Now that the highest rate of tax in the UK has gone up to a whopping 50%, (with historical evidence weighted more firmly in favour of the fact that most taxes in Britain are seldom removed or reduced once they’ve been created), there are plenty of places around the world where we can all move to live, work or retire if we specifically want to reduce our tax bill – which is very good news!
Britain was once considered a fairly taxed nation – but those days have long gone. And with governments having knee jerk reactions to claw back money that they unwisely spent or gave away to banks, we can all see clearly that the UK is no longer a nation in control of its economy.
If you’re unhappy with the amount of tax you have to pay, with the proposed spending cuts or you’d just like an adventure abroad and ideally you’d like it to be in a country where you can retain more of your salary each month, we’re going to be exploring where expats can go and live abroad and pay less tax.
Where Can You Work Abroad and Pay Less Tax?
There isn’t a single country that won’t tax you on your locally sourced income once you’ve become a fully-fledged tax resident of that nation. However, the good news is that there are plenty of nations where the tax you will be liable for locally will be far less than you’d be looking at paying in the UK!
What You Need to Know About Your Tax Status
If you’re intending to go abroad and work you need to be aware of your tax liability and who you are responsible for paying your tax to. For example, if you go overseas on a short-term contract you may still be resident or ordinary resident in the UK and therefore still liable for UK tax. Some people can end up in the unfortunate situation where they are also liable for tax abroad at the same time! Often there are double taxation agreements in place that protect the individual from paying tax twice – but you really do need to understand your tax position because ignorance is no excuse.
If you move abroad permanently or for the longer-term, you may well become non-resident in the UK and a tax resident of your new nation. You should fill in HMRC’s P85 form which relates to determining your tax status, and you should complete the necessary steps in your new nation to make sure you are fully tax compliant there. For more details please refer to HMRC’s own site where you will learn about the 183 day rule, and how many days you can visit the UK for each year once you’re an expat without becoming resident again for tax purposes!
Which Countries Tax Workers’ Salaries Less?
Countries and states such as Dubai and Saudi Arabia in the Middle East are well known for the fact that they offer residents a chance to earn a tax-free income – so if you want to move abroad and pay 0% tax, consider a move to this region but beware, your tax benefits may be outweighed by the cost of living you will face! Alternatives closer to home include Andorra and Monaco, or you might prefer the Bahamas or lesser-known Norfolk Island!
If you’re okay with paying some taxation but you’d simply like it to be fairer and less than the 50% upper limit in the UK, certain nations have a flat tax rate on personal income in place. This can work well for workers because they always know what they will have to pay each month depending on how much they earn. They don’t have the same fears that Brits do that one morning a new Chancellor will wake up and decide to hit the workers even harder to fund his ‘bail out habit!’
Countries that have a flat tax rate include Bulgaria, Lithuania and Estonia – but there are almost as many arguments against the flat tax as there are for it. For example, many believe that the rich should pay more tax – however, I feel that those who do earn well and are successful should not be penalised for their efforts.
France, Latvia, Malaysia, Mexico, New Zealand, Russia and Switzerland all have lower personal income tax rates for workers than the UK, and this list offers you a very diverse range of choices of country to live and work in if you’re currently contemplating your options.
Where Can You Live Abroad and Pay Less Tax?
If you’re not going to be earning all of your income from the local economy there are some countries you can live in where you only pay tax on that which you earn in the country or remit in to the country. So, you can legitimately retain some, (or even all), of your foreign sourced wealth offshore and keep it free from income taxation erosion in your new nation.
There’s a definite caveat required at this point however, and that is you have to be fully aware of your tax status and liabilities in a) your originating nation, b) your new country of residence and c) the location where you choose to ‘offshore’ your wealth. As stated previously in this report, ignorance of your liabilities and position is no excuse, and you and only you are ultimately responsible for meeting your liabilities. There are tax and wealth advisers out there who specialise in assisting expatriates like you and those with complex financial positions to determine the best, most advantageous paths for your money’s management, so make sure you seek advice.
In terms of the countries where you only pay tax on the money you earn in that nation or which you remit to it, they include the UK! But only if you are non-domiciled in Britain – so this benefit does not apply to Britons unfortunately. Countries we Brits can consider include the likes of Belize – where there is also a retired person’s incentive programme that I will discuss further below. This benefit also exists in New Zealand, but only for the first four years of your residency.
It’s worth speaking to your wealth adviser about any specific methods of saving and investing that can be used to legitimately shield you from tax in your new nation too.
Where Can You Retire Abroad and Pay Less Tax?
Unlike in the UK where pensioners receive very little in the way of an advantage, there are nations in the world that welcome retirees and go out of their way to make their integration smoother thanks to incentives such as reduced tax rates. Cyprus is one such country very popular with retirees who can reduce their annual tax bill to just 5% on qualifying pension income on this stunning Mediterranean island.
As Cyprus is in the EU, relocation is easy – and as it is a popular tourist island with a large British influence, integration is very straightforward too. Healthcare standards are high, the lifestyle available is excellent – the only downsides are the high costs of living and property in Cyprus.
Alternatively, in countries such as Belize, the Philippines and Malaysia there are retired person’s incentive programmes that allow qualifying retirees to live in these countries 100% free of any personal income tax liability. Each nation mentioned also has an affordable cost of living, and real estate in these countries can be cheap too.
In Conclusion
Whether you want to live abroad and work, you’re ready to retire or you just want to travel or take a short-term contract overseas, many countries will tax you less on your income than the UK will. There are also options available for some people to offshore their wealth and legitimately shield it from tax – so what’s holding you in the UK, why not go abroad in search of an adventure and save yourself some tax at the same time?
