Originally posted on: 27 January 2025
Updated on: 2 February 2026
When I first arrived in the UK, I didn’t give much thought to UK or New Zealand tax residency. I simply assumed that I would stop being a New Zealand tax resident when I left the country and that I would automatically become a UK tax resident from the day I arrived.
To be honest, I probably couldn’t have told you what it meant at the time, and I suspect I wasn’t alone in that. Like many Kiwis and Australians heading to the UK, I figured you pay tax where you live, and that’s the end of it. Turns out, it’s a little more complicated than that, especially when you’ve still got financial ties back home.
Fast forward to now, and I often hear from Kiwis and Aussies who are navigating the UK tax system for the first time. A couple of weeks ago, I had a call from a client who’d been in the UK for just over a year. He was working in the UK, earning a decent salary, but also had a rental property back in Australia bringing in a small profit. He was under the impression that he didn’t need to worry about UK taxes on his Aussie property because “it’s already taxed back home.”
What he hadn’t realised, and what trips up so many Kiwis and Aussies, is that the question of whether you’re a UK tax resident is the key to how your finances are treated. If you’re a UK tax resident, you’ll need to report most foreign income in the UK, even if it’s already been taxed overseas. And if you’re not a UK tax resident? Well, that’s a very different story, with far fewer obligations and some surprising benefits.
You can live and work in the UK without being a UK tax resident, which means you only pay tax in the UK on your UK-sourced income. You wouldn’t have to report any foreign income for example. It’s an outlier of an example, but it still helps illustrate how important it is to understand your tax residency.
Let’s quickly address another misconception. If you live in the UK and pay tax in New Zealand or Australia, such as on a rental property or interest income, this does not make you a tax resident of that country. You may, of course, be a tax resident in the UK, New Zealand, or Australia, but the payment of taxes on any form of income to any of those countries does not influence your tax residency status.
When I discuss tax planning and tax efficiency with clients, the first step is always to establish tax residency. With that in mind, let’s crack on with the blog.
Why Does It Matter
Tax residency is far more than a box to tick on a form. It’s the foundation of how your income is taxed, what you need to report, and even what financial advantages or challenges you might face. For Kiwis and Aussies living in the UK, understanding your tax residency status is the first step in understanding your tax obligations.
Income Tax and Foreign Earnings
If you’re classified as a UK tax resident, the implications for your foreign income are significant. The UK operates on a worldwide income basis, which means that as a tax resident, you’re required to report and potentially pay UK tax on income earned overseas. This could include rental income from a property in New Zealand or Australia, dividends from shares, or even interest on savings accounts.
Now, you might be thinking, “But I already pay tax on that income in New Zealand or Australia, why should I have to pay again?” Here’s where the UK’s double taxation agreements (DTAs) come into play. The UK has agreements with both New Zealand and Australia to prevent you from being taxed twice on the same income. However, these agreements don’t necessarily mean you’re off the hook. You’ll still need to report your foreign earnings on your UK tax return and may need to pay additional tax if the UK’s rates are higher than those of your home country.
A common example of this is rental property income. If you own a rental property in New Zealand or Australia, the rules for determining the taxable profit from that property tend to be more favourable in New Zealand and Australia than in the UK. For example, a loss-making property in Australia might actually be considered a taxable profit under UK rules.
Now there are two other things to be aware of that affect the foreign income you need to report. One surrounds the non-dom tax rules and using the remittance basis (this regime ends on 05 April 2025), and the other is the new FIG regime (starts from 06 April 2025 onwards) that can benefit people who are new to the UK. For the purposes of this tax residency blog, I have left these two items out, but they both could help you avoid needing to declare your foreign income in the UK (there are consequences though).
Dual-Tax Agreements: Your Safety Net
This brings us to one of the most important aspects of tax residency: the role of DTAs. These agreements are designed to provide clarity and prevent individuals from being taxed unfairly in two countries on the same income. If you’re a tax resident in both the UK and New Zealand or Australia, the relevant DTA will determine which country has the primary right to tax your income.
If you have foreign income from (say) New Zealand that is taxed in New Zealand, the DTA does not mean you don’t need to declare that income in the UK. In the vast majority of cases, you still do.
