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Complete Guide — NRP Tax Residency

Tax Residency Rules for
Non-Residents: US SPT vs UK SRT

Who this is for: Non-Resident Pakistanis splitting time between Karachi, London, and New York - anyone whose travel schedule could quietly hand the IRS or HMRC a claim on Pakistani income.

What you will learn: Exactly how the US and UK count your days, assess your ties, and decide whether you owe them tax on everything you earn worldwide - including rent from a Lahore flat or returns from a Karachi investment account.

Why It Matters

You do not need a green card or a British passport to be treated as a full tax resident. By the time most NRPs realise they have crossed the threshold, the 200% penalty clock has already started.

For NRPs Managing

Pakistani passport holders with property in Karachi or Lahore, children in UK schools, work in New York - anyone at risk of silent tax residency in the UK or US.

25 min read
Advanced Level
Updated 2025
NRP Pakistan
Key Takeaways

A Pakistani passport gives you zero protection from US or UK tax liability - physical presence is what decides it

The US SPT is a mathematical formula with a three-year lookback - there is no subjectivity, no discretion

The UK SRT is a three-stage hierarchy - ties only matter if the automatic tests do not settle your status first

You can be a tax resident of both countries in the same year - the UK-Pakistan DTA and treaty tie-breaker rules then decide who taxes you first

The 2025 FIG regime is not a permanent benefit - it is a 4-year countdown that starts from your first day of UK residency

Form P85 is not just a leaving notification - it is often a claim for thousands of pounds in overpaid PAYE tax

Travelling without a day-count log is a financial risk that NRPs routinely underestimate

Quick Navigation
01 Why Tax Residency Matters More Than Citizenship 02 US Substantial Presence Test (SPT) 03 UK Statutory Residence Test (SRT) 04 The Sufficient Ties Test 05 US vs UK: How the Rules Conflict 06 UK Split-Year Treatment 07 The 2025 FIG Regime: A 4-Year Countdown 08 Essential Compliance: P85 and SA109 09 Common Mistakes and Risks 10 Decision Support 11 Related Guides 12 Frequently Asked Questions
Foundation

Why Tax Residency Matters More Than Citizenship

Your passport tells a border officer where you are from. The IRS and HMRC do not care. Both countries tax based on where you spend time and what ties you have - nationality does not come into it.

That creates a specific, real risk for NRPs. A Pakistani national living in Karachi, with a child in a London school and a few months of work in New York each year, can end up a tax resident in two countries without signing a single form or making any deliberate choice. Once that happens, income from a Karachi business, a Lahore rental property, or a Pakistani investment account becomes taxable in the UK, the US - or both.

Pakistan runs a territorial tax system. It taxes what is earned locally. The US and UK do not work that way - both tax worldwide income once residency kicks in. That gap between what Pakistan taxes and what the UK or US then claims is exactly where NRPs get caught.

Risk

One extra week in London, a layover that becomes an overnight in New York - small decisions can give HMRC or the IRS a permanent claim on income you built at home.

Is This You?

This guide is for you if:
  • You hold a Pakistani passport and spend months in the UK or US each year
  • You own property in Karachi or Lahore and worry about whether those rental returns could be taxed in London or New York
  • You have a child in a UK school, a spouse in London, or a sibling's home where you stay when you visit
  • You recently relocated to the UK from Pakistan and have not looked at your tax position since you arrived
  • You are planning a move and want to know how many days you can spend in each country without triggering residency
This guide is not for you if:
  • You are a full-time UK or US citizen with no Pakistan connections
  • You have never spent more than a few weeks outside Pakistan in a single year
  • You need corporate tax guidance for UK entities - see our guide on UK Taxes for Non-Resident Businesses
US Tax Rules

The US Substantial Presence Test (SPT)

Of the two systems, the US SPT is the more dangerous one. The reason is simple: it is purely mechanical. No discretion, no ties assessment, no hierarchy. If the numbers add up, you are a US tax resident for that year. The IRS does not care why you were there.

The SPT Formula
All days Current year (1/1)
+
1/3 of days Prior year
+
1/6 of days Two years prior
=
183+
days = US
tax resident

You must also have been present in the US for at least 31 days during the current year. Both conditions must be met.

