Originally posted on: 17 September 2024
Updated on: 19 January 2026
Also see our other blog articles (a) A Look at the UK and Australia Double Tax Agreement, (b) Tax advice for Australians moving to the UK (c) Overseas Clients: A Guide for UK-Based Australian Contractors, where you’ll find essential information and tips tailored for those navigating contract work across borders
Have you moved to the UK from Australia and wondering how your Australian income impacts your UK taxes? You’re not the only one. In this week’s blog, I talk about an Australian couple who live in the UK and approached us several weeks ago to help with their personal tax planning. They had been living in the UK for just over 13 months and both have overseas income from Australia.
They were unsure how to report this income on a UK tax return or even if a UK tax return was due. This sort of scenario is common for both our personal tax clients and our limited company contractor clients, especially when they have come to the UK from a different country and still have other sources of income from that other country.
As you will know from our other blogs a high proportion of our clients were not born in the UK, so we are familiar with handling these sorts of cross-border tax questions.
In this case, our two clients thought they both needed to file UK tax returns including their Australian income. They were surprised to learn that for one of them, this was not the case. So let’s take a look at their scenario and learn from some of our clients experiences so you that might be able save yourself some time and money.
The Set-Up
William and his wife Susie moved to the UK from Australia in July 2023. Their plan is to base themselves in the UK but do a lot of travelling throughout Europe for the next few years. They have sufficient savings to support themselves, and their cost of accommodation in the UK is zero (because they are staying with family).
They both have some investments in Australia and some dividend income from these investments. They also have personal bank accounts in the UK but earn very little bank interest from them because these tend to be used to meet their living costs. They transfer money over from Australia as and when it is required.
They also have a rental property in Australia, which is their primary source of income. The rental property makes a profit of £18,000 per year, and because it is owned equally between William and Susie, the respective income for each of them personally is £9,000.
When William arrived in the UK, he undertook some short-term paid work and earned £10,000 over a two-month period. This work was taxed at source, so William has already paid tax on this income.
They spend enough time in the UK to be UK tax residents, and having a permanent establishment in the UK (and no home back in Australia with no plans to return anytime soon) their tax residency in Australia ended on the day they left Australia.
“…the service has been fabulous.”
Ah Mike, we think you’re pretty fabulous too!
Australian Personal tax Return
We found William and his wife were both well informed about what their tax obligations in both Australia and the UK. They just wanted to be sure that they were doing things correctly.
Even though they no longer live in Australia they still must file an Australian tax return for their Australian sourced income. This is common in many countries, where the country will tax the individual on certain forms of income where that income has been earned within the country, with the most common being dividend income from Australian companies, bank interest income, and rental property income (where the rental property is based in Australia).
The useful thing to have here is a tax treaty (double taxation agreement) with the country you are living in, to ensure that the tax you pay in Australia is not also taxed in the country that you live in.
Fortunately, there is a double taxation agreement between Australia and the UK which covers these forms of income and essentially states you don’t need to pay tax in both countries on the same income. For any Australian-sourced income that is included on their UK tax return, they’ll get a tax credit for any tax already paid in Australia.
As a side note we recently had another client who left Australia in 2016 to live in Dubai, and then moved from Dubai to London in 2018. When they left Australia, they rented out their family home and it has been a rental property for the last eight years. Not once have they filed the UK tax return to declare that rental income, and they got in touch with us after receiving a letter from the HMRC suggesting that they may have overlooked Australian rental property income when filing their taxes in the UK.
UK Tax Return – William
William suspected that he would be required to file a UK tax return for the 2023-24 tax year because the combined income that he had earned in the UK, along with his Australian rental property income and investment income, took him over the personal allowance threshold.
Note the UK personal allowance is the amount of income you can earn in the UK completely tax free. For the 2023/24 tax year this is £12,570. Once your earnings exceeds this then your income starts to get taxed.
Generally speaking, for our UK based clients if they have income that is not taxed normally through the Pay As You Earn (PAYE) system, such as dividend income or foreign income, then they need to file a UK personal tax return to declare their income and pay the correct amount of tax.
In this case William had £10,000 of UK income, £9,000 in rental income from his share of the Australian property, and £2,000 dividend income from his share in investments in Australian companies. He had already paid £900 in tax to the Australian Tax Office (ATO) for his rental property income, and £500 in tax on his dividend income (he paid the ATO in Australian dollars, I’m just using the converted values here in GBP to keep things simple😊).
The income that he earned in the UK shortly after arriving had been paid in two lots of £5,000 over two months and had £742 in taxes deducted.
So, in total his gross income was 10,000 + 9,000 + 2,500 = £21,500, and when factoring in taxes already paid in Australia on his foreign income, overall he was due a UK tax refund of £356.
UK Tax Return – Susie
Susie had the exact same earnings as William from Australia, because the rental property and the investments were owned equally between them. This means she had rental property income of £9,000 and dividend income of £2,000. This income had already been taxed in Australia at the same rates as William had paid.
