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Working abroad and tax

Everything you need to know about paying tax when you work overseas - and whether you'll pay UK tax, or tax in the country you live in.

In this article
What tax do I pay before I leave the UK? How am I taxed if I work abroad? How do I pay tax if I live outside the UK? Do I pay tax on non-UK foreign income? What taxes will I pay if I'm a non-resident in the UK?
What is a 'double taxation treaty?' What happens to my National Insurance contributions? What happens to my student loan? Submit your 2017/18 tax return with Which?

What tax do I pay before I leave the UK?

If you are leaving the UK part-way through the tax year, you may be able claim a repayment of tax if you haven’t used up all of your personal allowance for the year.

If you usually submit a self-assessment tax return, you can report this when you fill it out. If not, wait until the end of the tax year, and contact HMRC.

In instances where you’re leaving the UK for more than one complete tax year, you should complete form 85 ‘Leaving the UK – getting your tax right’.

If you’ve left your job before moving and received a P45, you should send HMRC parts 2 and 3, along with form 85.

Form 85 indicates that you want to be taken out of the UK tax system, and applies for a tax repayment if one is due.

  • Get a head start on your 2017-18 tax return with the Which? tax calculator. Tot up your tax bill, get tips on where to save and submit your return direct to HMRC with Which?

How am I taxed if I work abroad?

UK residents who have their permanent home (AKA domicile) outside the UK may not have to pay tax on foreign income.

Your domicile is usually classed as the country your father considered his permanent home when you were born – but it may have changed if you’ve moved from the UK and don’t intend to return.

You can check which country you’re domiciled in by reading HMRC’s guidance notes on Residence, domicile and the remittance basis.

How do I pay tax if I live outside the UK?

In order to be classed as a non-resident and exempt from UK tax, you will need to:

  • work abroad for at least one full tax year
  • spend no more than 182 days in the UK in any tax year
  • spend no more than 91 days in the UK on average over a four-year period. 

For this purpose, you count as being in the UK on any day when you're here at midnight.

Any days spent in the UK because of exceptional circumstances beyond your control (such as illness or flight delays) are not normally counted.

Find out more: retiring abroad - how it will affect your finances

Do I pay tax on non-UK foreign income?

If you’re not classed as a UK resident, you won’t have to pay UK tax on foreign income.

If you’re non-domiciled, you don’t pay UK tax on foreign income or capital gains if they’re less than £2,000 in the tax year and you don’t bring them into the UK – ie. don’t transfer them to a UK bank account.

If your foreign income or capital gains exceeds £2,000, you must declare it in a self-assessment tax return.

There are special rules for income from pensions, rent from property and certain types of employment income, which are outlined by HMRC.

 

What taxes will I pay if I'm a non-resident in the UK?

If you're classed as a non-resident in the UK, you won’t have to pay income tax to HMRC, although you may have to pay tax in the country you're working in instead.

You also won't be subject to capital gains tax (CGT) on items purchased after you've left the UK.

If you bought an item before you left the UK, you stop being liable for capital gains tax once you’ve been a non-resident for five years.

So, it might be a good idea not to dispose of anything that you might be liable for CGT on until this five year period is up. 

You will, however, pay capital gains tax on UK property regardless of whether you’re a UK resident.

Find out more: CGT rates and allowances and what items you might be liable for CGT on

What is a 'double taxation treaty?'

If you're taxed on your overseas income both in the UK and in the country where income was earned, you can usually claim tax relief to ensure you're not taxed on the same income twice.

How much tax you’ll get back, and how to claim it, depends on the double taxation agreement between the UK and your country of residence.

The UK has a double taxation agreement with hundreds of other countries.  

For most double taxation agreements, you will need to use form DT-individual, available on gov.uk, to get tax relief in the UK.

Double taxation agreements can be quite complicated. Our Which? Money Helpline experts can give you independent one-to-one guidance on all kinds of tax queries. 

HMRC has a list of the types of reliefs you can claim, along with a list of countries it does not have a double taxation treaty with.

What happens to my National Insurance contributions?

If you’re working abroad and plan to return to the UK at some point, you may choose to make voluntary National Insurance payments in the UK so you remain entitled to the associated benefits, such as the state pension.

To do this, you’d opt to make voluntary Class 3 National Insurance contributions.

For 2018-19, these contributions are £14.65 a week. You can backdate payments for previous years, when the rate will vary.

In 2019-20, Class 3 contribution rates will rise to £15 a week.

In 2018-19, if you’re self-employed and earn less than £6,250 a year, you can make voluntary Class 2 contributions, which are £2.95 a week.

In 2019-20, you can make voluntary Class 2 contributions of £3 a week if you earn less than £6,365 a year.

Find out more: National insurance and your state pension - more information on top-ups

What happens to my student loan?

If you are no longer within the UK tax system, the Student Loans Company (SLC) takes over collecting your loan repayments from HMRC.

If you go overseas for more than three months and had previously been repaying your student loan, you should let SLC know.

Submit your 2017/18 tax return with Which?

Get a head start on your 2017-18 tax return with the Which? tax calculator. Tot up your tax bill, get tips on where to save and submit your return direct to HMRC with Which?.

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