UK Tax Law: Working Abroad

Summary: This guide to UK tax law and working abroad is for those planning on taking a working holiday as well as expatriates who are intent on leaving Blighty behind for a new working life elsewhere.

When it comes to working abroad, how much tax you have to pay and to whom you have to pay it, a great deal will depend on the amount of time you are away from the UK and also whether or not the country you’re working in has a double taxation agreement with Great Britain.

This guide to UK tax law and working abroad is for those planning on taking a working holiday as well as expatriates who are intent on leaving Blighty behind for a new working life elsewhere.

The rules and laws relating to UK income tax depend on the individual establishing residence either in the UK or elsewhere. 

Basically and broadly speaking: - if you’re going to be in the UK for 183 days or more in any one tax year you will be deemed UK resident and have to pay tax in Great Britain.  However, if you leave the UK for one complete tax year or you leave permanently or remain outside of the UK for three or more years you will be deemed non-resident in the UK.  Care must be taken about the amount of time you spend visiting the UK though, if you visit the UK for more than 91 days each year for four years you can be deemed resident in the UK again, otherwise if you remain outside of this limit you will be accepted as being non-resident in the UK and you will be liable for taxation in the country in which you have established residency.

For those who are planning on spending only part of a tax year elsewhere but working whilst abroad the fact that they may remain UK tax liable may seem insane – after all you’ll be working and living abroad and whichever country you’re in will want their income tax paying right?  Well, this is where double taxation agreements come into play.

Many countries in the world have double tax agreements with the likes of the UK and other European nations.  These are in place to protect someone from being taxed twice…basically if you’re in the UK for more than 183 days in one tax year but spend some of your time in France working there and you pay tax as you earn for example, you can let the UK tax authorities know by showing them proof in the form of tax returns or pay slips that you’re up to date with your tax and don’t owe the Chancellor of the Exchequer a penny.

UK tax law for those working abroad needn’t concern those who work and reside overseas permanently – if you establish residency elsewhere you come under that particular country’s taxation system, but you should still officially de-register your residency from the UK by filling in forms P85 or P85s which are available from HM Customs and Excise centre for non-residents.  Whilst working abroad if you have UK sourced income this may still be taxable in the UK – however depending on the country you take up your new residency in they may want to tax you on your worldwide income and gains!  Again, this is where double taxation agreements come into place to protect you from having to pay tax twice.

If you’re planning on becoming an expatriate, moving abroad and working overseas you should take care with your taxation planning – get it right and you’ll be alright, get it wrong and you could find yourself inadvertently breaking laws, paying too much tax or facing an horrendously complicated tax return.  Get advice from an international accountant if in doubt, and check out the HM Customs and Excise website as it contains a wealth of useful information.

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