Because William was required to file a personal tax return, they had just assumed that Susie would also need to file one. After speaking with us, she realised that there would be no UK tax to pay on that foreign income (as her total income did not exceed the UK personal allowance), and as a result, there was no requirement to file a UK personal tax return.
However, she was not 100% sure if the HMRC had already contacted her asking for a tax return to be completed (if the HMRC request you to file a tax return then generally speaking you must). Then, just through coincidental timing, she received an email from the HMRC a couple of days later asking her to check if she was required to file a UK personal tax return. Here is the text of the first part of email;
Dear customer,
If you’ve already filed your tax return, thank you – you can ignore this email.
If you think you don’t need to file a Self Assessment tax return for the 2023 to 2024 tax year, you must let us know.
You can use our online tool to check.
You must tell us if:
• you’ve stopped being self-employed
• you’re not self-employed and you don’t need to send a return
You can do this by filling in one of our online forms. If you don’t, we’ll keep writing to you to remind you to file your return and we may charge you a penalty.
You’ll find guidance about stopping Self Assessment in our YouTube videos.
You’ll still need to file a Self Assessment tax return, if:
• you’ve already told us you don’t need to be in Self Assessment because your circumstances changed between 6 April 2023 and 5 April 2024
• we’ve already written to you to ask you to file a return – even if you think you don’t have anything to pay
At this point she was directed to an online form to complete that would tell her if a personal tax return was required. The wording of the form however is very unclear and I think it would be hard for any newcomer to the UK tax system to correctly navigate this question. I’ve included a screenshot to the question below along with the URL.
https://www.gov.uk/check-if-you-need-tax-return
Question 7 is “Do you need to pay tax on any of the following?”, and if Susie had not received our advice she would not have known. I mean, the purpose of this questionnaire is to find out if you need to pay tax and she could easily have ticked the box “Income from outside the UK (includes pensions). “
In her case we knew she had no tax to pay, so we suggested she call the HMRC (we were not her appointed tax agent) and explain to them she had £11,000 of foreign income, and that because it fell below the personal allowance threshold, that no obligation falls on her to complete a self-assessment.
She obviously did a great job on the call because the HMRC officer agreed it was fine not to file a UK tax return, and he also removed her from the self-assessment filing system going forward.
Note, its not always this straightforward dealing with the HMRC as there is no doubt their service levels have dropped in recent years, but in this case a simple phone resolved the situation for her perfectly. Plus, she saved her money not needing to pay for our tax return service.
“…the service has been fabulous.”
Ah Mike, we think you’re pretty fabulous too!
Summary
In our blog this week we are looked at an Australian couple William and Susie who moved to the UK and asked for advice on their overseas income and UK tax. They had been in the UK for over 13 months and were unsure if they needed to file UK tax returns on their Australian income.
As it turned out, William had to file a UK tax return as his total income exceeded the personal allowance (and it turned out he was due a small refund). But Susie’s income was below the personal allowance, and after getting advice from us, and reading the unclear guidance from the HMRC, a phone call with the HMRC helped Susie confirm she didn’t need to file a return and save her money on using our tax return service.
It was a nice results for this couple, and it meant they could resume their travels around Europe knowing both their Australian tax and UK tax obligations were completely in hand.
Frequently asked questions
Do I need to file a UK tax return if I have Australian income but live in the UK?
Provided you are a tax resident of the UK then generally speaking yes you need to declare your Australian income on your UK personal tax return. There is no mechanism to automatically tax foreign income which is why the requirement for personal tax to exists. Lets exclude any non-dom tax planning opportunities at the moment because it appears these will shortly be eliminated in the UK anyway.
How does the double taxation agreement between the UK and Australia work?
There are lots of facets to the double taxation agreement but for the vast majority of our clients what it means is if you pay tax on income earned in Australia and you are tax resident of the UK, then any tax you have already paid in Australia is available to be offset against your UK tax liability. The most common types of income that we see is dividends from Australian companies, Australian bank interest, and rental income from Australian property.
What happens if I receive a letter from the HMRC asking me to file a tax return even though I think I don’t need to?
If you get a letter from HMRC asking you to complete a personal tax return, then generally speaking, you should go ahead and do that.
In many cases where there is certainty that no UK tax is due, our clients have been able to speak with HMRC directly and get themselves removed from the self-assessment system. Once done, there is no longer a requirement by HMRC for them to file a personal tax return.
What are the potential penalties for not filing a UK tax return when required?
In the UK, not filing a tax return when you should will result in penalties from the HMRC. If your tax return is up to 3 months late you’ll get a £100 fine. But if it’s not filed after that, more penalties will apply. From 3 months after the deadline you can get a daily penalty of £10 for 90 days which can add up to a maximum of £900.
As well as these penalties, interest will be charged on any unpaid tax from the due date until paid. There is also a late payment surcharge of 5% of the unpaid tax if payment is more than 30 days late, with further 5% surcharges at 6 and 12 months if the tax remains unpaid.
Penalties can be reduced if you have a reasonable excuse for late filing, such as serious illness or natural disasters. You also have the right to appeal against penalties if you think they’re unfair or incorrect but you’ll need to provide evidence to support your claim.