What is the UK Statutory Residence Test?

Since its introduction in 2013, the UK Statutory Residence Test (SRT) has been central to residence-based tax planning. While designed to clarify tax residence, the rules remain notoriously complex, posing challenges for wealth managers and tax planners, particularly in light of changes enacted in the Finance Act 2025, to the question of residence for tax purposes. The SRT is challenging to navigate and, in practice, poorly understood by many. This can have serious tax consequences, not only for Income Tax and Capital Gains Tax (CGT) - for which residence has always been crucial – but following the enactment of the Finance Act 2025, for Inheritance Tax (IHT) as well.

The role of residence in the UK tax system

An individual’s tax residence status determines their exposure to UK taxation on worldwide income and gains. UK residents are generally taxed on their worldwide income and gains, subject to any reliefs or exceptions (e.g., they made use of the Remittance Basis which was abolished from 6 April 2025). The 2025 reforms introduced a residence-based approach to IHT, replacing the previous domicile-based rules.

Key features of the SRT

The SRT is built on three categories of tests, applied in sequence:

• Automatic overseas tests - these establish non-residence where, amongst other things and for example, an individual has been UK resident in one or more of the previous three tax years but spends fewer than 16 days in the UK in the current tax year.

• Automatic UK tests - these determine UK residence if, for example, the individual spends 183 days or more in the UK, OR has a UK home and no overseas home, OR works what is generally considered ‘full-time’ in the UK.
  
  
• Sufficient ties test - if neither of the above tests applies, this test looks at connections (known as "ties") to the UK - such as family, accommodation, UK residence in the previous tax years, and UK work. The greater the number of ties an individual has to the UK, the fewer number of days they will require to spend here before becoming tax resident under the SRT.

Though the framework appears structured, it demands a granular understanding of definitions, exceptions, and thresholds.

Common traps and pitfalls in applying the SRT

A number of features of the SRT routinely cause confusion, including:

• Day counting and the deeming rule: The number of days spent in the UK is an important facet of the SRT. An individual will generally be considered as having spent a day in the UK if they are physically present in the UK at midnight on a given day. There are instances where days can be disregarded for SRT purposes e.g., one is in ‘transit’ but the facts of what actually happened on the day in question are vital to validate its being disregarded. Furthermore ,under the UK’s “deeming rule”, where an individual has been resident under the SRT in a previous tax year and maintains significant links to the UK certain midnights can count as UK days for SRT purposes even if the individual departed the country earlier. This nuance is frequently overlooked.
  
  
• Exceptional circumstances: Days spent in the UK due to “exceptional circumstances” can be disregarded, but the evidential burden to be satisfied is high in such cases and there is a limit to how many days can be disregarded in those circumstances. HMRC requires that the circumstances be both beyond the individual’s control and unexpected. There is significant scope for misapplication of this rule, especially in cases involving illness or a global crises (e.g., pandemics).
  
  
• Split year treatment: Where individuals arrive in or depart from the UK part-way through a tax year, they may qualify for ‘Split year’ treatment. However, this is only available in specific situations and involves the satisfaction of distinct requirements (dependant on whether an individual is leaving, or comes to, the UK part way through a tax year). A misunderstanding of how split year treatment works can lead to overreporting or underreporting of income and gains.
  
  
• Family and accommodation ties: The nature of these ties is often misjudged: the absence of marriage or a civil partnership does not bar a client from having a family tie to the UK if their significant other is UK resident; and the fact that someone doesn’t have a place of their own to live in the UK, but they have a ‘close relative’ who may be able to afford them shelter for a period of time, may count as an accommodation tie under the SRT. Clients frequently fail to appreciate the realities of how these ties, amongst others, operate in practice.
  
  
• Interaction with treaty residence and ties to other jurisdictions: The SRT is a domestic UK test. However, where clients live internationally, they may be considered tax resident in the UK and elsewhere under foreign rules. The interaction of double tax treaties is essential to ensuring the correct tax treatment is applied across multiple countries (but is easily mishandled).

The Finance Act 2025 and the rise of the SRT in IHT planning

Until recently, domicile was the linchpin of IHT. With the passage of the Finance Act 2025, UK residence has become the new bases on which IHT is levied on death. Individuals who have been UK resident for at least 10 out of the previous 20 years are now considered ‘Long Term Resident’ for IHT purposes, meaning that their worldwide estate (subject to applicable exemptions and reliefs) will be subject to IHT on death.

Practical takeaways for advisors

In light of these developments, amongst other things, advisors could take the following steps:

• Implement proactive residency tracking: Encourage clients to keep precise records of their UK days, including reasons for travel, locations stayed, and activities undertaken.
  
  
• Analyse ties in detail: Go beyond the superficial and establish the extent to which clients do actually maintain ties, as defined under the SRT, with the UK.
  
  
• Plan exits and arrivals carefully and proactively: When clients are considering coming into or leaving the UK, encourage them to engage with advisors ahead of time to ensure no unfortunate surprises occur.

Understanding the practical application of the SRT can be challenging but will be fundamental to understanding if and when UK tax obligations arise. Careful, proactive planning supported by detailed advice, are the most effective tools for globally mobile clients to manage their relationship with the UK's tax system.

Brodies' are experienced in advising on the SRT, supporting clients operating across borders and often contribute UK tax planning advice as part of a multi-disciplinary team of specialists. If you have any questions or would like further information, please get in touch with one of our personal tax planning experts.