax on my Isle of Man bank and Thai bank accounts (though that would be negligible just now!!!!).

Alan

[huawei]

It doesn't matter if you are a UK resident or not - if you have income from UK you will pay UK tax on it. I have two pensions, both of which are taxed at UK rate in UK before transfer to my account here.

So you then make an annual-return to HMRC, which includes your personal-allowance & the income/tax-already-deducted, so that you then get a partial-refund of the tax deducted-at-source, after the end of each tax-year ?

If your income from year to year is pretty predictable, such as your pension amounts. The inland revenue should be changing your tax code to reflect the amount payable if in access of the annual personal alliance.

As CM says this is usually done by them.

[huawei]

The main benefit to non residence was for CGT exemption which has now been removed. I just don't see the value of it.

[wordchild]

The main benefit to non residence was for CGT exemption which has now been removed. I just don't see the value of it.

The CGT exemption has only been removed on residential property. For someone who has been non resident for five plus years there is still no CGT liability on the disposal of other kinds of assets eg shares and certain other kinds of property.

Frankly anyway there is very little financial reason for a long term expat to hold UK residential property anymore. The UK government is sending a very clear signal that it will continue to bias the tax regime, around residential property, against all except owner occupiers. (A smart and necessary policy shift in my opinion.)

For many people there are still very significant advantages in being treated as a non resident by HMRC eg all non UK sourced income out of scope and also significant exemptions on UK sourced income eg on dividends and bank deposits.

Edited December 13, 2015 by wordchild

[lineofentry]

Don't take up any form of 'residency', stay a 'visitor'. Avoid contact with governments as much as possible, keep your head down and tell them nothing.

[KittenKong]

I'm no longer considered a resident of the UK and can't get residency here, so where am I resident?

Tax residency has nothing to do with having Thai permanent residency. Thai PR is to do with immigration.

You become tax resident in Thailand simply by living here for more than half the year, or by having taxable income here. As a (tax) resident in Thailand you should complete a Thai tax return.

Even if it's a nil return?

I believe that you are supposed to, yes.

I do one anyway to reclaim my withholding tax.

[huawei]

The main benefit to non residence was for CGT exemption which has now been removed. I just don't see the value of it.

The CGT exemption has only been removed on residential property. For someone who has been non resident for five plus years there is still no CGT liability on the disposal of other kinds of assets eg shares and certain other kinds of property.

Frankly anyway there is very little financial reason for a long term expat to hold UK residential property anymore. The UK government is sending a very clear signal that it will continue to bias the tax regime, around residential property, against all except owner occupiers. (A smart and necessary policy shift in my opinion.)

For many people there are still very significant advantages in being treated as a non resident by HMRC eg all non UK sourced income out of scope and also significant exemptions on UK sourced income eg on dividends and bank deposits.

All above is very true, but most people's wealth is tied up in residential property and the exemption from cgt was the most significant saving.

Yep, time to sell in the uk.

[huawei]

I'm no longer considered a resident of the UK and can't get residency here, so where am I resident?

Tax residency has nothing to do with having Thai permanent residency. Thai PR is to do with immigration.

You become tax resident in Thailand simply by living here for more than half the year, or by having taxable income here. As a (tax) resident in Thailand you should complete a Thai tax return.

Even if it's a nil return?

I believe that you are supposed to, yes.

I do one anyway to reclaim my withholding tax.

I use to have to do a tax return/ tax document before being allowed to leave Thailand ( 80's) if I had been here 6 months, if my memory serves me correctly.They withdrew that requirement.

[JB300]

I'm no longer considered a resident of the UK and can't get residency here, so where am I resident?

Tax residency has nothing to do with having Thai permanent residency. Thai PR is to do with immigration.

You become tax resident in Thailand simply by living here for more than half the year, or by having taxable income here. As a (tax) resident in Thailand you should complete a Thai tax return.

Even if it's a nil return?

I believe that you are supposed to, yes.

