School of Law & Auditing

In the UK, the scope of total income under the Income Tax Act 2006 depends primarily on an individual’s residence status, determined by the Statutory Residence Test (SRT). Residents are taxed on worldwide income, while non‑residents are taxed only on UK‑sourced income.

📘 Residence Rules (Statutory Residence Test – SRT)

• Automatic UK Tests (Resident if any apply):
  • Spent 183+ days in the UK in the tax year.
  • Only home was in the UK for 91+ consecutive days, with at least 30 days of use.
  • Worked full‑time in the UK for 365 days, with at least one day falling in the tax year.
• Automatic Overseas Tests (Non‑Resident if any apply):
  • Spent <16 days in the UK (or <46 days if not resident in the previous 3 years).
  • Worked abroad full‑time (≥35 hours/week), spent <91 days in the UK, and worked ≤30 days in the UK.
• Sufficient Ties Test (applies if neither automatic test is conclusive):
  • Considers UK ties such as family, accommodation, work, and prior residence.
  • The more ties retained, the fewer days allowed in the UK before becoming resident.
• Split‑Year Treatment:
  • Tax year can be split into resident and non‑resident parts when moving in/out of the UK.
  • Ensures tax applies only to income during the UK‑resident portion.

💰 Scope of Total Income

• Residents:
  • Taxed on worldwide income (UK + foreign sources).
  • Includes employment, business profits, property income, dividends, interest, and capital gains.
  • Reliefs may apply under double taxation treaties.
• Non‑Residents:
  • Taxed only on UK‑sourced income, such as:
    • UK employment income.
    • Rental profits from UK property.
    • Capital gains on UK land/property.
• Foreign Income & Remittance Basis:
  • Historically, non‑domiciled residents could opt for remittance basis (taxed only on foreign income brought into the UK).
  • Since 2024, the Foreign Income and Gains (FIG) regime applies:
    • New UK residents (after 10 years abroad) can claim relief on foreign income/gains for their first 4 years.
    • Relief forfeits certain UK allowances and cannot be carried forward.

📊 Quick Comparison Table

Status	Tax Scope	Key Tests/Rules
Resident	Worldwide income taxable	Automatic UK tests, sufficient ties
Non‑Resident	Only UK‑sourced income taxable	Automatic overseas tests
Split‑Year	Tax applies only to UK‑resident part	Moving in/out of UK
FIG Regime	Relief on foreign income/gains (first 4 years)	Must be new UK resident after 10 years abroad

⚠️ Key Risks & Considerations

• Temporary Non‑Residence Trap: Income/gains realized abroad may be taxed if you return within 5 years.
• Day Count Accuracy: Keep detailed records of UK days to avoid misclassification.
• Loss of Allowances under FIG: Claiming FIG relief may reduce personal allowances.

✅ These notes give you a structured, exam‑ready overview of Residence and Scope of Total Income under the UK Income Tax Act 2006.