I regularly come across the same set of assumptions and mistakes when clients talk about their foreign income and Self Assessment filing obligations. In this blog, let’s break down some of the popular myths and understand what the law actually says in simple terms.
What is Remittance Basis (RB)?
- Arising Basis (default): Tax on worldwide income & gains as they arise.
- Remittance Basis (optional): Tax only on UK income/gains + any foreign income/gains that are brought into the UK.
- Automatic Rule: If unremitted foreign income ≤ £2,000 → remittance basis applies automatically, without losing allowances.
Myth 1: “If I don’t bring my foreign income into the UK, I Don’t Need to File a Return.”
Fact:
- If foreign income > £2,000 → SA filing is Mandatory.
- Two choices when filing:
1.Claim Remittance Basis → UK taxes only what is remitted, but you lose Personal Allowance (£12,570) and CGT exemption (£3,000).
2. Stay on Arising Basis → Declare all worldwide income, but keep allowances and may claim Foreign Tax Credit Relief.
Myth 2: “Remittance Basis applies automatically in all cases.”
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Fact:
- Automatic only if unremitted foreign income ≤ £2,000.
- If > £2,000 → must Manually claim RB in your SA return.
Myth 3: “If I have >£2,000 and don’t select anything, HMRC will still treat me as RB.”
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Fact:
- Wrong. If you don’t claim RB, you are automatically on Arising Basis.
- That means you must declare worldwide income.
- If you don’t → you’re understating income to HMRC, which is a compliance risk.
Myth 4: “I always keep my Personal Allowance on RB.”
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Fact:
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Claiming RB with > £2,000 foreign income = loss of:
- Personal Allowance (£12,570).
- Annual CGT exemption (£3,000).
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This can cost an extra £2,500–£5,600 in tax depending on your band.
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Myth 5: “Clean capital or old savings are taxable if remitted.”
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Fact:
- Clean capital (savings from before UK residence, gifts, some exempt sources) can be remitted tax-free.
- But mixed fund rules are strict → strong record-keeping is vital.
Myth 6: “If I never claimed RB, I can’t use the new TRF (Temporary Repatriation Facility).”
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Fact:
- Even without ticking RB, if foreign income ≤ £2,000 in past years, you were automatically on RB.
- This counts for eligibility under TRF 2025–27, allowing repatriation of old foreign income/gains at 12–15% flat rate.
Key Takeaways
- Foreign income > £2,000 → SA return is compulsory.
- No RB claim = Arising Basis by default.
- RB with > £2,000 = loss of allowances.
- Clean capital = remittable tax-free (with records).
- TRF 2025 = limited-time opportunity for NRIs.
Conclusion
- The Remittance Basis isn’t just about “bringing money in or not” – it has filing, allowance, and compliance implications.
- Many NRIs wrongly assume automatic RB and under-report to HMRC.
- Choosing between Arising Basis and Remittance Basis can mean thousands of pounds difference in tax.
- When in doubt, take advice before filing rather than after HMRC questions it.
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If you ever need help with UK tax filing, remittance basis queries, or compliance issues, just reach out to me at capratikp@gmail.com or +91 8149222073 — happy to help you.
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