I do one anyway to reclaim my withholding tax.

I use to have to do a tax return/ tax document before being allowed to leave Thailand ( 80's) if I had been here 6 months, if my memory serves me correctly.They withdrew that requirement.

Still have it in the Philippines...

[rogeroc]

It doesn't matter if you are a UK resident or not - if you have income from UK you will pay UK tax on it. I have two pensions, both of which are taxed at UK rate in UK before transfer to my account here.

Please do not quote as gospel but if you are a resident of the UK you can earn 10.8k income without any tax and, i believe, a further 5k savings interest without paying tax. Depending on circumstances maybe worth considering before declaring non residency.

[JB300]

It doesn't matter if you are a UK resident or not - if you have income from UK you will pay UK tax on it. I have two pensions, both of which are taxed at UK rate in UK before transfer to my account here.

Please do not quote as gospel but if you are a resident of the UK you can earn 10.8k income without any tax and, i believe, a further 5k savings interest without paying tax. Depending on circumstances maybe worth considering before declaring non residency.

I think the 5k you mention is the new dividend allowance coming in on 6th April next year.

All interest from bank accounts is added to your other income & if over the £10,600 personal allowance limit will be taxed.

[rogeroc]

From UK Gov website

Tax-free savings interest

Check if you’ll qualify for either:

• all your interest tax-free (if your taxable income is less than £15,600)
  
• a refund on some of the tax on your interest (if your taxable income is less than £15,600 when you don’t include savings interest)
  

Getting all your interest tax-free

Your taxable income (including some benefits) usually needs to be less than £15,600 a year to get all your interest tax-free.

It can be more than this if you get any of the following:

• Blind Person’s Allowance
  
• Marriage Allowance
  
• Married Couple’s Allowance
  
• age-related Personal Allowance
  

What you need to do

Contact your bank or building society to tell them you’re eligible. They’ll register you for tax-free savings.

If you’ve registered before for tax-free savings on each of your accounts, you don’t need to do it again.

[JB300]

Wow, you learn something new everyday...

Thanks for that [emoji106]

[juice777]

It is d_mn complicated! It's beyond the realms of simple internet forum advice because relaible advice would need full details of your finances, personal status, travel history etc and you aint gonna be prepared to post that in public!

If you can't put in the reading (and re-reading) you'll need to pay for advice unfortunately.

You will still be paying tax/doing tax returns in respect of any UK source income (unless you have a simple situation, like pension-only); achieving non-resident status does not remove the need to pay all taxation. Indeed my first question would be why do you need to attain non-resident for tax purposes status anyway? If you had CGT liabilities in the UK or substantial investment income arising in the UK, or substantial earnings here in Thailand I could understand the need, but for the average expat who retires here with insubstantial income-earning assets and a pension there is no benefit - indeed there are disadvantages in areas of health access and banking.

[Retired Chartered Accountant]

Actually I don't want to become a non resident

I just want to know when I become one because my next question was about if I am entitled to the NHS still?

I still sort of a have a UK address all my post goes to my sisters house

Sent from my SM-G900F using Tapatalk

If you don't want to become one then what's the fuss? Just keep your mouth shut. I've been in and out of the UK for lengthy periods of time over the preceding years. But because I maintained a UK address (as you do) a bank account (as you do) and pay taxes on rental income (as you do) there's never been a hint of a problem. So why cause one by raising a giant red flag??

I wasn't planning of raising a red flag myself but wondered if they would work it out somehow

Even if the tax man knows I suppose that doesn't mean the NHS would know as well

Thanks everyone for all the great post I had no ideal there would be so many people interested in this thread

Sent from my SM-G900F using Tapatalk

[SantiSuk]

It doesn't matter if you are a UK resident or not - if you have income from UK you will pay UK tax on it. I have two pensions, both of which are taxed at UK rate in UK before transfer to my account here.

Please do not quote as gospel but if you are a resident of the UK you can earn 10.8k income without any tax and, i believe, a further 5k savings interest without paying tax. Depending on circumstances maybe worth considering before declaring non residency.

