Who is entitled
Entitlement to the personal allowance and blind person's allowance is dealt with in Income Tax Act 2007, Part 3 Chapter 2. Tax reductions for married couples and civil partners are dealt with under Chapter 3.
Chapter 4 then states that the above allowances or tax reduction may be claimed for a tax year where the individual is resident for the tax year.
Even if an individual is not resident in the UK they may be able to claim personal allowances if they meet certain criteria.
The government announced changes in the Autumn Budget 2024 to the taxation of non-UK domiciled individuals. From 6 April 2025 the concept of domicile as a relevant connecting factor in the UK tax system was replaced by a system based on tax residence.
As part of these changes the government abolished the “remittance basis” for UK resident non UK domiciled individuals. From 6 April 2025, all UK residents will be taxed on the arising basis of assessment. A new regime for foreign income and capital gains (FIG) is available to individuals for their first four years of UK tax residence after a period of 10 years non-residence. Individuals who make a claim to use the new 4-year FIG regime will not pay tax on FIG arising in those four years.
An individual will lose their entitlement to a personal allowance for Income Tax for the tax year in which they make the claim for the FIG regime. The loss of entitlement to personal allowance will apply regardless of whether a claim is made for only income or only gains, or only an election for Overseas Workday Relief (OWR) is made.
Draft legislation relating to the changes was published by the government along with a technical note Reforming the taxation of non-UK domiciled individuals.
At Budget 2014, the government launched a consultation on whether or not to restrict the income tax personal allowance for non-residents. Although the government is keen, it recognises the complexity for both employers and individuals who may be affected. Accordingly, the government announced in Autumn Statement 2014 that it will continue to discuss implementation of this change with stakeholders. Should the government decide to proceed, a more detailed consultation will be undertaken.