In this case it means that the remittance basis will be applied without you needing to make a claim on your tax return. This has two big advantages:
- Firstly you will not lose the entitlement to the UK tax allowances. This can be highly beneficial as otherwise you'd lose the ability to offset the UK personal allowance and the annual CGT exemption.
- Secondly you won't be subject to the tax charge on overseas unremitted income and gains which is set at a minimum of £30,000 even if you've been here for more than 8 tax years. (The Finance bill amended this so that rather than there being a £30,000 stand alone tax charge as the price of using the remittance basis it is now treated as levied on overseas unremitted income or gains which you nominate).
Therefore there are some significant advantages to the £2,000 de minimis limit.
How does it work?
The Finance Bill makes it clear that the £2,000 limit applies to unremitted income and gains and not the total overseas gains.
This is confirmed in this extract from the Finance Bill:
'...Application of remittance basis without claim where unremitted foreign income and gains under £2,000 (1)
This section applies to an individual for a tax year if-- (a) the individual is UK resident in that year, (b) the individual is not domiciled in the United Kingdom in that year or is not ordinarily UK resident in that year, and (c) the amount of the individual's unremitted foreign income and gains for that year is less than £2,000. (2)
The amount of an individual's "unremitted" foreign income and gains for a tax year is-- (a) the total amount of what would (if this section applied) be the individual's foreign income and gains for that year, minus (b) the total amount of those income and gains that are remitted to the United Kingdom in that year...'
This is pretty clear that the exemption applies where the unremitted income and gain are less than £2,000.
As such based on this if you had overseas income or gains above £2,000 you could remit some of the gains but leave the unremitted element to less than £2,000.
For example if you had overseas income of £10,000 you could potentially remit income of £8,001 and retain £1,999 overseas.
In this case you'd then automatically be entitled to the remittance basis. The amount remitted would be subject to UK income tax but the £1,999 retained overseas wouldn't. There would also be no loss of personal allowances or exemptions or requirement to pay the £30,000 tax charge.
If you retained more than £2,000 overseas you would then need to decide whether to claim the remittance basis or not. If the minimum £30,000 tax charge would be due (eg you've been here for more than the last 7 years) you would obviously not opt for the remittance basis unless you had overseas unremitted or gains substantially above the £2,000 de minimis (otherwise you'd find yourself in the crazy position of having only nominal overseas unremitted income (eg £2,500) but paying a £30,000 tax charge on that income!)