More Than Just Income Tax
Tax residency also affects other taxes beyond income. For instance, inheritance tax (IHT) rules in the UK are vastly different from those in New Zealand or Australia. If you’re a UK tax resident, your worldwide assets, including properties, bank accounts, and investments, may be subject to UK inheritance tax. This can come as a shock to many Kiwis and Aussies, as neither New Zealand nor Australia has an inheritance tax regime.
On the flip side, if you’re not a UK tax resident, your liability for inheritance tax is limited to UK-based assets. For some individuals, this distinction could significantly impact how they manage their financial planning and estate.
The Bottom Line
Your tax residency isn’t just about ticking the right boxes; it’s about understanding how your financial obligations shift depending on where you live, where your income is earned, and how international agreements come into play. Failing to get it right can result in costly penalties or missed opportunities for tax efficiency.
To summarise, if you are a tax resident of the UK, you fall within all UK tax rules for all types of taxes across all forms of income (including foreign income and capital gains). However, if you live and work in the UK without becoming a UK tax resident, you only pay UK tax on your UK-sourced income / assets and are not subject to the broader taxation rules relating to foreign income and inheritance tax.
Introduction to the Statutory Residence Test (SRT)
If there’s one tool that underpins the UK’s approach to tax residency, it’s the Statutory Residence Test (SRT). Introduced in 2013, the SRT is the government’s framework for determining whether an individual is a UK tax resident in any given tax year. It’s methodical, thorough, and, as many Kiwis and Aussies have discovered, a bit of a game-changer when it comes to understanding your tax obligations.
At its core, the SRT is designed to remove the guesswork from tax residency. Gone are the days when tax residency could be a fuzzy concept open to interpretation. So let’s get into it.
Working Out Your UK Residency
There are three main rules for determining if you are a UK tax resident, and for most Kiwis and Australians, residency will be established under either the first or second rule.
Determining your UK tax liability involves a two-step process. The first step is to establish whether you qualify as a UK tax resident for a particular tax year. If you do, you’re considered a tax resident for the entire tax year, not just from the date you arrived in the UK. For example, if you moved to the UK from Australia on 1 December 2024, any income you earned in Australia from 6 April 2024 to 1 December 2024 would also be subject to UK tax.
Fortunately, there’s a helpful second step: split year treatment. This rule, which we’ll cover in more detail later, allows you to ignore any foreign income earned before your arrival in the UK, provided you meet the necessary conditions. This simplifies your UK tax reporting and makes sense from a practical point of view.
Rule 1. First automatic UK test
The first rule is incredibly straightforward: if you spend more than 183 days in the UK during a tax year (6th April to 5th April), you automatically become a UK tax resident for the tax year.
Examples of the First Automatic UK Test
- Arriving on 1st May and staying for two years
Let’s say you arrive in the UK on 01 May 2024 and plan to stay for at least two years. In your first tax year (6th April to 5th April), you’ll spend more than 183 days in the UK. As a result, you’ll automatically become a UK tax resident for the 2024/25 tax year. - Arriving on 15th June and staying for eight months
Now imagine you arrive on 15 Jun 2024 and stay for only eight months, leaving in mid-February 2025. In this case, you’ll still meet the 183-day rule during the tax year and be a UK tax resident for the 2024/25 tax year. - Arriving on 20th November
If you arrive in the UK on 20 Nov 2024, there aren’t enough days left in the tax year (which ends on 5th April) to reach 183 days. Therefore, you won’t meet this test, even if you remain in the UK for the rest of that tax year. - Arriving on 10th July and staying for four months
Suppose you arrive in the UK on 10 Jul 2024 and stay for only four months, leaving in early November. In this case, you won’t reach 183 days in the UK during the tax year, so you won’t meet this first automatic UK test.
Rule 2. Second automatic UK test
If you get to here, and you have not met the first automatic UK test, no problem. You now move on to the second test to determine if you have become a UK tax resident.
The second automatic UK test focuses on whether you have a home in the UK and how much time you spend there, compared to any homes you may have overseas. If you don’t meet the criteria of Rule 1 above you will usually meet this one. This rule applies if all the following conditions are met:
- You had a home in the UK for at least part of the tax year. Note a home is typically described as a place where you live on a regular basis (it doesn’t need to be owned; it could be rented or even just a place you occupy regularly).
- There is at least one period of 91 consecutive days during which you had that home in the UK, and at least 30 of those days fall in the tax year, and during those 30 days you actually spent time living there.