I think the 5k you mention is the new dividend allowance coming in on 6th April next year.

All interest from bank accounts is added to your other income & if over the £10,600 personal allowance limit will be taxed.

The changes are confusing because, there will be a new dividend allowance of £5,000, but the 0% tax rate applied to the first £5,000 of savings interest will continue to be in effect and there will be a new set of personal savings allowances (and dividend allowances) as well. How this all squares with the government's stated aims of simplifying taxation is totally beyond me!

So you are both right, but respectfully also both potentially misleading by picking only part (different parts) of the equation.

It is my understanding from reading the autumn statement, the Draft Finance Bill and expert commentary on the internet that:

1. For taxpayers who have total income less than £15,600 the first £5,000 of savings interest is already tax-free (this change was introduced in April 2015). This will continue 'next year' (tax year starting 6 April 2016).
2. Next year taxpayers will additionally be given a Personal Savings Allowance ('PSA'). The amount of this allowance will be £1,000 for basic rate taxpayers; £500 for anyone whose income falls into the higher rate and £nil for anyone whose income falls into the additional rate of tax. A taxpayer with total income of £16,600 including £6,000 of savings interest will pay no tax on the savings interest
3. Alongside the introduction of the PSA, banks, building societies and National Savings and Investments will cease to deduct tax from the account interest they pay to customers. Registering for no tax deduction with banks becomes obsolete
4. Gross interest income above those allowance levels will then be taxed as income at whichever rate applies to you
5. Similar new allowances apply to dividend income next year (but there is no 0% tax rate band on dividend income) and the old regime of companies deducting a 10% tax credit is discontinued. There will be an additional dividend allowance (it does not seem to have been given an official name yet like the Personal Savings Allowance) so that the first £5,000 of gross dividend income will not be taxed and amounts above that threshold will be taxed at 7½%, 32½% and 38.1% within the basic, higher and additional rate bands respectively
6. The position for non-residents next year has not been specifically outlined in the draft legislation to date (ie not mentioned in the draft Finance Bill published earlier this month). In the absence of any special provisions for non-residents it is safe to assume that non-residents will be entitled to these new personal savings and dividend allowances also.

For some non-residents who have significant levels of savings interest and/or dividend income the availability of the standard personal allowance of £10,600 has been effectively irrelevant and I assume that the availability of the new personal savings and dividend allowances will be similarly irrelevant to them also. Why has it been irrelevant - because those receiving significant amounts have been able to benefit from the "disregarded income" clause in tax legislation. Under that clause gross savings interest income and gross dividend income has not previously been taxed, except to the extent of any taxation already deducted at source; there will be no tax deducted at source on interest or dividends next year and the draft Finance Bill does not seek to introduce any special witholding tax on non-residents and it does not mention the disregarded income clauses at all. In the absence of any such mention it seems likely that the disregarded income clause will continue to benefit those non-residents next year; in fact, if my assumptions are correct, they will be in an even better position since hitherto they have suffered the taxation at source (20% on savings and 10% on dividends) which will no longer be charged by banks and companies.

The interplay of 0% rates, special rates on dividends, new allowances and the continuing personal allowance is not easy to grasp without worked examples. My brain hurts just writing this, but I guess I could work some up if anyone expressed an interest.

[Retired Chartered Accountant, but not a tax specialist beyond my own personal interest. E&OE!]

Edited December 17, 2015 by SantiSuk

[JB300]

Thanks SantiSuk, really hope you're right about no changes for non-Tax residents re disregarded income [emoji106]

Cheers

JB

[SantiSuk]

Thanks SantiSuk, really hope you're right about no changes for non-Tax residents re disregarded income [emoji106]

Cheers

JB

Prior to the publication of the draft Finance Bill there were tax experts and supposed insiders at the Institute (Chartered Accountants) speculating that disregarded income clauses could be deleted from legislation. It seems highly unlikely to me that this would now be introduced having watched the Statement to Bill to Law progression over the years.