Worked Example
This Year
120 days
= 120 (full count)
Last Year
90 days
= 30 (x 1/3)
Two Years Ago
60 days
= 10 (x 1/6)
SPT Weighted Total 160 days Safe - for now

Safe for now. But 25 more days this year and you cross the line - even without changing anything in past years.

The lookback structure is what catches people off guard. You can be carefully managing your current-year days and still cross the threshold because of how much time you logged in the past two years. A lot of NRPs do not discover this until after the IRS has already made a determination.

Can You Live in Pakistan and Still Be a US Tax Resident?

Yes - through this exact formula. Physical presence in prior years can create US tax residency even if you are currently based in Karachi and have not visited in months.

Days That Do Not Count Toward the SPT

Transit Days

If you pass through a US airport without clearing immigration, those days are excluded. But clearing immigration - even briefly - typically makes it a countable day. Do not assume a stopover is safe without checking.

Medical Days

Days where you were physically unable to leave because of a medical condition that developed while you were already in the US may be excluded. This requires documentation and is not automatic.

Certain Student Visas

Days on certain student visa categories like F, J, M, and Q also get different treatment, though that is less relevant for most NRPs operating in a professional or business context.

Critical Rule

The mistake people make most often is assuming transit is automatically exempt. It is not. When there is any doubt, count the day.

UK Tax Rules

The UK Statutory Residence Test (SRT): Three Stages, Applied in Order

The UK SRT is more structured than the US system - and more forgiving, once you understand how it actually works. It does not jump straight to counting your social ties. There is a hierarchy. You only move to the next stage if the one before it does not give a clear answer.

Stage 1
Automatic Overseas Tests
Are you clearly a non-resident? If yes - settled. Stop here.
Stage 2
Automatic UK Residence Tests
Are you clearly a UK resident? If yes - settled. Stop here.
Stage 3
Sufficient Ties Test
Only if both stages leave the question open - ties and day counts decide.

Stage 1 asks whether you are obviously a non-resident. Stage 2 asks whether you are obviously a resident. Only if both stages leave the question open does Stage 3 - the ties assessment - come into play.

1

Stage 1: Automatic Overseas Tests

Meet any one of these and you are automatically not a UK tax resident for the year.

Test A

Fewer than 16 days in the UK

You were UK resident in one or more of the three previous tax years and spent fewer than 16 days in the UK this year.

Test B

Fewer than 46 days - no recent UK residency

You were not UK resident in any of the three previous years and spent fewer than 46 days in the UK this year.

Test C

Full-time overseas work

You worked full-time overseas (at least 35 hours per week on average), spent fewer than 91 days in the UK, and worked there for no more than 30 of those days.

Most Useful for NRPs Based in Pakistan

For NRPs based in Pakistan who make occasional business trips to London, Test C is often the most useful. Short UK visits and substantive overseas work can close the question right there, without going any further.

2

Stage 2: Automatic UK Residence Tests

If none of the overseas tests apply, HMRC looks the other direction. Meet any of these and you are automatically a UK resident.

Test A

183-day rule

You spent 183 days or more in the UK during the tax year. The most commonly triggered test for NRPs on extended contracts or prolonged family stays.

Test B

UK home with limited overseas presence

You have a UK home, spent at least 30 days there during the year, and had no overseas home - or spent fewer than 30 days in your overseas home.

Test C

Full-time UK work for 365 days

You worked full-time in the UK for at least 365 days with no significant breaks.

Important

The 183-day rule is the most commonly triggered for NRPs on extended contracts or prolonged family stays. Many hit it without realising until the tax year has already ended.

UK SRT - Stage 3

The Sufficient Ties Test: When Your Connections Decide It

If the automatic tests do not settle the question, HMRC moves to Stage 3. Personal and economic connections to the UK are counted as ties - and the more ties you have, the fewer days you can spend in the UK before becoming a resident.

There are five ties:

1
Family Tie

Family Tie

Your spouse, civil partner, or minor child is UK resident. For NRPs with children in UK schools, this one is almost always in play.