- During that time, you didn’t have a home overseas, or if you did, you spent fewer than 30 days in it during the tax year.
If all these conditions are true, you’ll automatically be a UK tax resident.
Examples of the Second Automatic UK Test
- Living in the UK with no overseas home
Let’s say you moved to the UK on 01 Mar 2025 and rent a flat with friends. You live in this flat until 16 July 2025, when you leave the UK and head back to New Zealand. As long as you don’t have a home overseas during this period, you meet the criteria of being in the UK for 91 days, with 30 of those days falling within the tax year with you living in your UK home. In this scenario, you meet the second UK test for tax residency and became a UK tax resident for the 2024/25 tax year. - Living in the UK with an overseas home
Using the same scenario as above, but this time the person continues to pay rent for their house in New Zealand, which they had been living in for the two years prior to moving to the UK. Because they have a home overseas and spent more than 30 days in it during the tax year (eg from 06 April 2024 to 01 Mar 2025 when they left for the UK), they would not meet the criteria for the second UK test for tax residency, and so are not a tax resident for the 2024/25 tax year. - Living in the UK for Less Than 91 Days
Let’s say you moved to the UK on 01 Mar 2025 and rent a flat with friends. You live in this flat until 15 May 2025, when you leave the UK and return to New Zealand. Since your time in the UK home was less than 91 consecutive days, you don’t meet the criteria for this test and so are not a tax resident for the 2024/25 tax year.
Generally speaking, Kiwis and Australians who arrive in the UK after 7th March of the tax year, or who maintain a home in New Zealand / Australia where they spend more than a month each year, do not meet the second automatic UK test for a relevant tax year.
Rule 3. Third automatic UK test
If you are looking at the rules surrounding the third automatic UK test, you’re among a very small number of Kiwis and Australians who haven’t met the first or second tests. This third test typically picks up everyone else, and, as you can imagine, it gets quite specific at this stage.
Rule 3. Third Automatic UK Test
The third automatic UK test applies if you work full-time in the UK for a continuous 12-month period, where most of your work is done in the UK. To meet this test, all the following must apply:
- You have a 365-day period of full-time work that overlaps with the tax year.
- Over that 365-day period, more than 75% of the days on which you work more than 3 hours are UK-based.
- At least one of these workdays (over 3 hours) falls within the tax year.
If these conditions are met, you’ll automatically be a UK tax resident. Note that during the 365-day period, you cannot have a significant break from work (HMRC typically defines a significant break as 31 days or more). So, if you took 4 three-week holidays during the 365 days, it would still be counted as continuous.
Examples of the Third Automatic UK Test
- Splitting time between the UK and Australia
An Australian arrives in the UK on 01 Jun 2024. He frequently travels back to Australia, where he has a home, and splits his workdays between the UK and Australia. He never spends more than 183 days in the UK in a tax year and has two homes, one in the UK and one in Australia. He does not meet the first or second automatic UK tests, and because he does not work more than 75% of his days in the UK, he also fails to meet the third automatic UK test. Under the automatic UK tests, he is not considered a UK tax resident. - Splitting time between the UK and New Zealand
A Kiwi arrives in the UK on 01 Feb 2025 and rents a flat. She intends to work primarily in the UK but will also return to New Zealand occasionally for work. She owns a home in New Zealand, where she stays whenever she returns. At this stage, she is unsure how many days she’ll be spending in the UK over the next two years, which makes her tax residency status uncertain for now.
She plans to return to New Zealand for only 2 to 3 weeks at a time. For this reason, she’ll need to carefully track the number of days she works in the UK versus the days she works in New Zealand. As a result, she may not know whether she becomes a UK tax resident for the 2024/25 tax year until 8 or 9 months later. Without further information, it’s currently impossible to determine her tax residency under this test as we need to wait for the facts to become clear.
“…the service has been fabulous.”
Ah Mike, we think you’re pretty fabulous too!
Sufficient ties test
If you’ve reached this point and are still unsure whether you’re a UK tax resident, you’re in rarefied air. Very few people get to this stage after failing all three automatic UK tests, and the conditions only become more stringent from here. Let’s take a look at the sufficient ties test and how they are applied.
This test looks at your connections to the UK (called “ties”) and the number of days you spend here. The more ties you have, the fewer days you can spend in the UK before you are considered a UK tax resident.