I've only read one expert comment post the Bill on the internet. He speculated that non-resident changes are unlikely to come out of the blue of the consultation period since there are lots of wealthy expats who are mates of the Chancellor and stuff like this is just not bomb-dropped without flagging. Whether that is true or not I dunno, but I won't be bragging about the potential for an even better tax position next year in any broader forum than this!

There is a phone number contact for the new savings and tax rules in the Notes to the Draft Bill and one could ask the relevant HMRC guy if there is anything on a side table. Think I'll let sleeping dogs lie though!

[KittenKong]

.... it seems likely that the disregarded income clause will continue to benefit those non-residents next year; in fact, if my assumptions are correct, they will be in an even better position since hitherto they have suffered the taxation at source (20% on savings and 10% on dividends) which will no longer be charged by banks and companies.

For the savings that's my understanding also. I'm looking forward to it as not all deposit takers would accept R105 forms, which sometimes excluded me from better products.

But I'm expecting my dividends to be taxed at source as before with no possibility of reclaiming the tax also as before (and no further liability either). I dont think that residents will avoid that tax either.

[SantiSuk]

Why are you expecting your UK dividends to be taxed at source KittenKong? The Government has already announced in the Autumn Statement and set it out in detail in the Finance Bill that the system of tax credits is to be abolished. Read the overview document here:

https://www.gov.uk/government/collections/finance-bill-2016

You expecting the Chancellor to have a Saul on the road to Damascus moment a la working tax credits?

[KittenKong]

I know they are abolishing the tax credits, but as far as I know they aren't abolishing the tax behind them. That tax is really a corporation tax and it's paid by the company. In 1997 Gordon Brown stopped non tax payers (individuals and pension funds) from reclaiming that tax.

As far as I know that tax is not going to be removed, or altered so that it can be reclaimed. Just the tax credit will go. So in fact those who could actually use the tax credit to offset other tax due (not me as I have no taxable UK income) will lose the value of it from April. The value of the dividends they receive will not rise but they will gain the same new dividend allowance as everyone else.

So I'm not expecting there to be any new taxation at source, and I'm not expecting any change to the tax at source/corporation tax that already exists, apart from the abolition of the tax credit that currently comes with it. Hence my comment about everything "as before" (with the exception of the disappearing tax credit which was worthless to me anyway).

That's my understanding anyway. Sorry if I wasnt clear.

[AyG]

I know they are abolishing the tax credits, but as far as I know they aren't abolishing the tax behind them. That tax is really a corporation tax and it's paid by the company. In 1997 Gordon Brown stopped non tax payers (individuals and pension funds) from reclaiming that tax.

As far as I know that tax is not going to be removed, or altered so that it can be reclaimed. Just the tax credit will go. So in fact those who could actually use the tax credit to offset other tax due (not me as I have no taxable UK income) will lose the value of it from April. The value of the dividends they receive will not rise but they will gain the same new dividend allowance as everyone else.

So I'm not expecting there to be any new taxation at source, and I'm not expecting any change to the tax at source/corporation tax that already exists, apart from the abolition of the tax credit that currently comes with it. Hence my comment about everything "as before" (with the exception of the disappearing tax credit which was worthless to me anyway).

That's my understanding anyway. Sorry if I wasnt clear.

That's partly right. Many countries operate a withholding tax on dividend payments, but Britain isn't one of them. The tax credit is purely notional and doesn't relate to any tax paid.

However, as you say, the amount of dividend actually paid won't change.

At least, that's my understanding.

[alfieconn]

The main benefit to non residence was for CGT exemption which has now been removed. I just don't see the value of it.

The CGT exemption has only been removed on residential property. For someone who has been non resident for five plus years there is still no CGT liability on the disposal of other kinds of assets eg shares and certain other kinds of property.