2
Accommodation Tie

Accommodation Tie

You have a place to stay in the UK that is available to you for at least 91 consecutive days during the tax year, and you actually use it. It does not need to be a property you own. A room in your sibling's flat in Edgware, your parents' home in Wembley, any space that is consistently available when you visit - all of these can trigger the Accommodation Tie.

Most guides describe this as "having a UK home," and that framing misses the point entirely. You do not need to own anything. The test is availability, not ownership.

3
Work Tie

Work Tie

You do substantive work in the UK for at least 40 days during the tax year. This includes remote work carried out while you are physically in the UK.

An NRP professional working from a relative's home in London for a UK employer during what they think of as a "family visit" can trigger this tie without intending to. HMRC does not distinguish between a business trip and a personal visit if you are working.

4
90-Day Tie

90-Day Tie

You spent more than 90 days in the UK in either of the previous two tax years. This tie looks back, not just at the current year - past travel patterns count against you.

5
Country Tie

Country Tie

The UK is where you spent the most days during the tax year. This only applies if you were UK resident in any of the three previous years.

How Ties Translate into Day Limits

Ties Held Maximum Days in UK (Before Becoming Resident) Risk Level
0 ties 182 days Low Risk
1 tie 120 days Caution
2 ties 90 days Monitor Closely
3 ties 45 days High Risk
4 ties 15 days Critical
Practical Example
Tariq - Lives in Karachi
His wife is UK resident - Family Tie confirmed. 1 tie - max 120 days
His brother's house in East London is always available to him - Accommodation Tie confirmed. 2 ties - max 90 days
He also works remotely from his brother's house for 45 days - Work Tie added. 3 ties - max 45 days

This is not theoretical. A lot of NRPs are in exactly this position and have never counted a single day. Two ties from family and accommodation alone limit Tariq to 90 days. Add one working visit and that drops to 45.

Critical Comparison

US vs UK: Where the Rules Directly Conflict

This part is missing from almost every guide on this topic - and for NRPs moving between all three countries, it matters.

🇬🇧
United Kingdom
HMRC - SRT Counting
Counting Method

Midnight rule. A day in the UK is any day where you are present at midnight. Leaving before midnight on any given day - that day does not count.

Arrive Monday, leave Tuesday before midnight - only Monday counts as a UK day. The departure day falls out of the count.

🇺🇸
United States
IRS - SPT Counting
Counting Method

Any presence rule. Any part of a day counts as a full US day. Arriving at 11:55 PM makes it a countable day - from the moment you land.

A late-night flight arriving at 11:55 PM in New York? That entire day is counted. There is no fraction - presence at any point means the full day counts.

Real Trip Scenario
The same trip - two different day counts
✈
Karachi
🏠
London
10 days
🏛
New York
Arrives 11:55 PM
UK Count (Midnight Rule)
The day you fly out of London does not count if you leave before midnight.
Departure day drops out of the UK count. Fewer UK days logged than calendar days spent.
US Count (Any Presence Rule)
Landing in New York at 11:55 PM counts as a full US SPT day from the moment of arrival.
The arrival day adds to the SPT total immediately - even though only 5 minutes of it were spent in the US.
The Compliance Gap

You can be carefully staying within the UK's non-resident threshold and still accumulating US SPT days from the exact same travel. The two systems run simultaneously and independently - managing one without the other is a gap you cannot afford.

The practical takeaway: You need two separate day-count logs. One for the UK, midnight-based. One for the US, any-presence. They will not match. Managing one without the other is a gap you cannot afford.

If You Meet Both Tests

What Happens When You Are Resident in Both Countries?

If you end up meeting residency tests in both countries simultaneously, the UK-Pakistan Double Taxation Agreement (DTA) and the US-UK tax treaty both have tie-breaker rules that determine which country taxes first. That process is covered in detail in our guide on Avoiding Double Taxation.

Review Your Position

Residency rules are precise enough that small errors carry large consequences

A day count that is off by two weeks, an Accommodation Tie you did not know you had, a FIG claim you forgot to make - none of these are minor oversights. They turn into unexpected tax bills, penalty exposure, and years of correspondence with HMRC or the IRS. The time to review your position is before your next trip - not after the tax year closes and the options narrow.