The Five UK Ties
- Family Tie
You have a spouse, civil partner, or minor children living in the UK. - Accommodation Tie
You have a place to live in the UK (owned, rented, or otherwise available) for at least 91 days of the tax year, and you stay there for at least 1 night during the tax year. If it is a home of a close relative the required stay is 16 nights. - Work Tie
You work in the UK for at least 40 days in the tax year, with each workday involving more than 3 hours of work. - 90-Day Tie
You spent at least 90 days in the UK in either of the two previous tax years. - Country Tie (only applies if you were a UK resident in one or more of the three previous tax years)
The UK is the country where you spent the most days during the tax year.
Days Spent vs. Ties Needed
The number of ties you need to become a UK tax resident depends on how many days you spend in the UK and whether you were a UK tax resident in the previous three tax years.
If you were a UK tax resident in one or more of the three previous tax years:
- 16–45 days: At least 4 ties.
- 46–90 days: At least 3 ties.
- 91–120 days: At least 2 ties.
- Over 120 days: At least 1 tie.
If you were NOT a UK resident in the previous three tax years:
- 46–90 days: All 4 ties.
- 91–120 days: At least 3 ties.
- Over 120 days: At least 2 ties.
Examples of the Sufficient Ties Test
- Splitting time between the UK and Australia
Let’s revisit the example from the third automatic UK test, involving an Australian who splits his time and work between the UK and Australia. If he was not a UK tax resident in the previous three years and spends over 123 days in the UK each tax year, he must have at least two ties to qualify as a UK tax resident. For him, this is straightforward, he has an accommodation tie and a work tie. On this basis, having failed all three automatic UK tests, he is considered a UK tax resident based on the sufficient ties test. - Splitting time between the UK and New Zealand
Let’s look at our second example from the third automatic UK test. A Kiwi arrives in the UK on 01 Feb 2025 and rents a flat. Assuming she has not previously been a UK tax resident and did not spend 90 days in the UK in either of the two previous tax years, she does not meet the sufficient ties test for the 2024/25 tax year.
She may still become a tax resident for 2024/25 under the third automatic UK test, but we won’t know the outcome for several months. However, we do know that from 06 Apr 2025, if she spends over 120 days in the UK, she will have both an accommodation tie and a work tie. For the 2025/26 tax year, the sufficient ties test confirms that she will be a UK tax resident from 06 Apr 2025 onwards.
Special Considerations for Newly Arrived Individuals
When you first move to the UK, your tax residency for the year doesn’t have to be all or nothing. Thanks to split-year treatment, you may only be considered a UK tax resident for part of the tax year. This can significantly reduce your tax obligations on foreign income earned before you became a UK resident.
What Is Split-Year Treatment?
Split-year treatment allows the tax year to be divided into two parts:
- A non-resident period, covering the time before you became a UK tax resident.
- A resident period, starting from the day your circumstances changed, making you a UK tax resident.
During the non-resident period, you won’t need to report or pay UK tax on foreign income. However, once you become a UK resident, your worldwide income will generally fall under UK tax rules.
Split-year treatment is a helpful provision for newly arrived individuals, ensuring that you’re not taxed on foreign income earned before you truly became a UK resident. However, it’s not automatic, you’ll need to meet specific criteria. There is more detailed information available here.
Common Pitfalls and How to Avoid Them
Understanding UK tax residency can be tricky, and even small mistakes can lead to unexpected tax bills, penalties, or missed opportunities for tax efficiency. Below, we’ll cover some of the most common pitfalls and how to avoid them.
1. Misunderstanding Residency Rules
Pitfall: Many people assume that the 183-day rule is the only criterion for determining UK residency. While this rule is clear-cut, it’s just one of several tests used to establish residency which we have explored in this blog.
How to Avoid It: Read our blog and be familiar with the three automatic UK tests, and the sufficient ties test.
2. Failing to Track Days
Pitfall: Losing track of how many days you spend in the UK and abroad can cause problems, especially if you’re close to the threshold for becoming a UK tax resident. Misreporting your time in the UK could result in penalties from HMRC.
How to Avoid It: Keep detailed records of your travel. Note the dates you enter and leave the UK and any other countries. Remember, a “day” in the UK counts if you are here at midnight (with a few exceptions, like transit days).
