What is HMRC (His Majesty's Revenue and Customs)?

How it works

His Majesty's Revenue and Customs (HMRC) is the UK government department responsible for tax collection and customs enforcement. Created in 2005 by the merger of Inland Revenue and HM Customs and Excise, it is one of the largest tax administrations in the world.

HMRC runs several major streams:

• PAYE (Pay As You Earn) — UK employers withhold income tax and National Insurance from employees' salaries each pay period. Most UK employees never see HMRC directly because PAYE handles everything.
• Self Assessment — the UK version of self-filed personal returns. Required for the self-employed, landlords, anyone with > £100,000 income, non-residents with UK-source income, and others. Online deadline: 31 January following the tax year (which runs 6 April to 5 April).
• Corporation Tax — UK-resident companies and UK PEs of foreign companies file annual returns. Rate: 25% (2025) for profits over £250k, 19% for under £50k, marginal in between.
• VAT — Value Added Tax, currently 20% standard rate. Registration mandatory at £90,000 of taxable turnover.
• National Insurance Contributions (NIC) — separate from income tax, fund state pensions and benefits.
• Customs and trade — import duties, customs declarations.

How non-UK residents interact with HMRC

The trigger is UK-source income for a non-resident, or UK tax residency for someone living elsewhere.

• UK-source income for a non-resident (UK rental property, UK employment income for limited days, UK partnership share, UK pension): file Self Assessment as a non-resident, paying UK tax on UK-source income only.
• UK tax residency (anyone meeting the Statutory Residence Test): worldwide income reporting, plus or minus the historic non-dom regime (which the 2024 Autumn Statement moved to abolish — replaced by a new four-year FIG residency relief from 6 April 2025).
• US-citizen UK resident: the dreaded dual-tax burden. UK as resident → worldwide UK tax. US as citizen → worldwide US tax. The treaty plus foreign tax credits prevent literal double taxation but don't eliminate the dual filing burden.

Making Tax Digital (MTD)

HMRC's modernisation programme. MTD for VAT has been mandatory since 2019. MTD for Income Tax Self Assessment is being phased in: from April 2026 for self-employed and landlords with income above £50k; April 2027 for the £30k-£50k cohort. Quarterly digital submissions replace the annual return for those in scope.

The non-dom regime change

For decades, UK residents who were not UK-domiciled could elect "remittance basis" — paying UK tax only on UK-source income and on foreign income remitted to the UK. The Autumn Statement 2024 abolished the regime as of 6 April 2025, replacing it with a four-year Foreign Income and Gains (FIG) regime for new arrivals: the first four UK tax years of residence (provided no UK residency in the prior 10 years) get full exemption on foreign income and gains, regardless of remittance.

After the four years, the new arrival becomes taxable on worldwide income on a standard residency basis. This is a significant policy change that many international founders and HNWs are still adapting to.

Examples

• French founder relocates to London, no prior UK residency. From 6 April 2025, FIG regime applies for first four UK tax years. Pays UK tax only on UK-source income; foreign salary, foreign dividends, foreign capital gains are exempt — no remittance restriction. After year four, switches to full worldwide UK taxation.
• US citizen in London for two years on assignment. UK tax resident under SRT → worldwide UK tax (with FIG cushion if eligible). US citizen → worldwide US tax. Files both Self Assessment with HMRC and Form 1040 with the IRS, claims foreign tax credits each direction. Treaty tie-breaker irrelevant because US still taxes citizens regardless of treaty residency.

Common mistakes

• Assuming the UK tax year is the calendar year. It isn't (6 April – 5 April). Most filing deadlines are 31 January / 31 October, not 15 April.
• Skipping the P85 on departure. Without Form P85, HMRC may keep you in PAYE / Self Assessment loops longer than necessary. File it with your departure date as part of the offboarding.
• Conflating UK domicile with UK residency. Different concepts. Domicile (rooted in family / origin) shaped non-dom status historically; residency (presence + ties) is what the SRT measures. The 2025 reform leans more on residency-based testing.
• Ignoring the dual-filing burden as a US citizen in the UK. No treaty position eliminates US worldwide taxation of citizens. Foreign tax credit and treaty mechanisms reduce double tax but don't reduce paperwork.