Up to 200% Penalty on offshore income errors
3-Year Lookback US SPT weighted formula
4-Year Window FIG regime countdown
UK Residency Rules

UK Split-Year Treatment

Most people do not move to or from the UK on April 6th. Relocations happen mid-year - a flight in October, a job that starts in January. Split-year treatment handles that reality.

If you qualify, the tax year is divided. The portion where you were UK resident is taxed normally. The portion where you were not is treated as non-residency, so foreign income from that stretch stays outside the UK tax net.

How Split-Year Treatment Divides a Tax Year
Non-Resident Portion
UK Resident Portion
Foreign income in this portion: outside UK tax net
UK residency rules apply in full: worldwide income taxed

The dividing line is not necessarily April 6. It is the date you arrived in or departed from the UK - which must be formally established and claimed.

The Most Common Split-Year Cases for NRPs

HMRC defines eight split-year cases. For NRPs, the most common ones are:

1

Case 1 - Starting Full-Time Overseas Work Mid-Year

Starting full-time overseas work partway through the year. Applies when you leave the UK to begin substantive overseas employment.

4

Case 4 - Becoming UK Resident Mid-Year

Becoming UK resident during a year when you were not resident the year before. Typical for NRPs arriving from Pakistan to start a UK role or join family.

8

Case 8 - Ceasing to Be UK Resident Mid-Year

Ceasing to be UK resident mid-year. Applies when you leave the UK permanently or for an extended period during an active tax year.

Split-Year Treatment Is Not Automatic

You must claim it via form SA109 as part of your Self Assessment return. Skip it, and HMRC treats the entire year as resident - taxing foreign income from the non-resident portion as well. This is one of the quietest and most costly compliance gaps for NRPs. People relocate, assume they are covered, and then discover years later that they owed tax on income from a period before they even arrived in the country.

Required Action

Claim Split-Year Treatment via Form SA109

If you are filing a UK Self Assessment return as a non-resident, or claiming split-year treatment or FIG relief, form SA109 is the supplementary page where all of that gets declared. This form is not optional if HMRC has issued a tax return notice. See our full guidance in Essential Compliance: P85 and SA109.

2025 UK Tax Change

The 2025 FIG Regime: A 4-Year Countdown

The FIG regime is not a permanent benefit. It is a window - and once it closes, it does not reopen.

From April 2025, the UK replaced the old non-domiciled (non-dom) system with the Foreign Income and Gains (FIG) regime. Under the old system, non-doms could defer UK tax on foreign income by keeping it outside the UK. That option is no longer available in the same form.

Your FIG Window
Four years of relief - starting from day one of UK residency
Year 1
FIG Active
Clock starts on first day of UK tax residency. No grace period.
Year 2
FIG Active
Foreign income - Karachi rents, Lahore profits, Pakistani dividends - outside UK tax net.
Year 3
FIG Active
Must claim on Self Assessment return each year. Missing a claim loses that year permanently.
Year 5+
Window Closed
Worldwide income falls into full UK tax net. All Pakistani income now taxable in UK.

The window does not reopen. Once your four years are used, they are gone permanently regardless of any subsequent travel or residency changes.

What the FIG regime does instead is give new UK arrivals four years of relief on foreign income and gains, provided they have not been UK tax resident in any of the 10 tax years before arriving. During those four years, income from Pakistani properties, businesses, or investments is not subject to UK tax - whether it comes into the UK or stays offshore.

For an NRP arriving in the UK in 2025 after a decade in Karachi, this window typically applies. But the clock starts on day one of UK residency. Year one begins the moment you become a UK tax resident under the SRT. There is no grace period.

When year four ends, worldwide income falls into the full UK tax net. Karachi rental income, Lahore business profits, Pakistani dividends - all of it becomes taxable. What you do in the years before that point determines how exposed you are when it happens.

What Most Guides Miss

FIG relief protects foreign income during the four years. It does not necessarily protect against capital gains tax (CGT) complications if Pakistani assets are sold after the window closes. Selling a Karachi property in year five, after UK residency is established and FIG has expired, puts those gains directly in scope for UK CGT. That requires planning well before the window ends, not after.