3. Ignoring Overseas Income
Pitfall: Many people assume that foreign income, such as rental income, dividends, or interest, is irrelevant to UK taxes if it’s already taxed overseas. However, as a UK tax resident, you’re required to report your worldwide income to HMRC, even if it’s taxed elsewhere.
How to Avoid It: Understand the concept of double taxation agreements (DTAs), which prevent paying tax twice on the same income. You may still need to report the income in the UK and claim a tax credit for taxes paid abroad.
Summary
Tax residency in the UK is an essential concept for Kiwis and Aussies to understand when moving to the UK. It determines how your income, both UK-sourced and foreign, is taxed, and it can have significant implications for your financial planning.
We’ve explored the key rules for determining UK tax residency:
- The Three Automatic UK Tests:
- Spending 183 days in the UK in a tax year (Rule 1).
- Having a home in the UK and spending significant time there (Rule 2).
- Working full-time in the UK for a continuous 12-month period (Rule 3).
- The Sufficient Ties Test: If you don’t meet any of the automatic tests, your residency is based on your connections to the UK (such as family, accommodation, and work) and the number of days you spend here.
- Special Considerations for Newly Arrived Individuals: Split-year treatment allows your tax residency to apply only from the point you settle in the UK, potentially reducing tax obligations on foreign income earned earlier in the year.
We’ve also highlighted some common pitfalls, including misunderstanding residency rules, failing to track your days accurately, and ignoring the UK’s requirement to report worldwide income as a resident.
Understanding and planning your tax residency is crucial for avoiding unexpected tax bills and penalties while ensuring you make the most of any tax reliefs or agreements between the UK, New Zealand, and Australia. Whether you’re moving for work, study, or family, taking the time to grasp these rules, or seeking professional advice, can save you time, money, and stress in the long run.
“…the service has been fabulous.”
Ah Mike, we think you’re pretty fabulous too!
Frequently Asked Questions
1. What is the 183-day rule for UK tax residency?
The 183-day rule is one of the easiest ways to determine UK tax residency. If you spend more than 183 days in the UK during the tax year (6th April to 5th April), you’re automatically considered a UK tax resident for that year.
2. Can I work in the UK without being a UK tax resident?
Yes, you can work in the UK without being a tax resident, as long as your time in the UK and ties to the country don’t meet the criteria for residency under the Statutory Residence Test (SRT). In this case, you’ll only pay UK tax on your UK-sourced income, not your worldwide income.
3. Do I need to report my foreign income in the UK?
If you are a UK tax resident, you generally need to report your worldwide income to HMRC, even if it’s already been taxed overseas. However, double taxation agreements (DTAs) between the UK, New Zealand, and Australia can help prevent paying tax twice on the same income.
4. I’ve moved to the UK and become a UK tax resident, but I’m still receiving salary payments from my old job back home. Do I need to pay UK tax on this income?
If the salary payments you’re receiving relate to work performed before you moved to the UK, and you qualify for split-year treatment, this income is not taxable in the UK. The income was earned while you were within the non-resident period of the tax year (regardless of the fact it was paid to you after you became a UK tax resident).
4. What is split-year treatment, and how does it work?
Split-year treatment allows you to divide the tax year into a non-resident period (before you became a UK tax resident) and a resident period (after you became a resident). This means you won’t need to report foreign income earned before you became a UK resident. It’s not automatic, you must meet specific criteria to qualify.
5. Can I still be a tax resident in New Zealand or Australia after moving to the UK?
Yes, you may remain a tax resident in New Zealand or Australia if you maintain strong ties there, such as a home or significant time spent in the country. If this happens, you could be a tax resident in both countries, and the relevant double taxation agreement (DTA) will determine which country has the primary taxing rights on your income.
6. Does paying tax in New Zealand or Australia affect my UK tax residency?
No, paying tax in New Zealand or Australia does not directly impact your UK tax residency. Residency is determined by the Statutory Residence Test (SRT), not by where you pay tax. However, taxes paid overseas can usually be offset against UK taxes under double taxation agreements (DTAs).
7. What are the UK tax residency rules for digital nomads?
If you’re a digital nomad working remotely in the UK, your tax residency depends on how many days you spend in the UK and your ties here. If you meet any of the automatic UK tests or the sufficient ties test, you could become a UK tax resident and be taxed on your worldwide income.