I am a non-Dom (37 years old), ordinary resident, and I came to work in the UK in September 2009. I have some overseas capital, on which I have made about £34k capital gains so far in tax year 2015-2016 ( Total capital in foreign account approx.£140k). Since I am a non-dom, I can choose if I should I want to be taxed on the arising basis or remittance basis, and I am considering which one of the two would be most beneficial to be for my 2015-2016 SA Tax return. Next to my capital gains, I have an income from employment of $44k ( I am expecting to keep a similar income for the foreseable future). I am not a home owner, and do not have any other income. If my capital gains stay as they are, I would have to pay £6,600 pounds on Capital Gains tax if I would be taxed on the arising basis.
I have file SA tax returns starting from tax year 2009-2010. This means that tax year 2015-2016 will be tax year 7 for me, and that in the tax year 2016-2017, I will be seen as a long-term resident, and will therefore have to apply the Remittance basis charge from next year onward if I wanted to use it for 2016-2017, but that does not apply yet for 2015-2016. Therefore, I do not intend to use the remittance basis in later tax years.
In some of the previous tax years, I have filed to be taxed the remittance basis, but this was only because my foreign income/gains were under £2000.
I have not yet told HMRC that I would like to be taxed on the remittance basis for this tax year, so my current tax code assumes (for employment purposes) that my income for 2015-2016 would be taxed on the arising basis.
My current objective is to stay in the UK, and use part of the overseas capital to use for a deposit for a property in the UK (approx.£70,000)
My opinion is the following:
- If I was taxed on the arising basis, my tax bill for capital gains would be £6,600.
- If I was taxed on the remittance basis then:
a. HMRC would have to issue me a new tax code for 2015-2016
b. I would loose my personal allowance on my current income, so this would be charged at the highest tax band. This would cost me £10,600 x 40%= £ 4240.
c. If I was to remit £70,000 in a later tax year (say 2017/2018) to buy a property, the £34k profit from tax year would become a chargable gain in that tax year. In that tax year, I would then still have to pay £6600,see (http://www.hmrc.gov.uk/manuals/cgmanual/cg25385.htm)
d. So, overall for all tax years combined, I would be better off using the arising basis for 2015/16, as I would be £4240 worse off if I would use the remittance basis for tax year 2015/2016.
Could any of you please confirm if my opinion is correct?