Who Qualifies

Eligibility Requirements for FIG Relief

  • New UK resident from April 2025 onwards
  • Not been UK tax resident in any of the 10 tax years before arriving
  • NRPs arriving from Pakistan with no recent UK residency history typically qualify

FIG relief is not automatic. You must claim it on your Self Assessment return each year it applies. Miss a year and that year's relief is gone permanently - there is no retroactive claim mechanism.

Missing the Annual FIG Claim

FIG relief must be actively claimed every year. There is no retroactive option. An NRP who qualifies but forgets to claim in year two loses that year's relief permanently, regardless of what they do in years three and four.

HMRC Filing

Essential Compliance: Form P85 and SA109

Knowing your residency position is step one. Telling HMRC about it correctly is step two. Most NRPs focus on the first and quietly skip the second.

Form P85
Leaving the UK notification

More Than a Leaving Notice

When you leave the UK - permanently or for an extended period - you need to submit Form P85 to HMRC. It updates your tax record, stops incorrect PAYE deductions, and triggers a review of whether you have overpaid tax.

That last part is what most NRPs do not realise. Form P85 is often a claim for a refund. If you were employed in the UK and paid PAYE, leaving mid-year typically means you overpaid - you were taxed on the basis of a full year's personal allowance but only earned for part of it. P85 starts the process of recovering that money.

  • Updates your HMRC tax record to non-resident status
  • Stops incorrect PAYE deductions from continuing
  • Triggers a refund review if you overpaid tax in your departure year
A lot of NRPs who skip this form are owed thousands of pounds and never collect it. File it as soon as you depart, not months down the line.
Form SA109
Self Assessment residency declaration

Declaring Your Residency Status

If you are filing a UK Self Assessment return as a non-resident, or claiming split-year treatment or FIG relief, form SA109 is the supplementary page where all of that gets declared.

This form is not optional if HMRC has issued a tax return notice. Completing it incorrectly - or not submitting it at all - is one of the most common filing errors among NRPs managing their own returns.

  • Required to formally declare non-resident status
  • Used to claim split-year treatment for mid-year relocations
  • Required to claim annual FIG relief on foreign income and gains
Completing SA109 incorrectly is one of the most common filing errors among NRPs managing their own returns. If HMRC has issued a notice, this form is mandatory.

Penalties for Getting It Wrong

HMRC's penalty structure for residency errors is not lenient. The cost of a single incorrect tax year almost always exceeds what proper planning would have cost upfront.

200%
Deliberate Offshore Misreporting

Deliberate misreporting on offshore income can trigger penalties of up to 200% of the tax owed.

Auto
Careless Error Penalties

Even careless errors - a miscounted year, an undeclared tie - carry automatic penalties once HMRC finds them.

+yrs
Compounding Errors Across Years

Skipping Form P85 means HMRC continues taxing at the resident rate - errors compound across multiple years before discovery.

The Real Cost of Getting It Wrong

The cost of a single incorrect tax year almost always exceeds what proper planning would have cost upfront. If HMRC has already issued a determination, the options for mitigation narrow significantly.

Risk Areas

Common Mistakes and Risks

These are the errors NRPs make most often - each one capable of triggering unexpected tax bills, penalties, or years of unwanted correspondence with HMRC or the IRS.

01
US SPT Error

Assuming transit days do not count toward the US SPT

They only do not count under narrow, specific conditions. Clearing US immigration - even briefly - typically makes that a countable day. NRPs who assume their airport stop was "just transit" often discover the error after the IRS has already run the numbers.

02
UK SRT Error

Underestimating the Accommodation Tie

This is probably the most common blind spot for NRPs visiting the UK. Staying in a sibling's or parent's home when in London - even occasionally - can trigger the Accommodation Tie if that space is available to you for 91 or more consecutive days. The test is availability, not how often you actually use it. "I only stay a few nights" is not a defence.

03
Work Tie Error

Working remotely from the UK during a family visit

An NRP professional who takes their laptop to London and works from a relative's home for a UK employer for 40 or more days has triggered the Work Tie. Many people do not count this as "working in the UK" because they see it as a personal trip. HMRC does not share that view.

