Double Taxation: How it Works and the Countries with UK Agreements

Double taxation occurs when individuals or businesses are subject to taxation in multiple jurisdictions on the same income. To address this issue, the United Kingdom has established double taxation agreements (DTAs) with over 130 countries worldwide.

How Double Taxation Works

DTAs aim to provide relief to individuals who reside in multiple countries or earn income from multiple sources. These agreements determine:

* Which country considers the individual a tax resident
* Which country the individual can apply for relief from
* The amount of relief available

Countries with UK Double Taxation Agreements

The UK has DTAs with the following countries, among others:

* Australia
* Canada
* China
* France
* Germany
* India
* Ireland
* Spain
* USA

How to Avoid Double Taxation in the UK

To avoid double taxation, individuals should:

* Identify applicable DTAs
* Understand the terms of the relevant DTA
* Claim relief by completing the appropriate form and submitting it to the relevant tax authority

What's Changing in 2025?

The UK government has announced changes to the non-domiciled regime, which will affect individuals who are not considered UK domiciled residents. From April 2025, these individuals will be taxed on their overseas income after four years of UK residency. However, the government is reportedly considering watering down some of the proposed changes.

FAQs About Double Taxation Agreements

* Do I have to pay tax on money transferred from overseas to the UK?

Typically, no, if the income or savings were earned prior to becoming a UK resident.

* What are the key functions of a double tax agreement?

DTAs prevent individuals from paying tax twice on the same income in multiple countries.

* Are double taxation agreements affected by Brexit?

The UK's existing DTAs with EU countries were not affected by Brexit.

* Is there a double taxation agreement between the UK and the USA?

Yes, the UK has a DTA with the USA that provides full relief on certain income sources.

* Does Spain have a double taxation agreement with the UK?

Yes, the UK has a DTA with Spain that provides full relief on certain income sources.