The Statutory Residence Test (SRT) is a set of rules that determine whether an individual is considered a resident in the UK for tax purposes.
Introduced in April 2013, it provides clear guidelines based on an individual’s connections to the UK and the amount of time they spend in the country during a tax year (from 6 April to 5 April the following year).
Your UK residence status is crucial because it determines your tax liability. If you are deemed a UK resident, you’ll be subject to UK tax on your worldwide income and gains. Non-residents, on the other hand, only pay UK tax on their UK-sourced income.
In this blog, we’ll explain the SRT rules, highlight a potential trap around UK home ownership, and offer an example to illustrate how it can apply in practice.
What is the Statutory Residence Test (SRT)?
The SRT is a three-part test designed to establish residency based on the number of days you spend in the UK and your connections to the country. It comprises:
- The Automatic Overseas Test
- The Automatic UK Test
- The Sufficient Ties Test
1. The Automatic Overseas Test
If any of these conditions apply, you will automatically be considered a non-resident for the tax year:
- You spent fewer than 16 days in the UK (if you were a UK resident for any of the previous three tax years).
- You spent fewer than 46 days in the UK (if you were a non-resident for the previous three tax years).
- You worked full-time overseas and spent fewer than 91 days in the UK, with no more than 30 days of work (three hours or more) in the UK.
If none of the conditions above apply, you will move on to the next test.
2. The Automatic UK Test
You’ll be automatically considered a UK resident if:
- You spend 183 or more days in the UK during the tax year.
- You have a UK home, available for at least 91 days, where you spend at least 30 days during the tax year.
- You work full-time in the UK for any period of 365 days, with at least 75% of your workdays being in the UK.
If you meet none of these criteria, you will proceed to the Sufficient Ties Test.
3. The Sufficient Ties Test
This test applies if neither the automatic overseas nor the automatic UK tests give you a clear result. It examines your ties to the UK, such as having a family in the UK, available accommodation, substantive UK workdays, and more. The more ties you have, the fewer days you can spend in the UK without being considered a resident.
Beware of the UK home trap
One of the less obvious traps in the Statutory Residence Test is related to the UK home condition under the second automatic UK test. Many people who leave the UK or spend substantial time abroad may unwittingly retain their UK residence status by maintaining a home in the UK, even if they spend the majority of the year elsewhere.
The rule states that if you have a home in the UK available to you for at least 91 days during the tax year, and you spend 30 days or more in that home, you may automatically be considered a UK resident. This can be true even if you don’t spend 183 days or more in the UK, which is the threshold under the first automatic UK test.
This is a common pitfall for those who may have left the UK with the assumption that they’ve broken their ties. Retaining access to a UK home, such as keeping a house, flat, or even regularly staying with family, can trigger residency, leading to unexpected tax consequences.
Example: The UK home trap in practice
Let’s consider a real-world example to understand how this rule can apply.
David is a British national who moved to Spain in 2022 to take up a new job. He spends the vast majority of the tax year abroad, only visiting the UK for family holidays or short trips. He does, however, keep his family home in the UK, where his adult children live. While David thinks of himself as a non-resident for tax purposes because he works full-time abroad and is rarely in the UK, he makes a couple of trips back home during the tax year, spending 35 days in total in his UK house.
Although David has spent far fewer than 183 days in the UK, he still meets the second automatic UK test for residency. His UK home is available to him for more than 91 days, and he spends at least 30 days in it during the tax year. Consequently, he is classified as a UK resident for tax purposes, and his worldwide income, including that earned in Spain, is subject to UK tax.
David could have avoided this situation by either limiting his days spent at the UK property to fewer than 30 or by ensuring that his home is no longer available for his use (e.g., selling or renting it out on a long-term basis).
How can we help?
The Statutory Residence Test is designed to be a clear and objective way to determine tax residency, but it’s essential to understand the finer details to avoid pitfalls, particularly if you retain a UK home.
If you are planning a move abroad or already living overseas, it’s important to review your ties to the UK carefully, especially if you still have a home in the country. A failure to plan your movements and property arrangements can lead to an unexpected UK residency status – and a hefty tax bill.
For help navigating the SRT rules or managing your tax status, contact your relationship principal, email tax@haroldsharp.co.uk or call 0161 905 1616.