Frankly anyway there is very little financial reason for a long term expat to hold UK residential property anymore. The UK government is sending a very clear signal that it will continue to bias the tax regime, around residential property, against all except owner occupiers. (A smart and necessary policy shift in my opinion.)

For many people there are still very significant advantages in being treated as a non resident by HMRC eg all non UK sourced income out of scope and also significant exemptions on UK sourced income eg on dividends and bank deposits.

All above is very true, but most people's wealth is tied up in residential property and the exemption from cgt was the most significant saving.

Yep, time to sell in the uk.

There still is exemption from CGT on capital gains up until Apr 2015 !

[Jip99]

. Under that clause gross savings interest income and gross dividend income has not previously been taxed, except to the extent of any taxation already deducted at source; there will be no tax deducted at source on interest or dividends next year and the draft Finance Bill does not seek to introduce any special witholding tax on non-residents and it does not mention the disregarded income clauses at all. In the absence of any such mention it seems likely that the disregarded income clause will continue to benefit those non-residents next year; in fact, if my assumptions are correct, they will be in an even better position since hitherto they have suffered the taxation at source (20% on savings and 10% on dividends) which will no longer be charged by banks and companies.

[Retired Chartered Accountant, but not a tax specialist beyond my own personal interest. E&OE!]

Thanks SantiSuk and at least the disclaimer means you cannot charge for your services!

I would like to follow up on one point on dividends:-

At present a company, in which I am a shareholder, suffers 10% tax. The net dividend is paid to me and that represents 'gross income' to me and would go on my my tax return if I was 'resident'. As a non-resident there is no further liability to tax as this is 'disregarded income'.

As I see it, the proposed changes simply benefit the company by virtue of removal of the 10% tax (Corporation tax has already been paid on profits). For the resident, or non-resident, recipient of the dividend nothing seems to have changed (assuming continuation of disregarded income) - except the dividend allowance of 5000.

Does that sound about right ?

My reason for asking is that I am not formally non-resident but (for various reasons)I may become so in April.

[huawei]

The main benefit to non residence was for CGT exemption which has now been removed. I just don't see the value of it.

The CGT exemption has only been removed on residential property. For someone who has been non resident for five plus years there is still no CGT liability on the disposal of other kinds of assets eg shares and certain other kinds of property.

Frankly anyway there is very little financial reason for a long term expat to hold UK residential property anymore. The UK government is sending a very clear signal that it will continue to bias the tax regime, around residential property, against all except owner occupiers. (A smart and necessary policy shift in my opinion.)

For many people there are still very significant advantages in being treated as a non resident by HMRC eg all non UK sourced income out of scope and also significant exemptions on UK sourced income eg on dividends and bank deposits.

All above is very true, but most people's wealth is tied up in residential property and the exemption from cgt was the most significant saving.

Yep, time to sell in the uk.

There still is exemption from CGT on capital gains up until Apr 2015 !

Yes. If you had been non resident based on your tax returns for more than 5 years prior to April 2015.

Sorry I should have added the date.

[SantiSuk]

I've been banging on a bit about the changes to the taxation of dividends being potentially good news to non-resident Brits who have substantial levels of dividend income. As a conclusion that has been bothering me as I could not understand why HMRC would let an advantage accrue to expats. Postings by Kitten Kong and Jip99 also prompted me to re-engage brain. I have now done some back of the envelope calcs on my own return - I have quite high levels of UK didvidend and savings interest - and realise I made a fundamental mistake in stating that non-residents "suffered the taxation at source (20% on savings and 10% on dividends) which will no longer be charged by banks and companies".

That was wrong with respect to dividends; non-residents do not suffer any tax at source on dividends under the existing regime. The tax credit is purely notional and although it is included ("notionally grossed up") in the Income Received section of HMRC's tax calculation, it is the notionally grossed up dividend that is then removed from the calculation as disregarded income (where the disregarded income basis is beneficial), resulting in their being no effect on their tax liability. For 2016 those that benefit from the disregarded income basis will include dividends in their tax returns without grossing up for the notional tax credits and that same un-grossed income will then be disregarded. There is no change between 2015 and 2016 in terms of tax impact.