04
Filing Error

Not filing Form P85 after leaving the UK

The result: HMRC keeps taxing UK income at the resident rate, refunds never materialise, and the error compounds across multiple years before anyone catches it.

05
Concept Error

Conflating domicile with residency

They are different legal concepts. Domicile relates to your long-term permanent home and is difficult to change. Residency is determined year by year based on physical presence and ties. Under the 2025 FIG regime, domicile is less central than it was under the old non-dom rules - but treating the two as interchangeable still produces planning errors.

06
FIG Error

Missing the annual FIG claim

FIG relief must be actively claimed every year. There is no retroactive option. An NRP who qualifies but forgets to claim in year two loses that year's relief permanently, regardless of what they do in years three and four.

07
US SPT Error

Ignoring the three-year lookback in the US SPT

Careful day management this year means nothing if the prior two years already carry enough weight to push the weighted total past 183. Check all three years, not just the current one.

Questions Answered

Frequently Asked Questions

The questions NRPs ask most often about US and UK tax residency - answered directly, without jargon.

No. HMRC determines tax status based on physical presence, ties to the UK, and the SRT framework - nationality does not factor in at all. A Pakistani passport holder who spends more than 183 days in the UK in a tax year is a UK tax resident for that year, full stop.

Form P85 is submitted to HMRC when you leave the UK or establish non-resident status. It updates your tax record, stops incorrect PAYE deductions, and starts a refund process if you overpaid tax in the year you left. File it as soon as you depart, not months down the line.

Yes, it happens. If you meet the SPT for the US and the SRT for the UK in the same tax year, you are technically resident in both. The US-UK tax treaty and tie-breaker provisions then determine which country has primary taxing rights. Our guide on Avoiding Double Taxation covers how that process works.

The FIG regime replaced the old non-dom system from April 2025. It gives four years of relief on foreign income to new UK arrivals who have not been UK resident in any of the 10 tax years before arriving. NRPs arriving from Pakistan with no recent UK residency history typically qualify. Relief must be claimed annually - miss a year and it is gone.

Any day where you are present in the UK at midnight. Arriving Monday, leaving Tuesday before midnight - both days count. Landing at 11:55 PM on Friday counts as a UK day for that Friday. The midnight rule catches more days than most people expect.

The UK-Pakistan DTA contains provisions that stop the same income from being taxed in full twice over. If Pakistani income is taxed in Pakistan first, you can claim a credit against UK tax liability on that same income. But the DTA does not eliminate UK tax once UK residency is established - it limits double taxation, not taxation itself. The FIG regime provides stronger protection during its four-year window.

That year's relief is gone, permanently. There is no retroactive claim mechanism. If you qualify for FIG, it must be actively claimed on your Self Assessment return each year during your qualifying window - missing a year means losing it regardless of what you do later.

Not at all. Any place consistently available to you in the UK for at least 91 consecutive days during the tax year can trigger it - owned, rented, or belonging to a family member. A room in your sibling's house in Wembley, your parents' spare bedroom in Ilford - if it is available to you for 91 days and you use it, the tie is there.

Yes. The SPT formula looks back three years. If your combined weighted day count across the current and two prior years reaches 183 or more, the IRS treats you as a resident for the current year - regardless of where you are based right now. This catches NRPs who visited frequently in prior years and assumed their current Pakistan residency cleared the slate.

It happens when an NRP crosses the SPT threshold without realising it - usually because they did not account for the prior two years in the weighted formula, or because they miscounted transit days and partial days. Once the threshold is crossed, US worldwide income tax liability follows automatically. The IRS does not require intent. The math is what triggers it.

Get Expert Help

Review Your Position
Before Your Next Trip

Residency rules are precise enough that small errors carry large consequences. A day count that is off by two weeks, an Accommodation Tie you did not know you had, a FIG claim you forgot to make - none of these are minor oversights. They turn into unexpected tax bills, penalty exposure, and years of correspondence with HMRC or the IRS. For NRPs managing the Pakistan-UK-US triangle, the time to review your position is before your next trip - not after the tax year closes and the options narrow. Our advisers work specifically in this space and can assess your residency position, model your day counts, identify FIG eligibility, and flag compliance gaps before they become problems.

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