If you are transferring large amounts of money into the UK, it is important to know what the potential tax implications could be. For most international money transfers, there is unlikely to be any requirement to pay tax.
The first thing to note is that if you are a UK resident and you are transferring existing funds/assets to yourself, there are typically no tax implications.
But when it comes to other transfers from overseas, the taxation regulations for the UK are determined by the following:
Currently, there are no legal limits on the amount of money you can transfer to the United Kingdom. However, if you’re bringing in £10,000 or more in physical cash you will need to declare it. Also, there are no limits on payments made via bank transfer. Despite this, some major UK banks set daily online limits of £50,000 to £100,000.
Money specialists such as Xe Money Transfers and TorFX allow transfers of any amount for select customers, no matter how large.
One of the key factors on whether you’re required to pay tax on money sent from overseas is your residency status. All UK residents have to pay tax on foreign income – unless your permanent home is abroad.
Foreign income includes all forms of the following:
If you are unsure about your residency status, then you can use the Statutory Residence Test (SRT) to work out your residence status for a tax year. As a general rule, if you live in the UK for 183 days of the year, you will be considered a UK resident.
If you are not a UK resident – a non-domiciled person – you do not pay UK tax on your foreign income if the following apply:
If your foreign income is £2,000 or more, then you can either pay UK tax on it (and may be able to claim it back) or claim the “remittance basis”. This means you only pay UK tax on the income you bring into the UK. But you lose your tax-free allowances for Income Tax and Capital Gains Tax and pay an annual charge if you’ve been a resident of the UK for a certain amount of time.
Claiming the remittance basis is complicated, so it is advisable to seek professional help.
If funds transferred from abroad are a gift, then there won’t be any tax implications as HMRC does not view gift transfers as a form of income.
However, it is still a good idea to consult a UK tax adviser, especially if there are large sums of money being sent. If the received money earns interest, the gains could be taxable.
The UK offers flexible money transfer options. Depending on the transfer company you use, you can set up your transfer for cash pickup, a bank deposit, a deposit to a mobile wallet or an international money order delivery.
Cash pickups may be limited outside of major cities. Read our guide on transferring money to the UK for details on sending and receiving funds.
Learn about how Small World alternatives can help you send more money for less.
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Xe is a leading company of currency solutions that offers competitive exchange rates, no fees and fast money transfers.
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If you’re looking for a secure way to send money overseas, an international bank draft could be for you – but if speed is important, consider using a money transfer service instead.
Check out our review of TorFX’s fee-free money transfers.
If you’re thinking of sending a money transfer with Western Union, read our review of its transfer speed, exchange rates and fees first.
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