That's ok in my book - the existing disregarded income basis is good for non-resident expats and I can no longer see any reason now why HMRC would want to tinker with it in the absence of any broader attack on non-resident taxation. Sorry for creating a bit of a storm in a teacup. I'll do some illustrations of the before and after taxation effects on typical expats of several income levels in due course and post them here.

[SantiSuk]

Thanks SantiSuk and at least the disclaimer means you cannot charge for your services!

I would like to follow up on one point on dividends:-

At present a company, in which I am a shareholder, suffers 10% tax. The net dividend is paid to me and that represents 'gross income' to me and would go on my my tax return if I was 'resident'. As a non-resident there is no further liability to tax as this is 'disregarded income'.

As I see it, the proposed changes simply benefit the company by virtue of removal of the 10% tax (Corporation tax has already been paid on profits). For the resident, or non-resident, recipient of the dividend nothing seems to have changed (assuming continuation of disregarded income) - except the dividend allowance of 5000.

Does that sound about right ?

My reason for asking is that I am not formally non-resident but (for various reasons)I may become so in April.

Not quite right Jip99. The company pays whatever rate of corporation tax it is due to pay. I doubt that it is 10% and I think you may be confusing corporation tax for small companies with the notional tax credit that they have in recent years notified to shareholders when they pay a dividend. So set that aside - the company will carry on paying corporation tax as before and the changes to personal taxation in respect of dividends has no impact on them other than they do not need to calculate and inform shareholders of the amount of tax credit attaching to the dividend they are paying out. The company is neither benefited or disadvantaged financially by a requirement to dispense with giving shareholders this bit of information.

For UK residents, in summary the changes are not massive, but the previous system of tax credits and bands of tax rates have been replaced by the £5,000 dividend allowance (effectively a nil rate band) and revised rate bands for levels of income above that. What's the impact? Difficult to generalise - you almost have to work it out on a case by case basis. A Telegraph article states:

"While it’s true that many will pay more, such as basic-rate taxpayers who receive more than £5,000 in dividends, there are others, such as higher-rate taxpayers with £5,000 or less in dividend income, who will gain – currently they pay 25 per cent on the whole sum (or £1,250), while under the new regime there will be no tax to pay, thanks to the £5,000 allowance".

Non-residents are taxable on the same basis as residents for dividends arising in the UK, which means that they benefit from the same personal allowances and will presumably benefit from the new dividend allowance also. The exception to that statement are non-residents with higher levels of dividend income (reasonably significantly higher - but I have not worked out the threshold and it probably depends on the level of their other income too). They benefit from the disregarded income clause in tax legislation- which I discuss in previous postings. I suspect that nearly all non-residents in one way or another will be untaxed on their UK dividend income in 2016, but there may be a few "trapped" in the middle.

If your dividend income is less than £5,000 non-residence gives you no tax advantages. If your dividend income is large (certainly if it's over say £20,000) there are significant advantages under existing (and, I am reasonably confident, continuing legislation in being non-resident. In between, wait for me to put up some illustrations or get a tax adviser! It's cold-towel stuff even for an ex-accountant.

Taxation of Dividends

Under the current system, basic-rate taxpayers pay no tax on their dividend income, while higher-rate taxpayers pay an effective rate of 25 per cent and additional-rate taxpayers pay 30.56 per cent. So taxpayers in all bands pay less than they would on earned income. This is because dividends are paid out of company profits that have already suffered corporation tax.

Under the new system, the first £5,000 of dividend income in each tax year will be tax-free. Sums above that will be taxed at 7.5 per cent for basic-rate taxpayers, 32.5 per cent for higher-rate taxpayers and 38.1 per cent for additional-rate taxpayers. The new tax takes effect on April 6, 2016. No tax will be deducted at source; taxpayers must use self-assessment to pay any tax due.