Accounting for income tax when working abroad, are you set up?

Melanie Richardson


If you live and work exclusively here in the UK, your duty for paying income tax is simple. You pay good-old HMRC. However, if you spend time working abroad like many of our clients do, you will need to consider where to pay your income tax. You may need the services of a good firm of chartered accounts to help you to determine who it is you have to pay, and how much so that you can get on with your work and not worry about the legalities.

In the first instance, let's take a quick overview of the scenarios whereby you could be liable to pay UK income tax. They are:

• For any salary or wages you earn (here or abroad)
• On any foreign investments you may have or any interest on savings
• If you receive any rental income from overseas property
• The income from any pensions held outside the UK

For the avoidance of doubt, the Channel Islands and the Isle of Man are classed as being outside of the UK for tax purposes.


Establishing whether or not you have to pay UK income tax

Deciding whether or not you have to pay UK income tax is governed by your country of residency. If you are not classed as a resident of the UK, you do not have to pay UK income tax on your foreign earnings. You will instead be governed by the tax rules of your country of residency.

If you are classed as a UK resident, you would normally be expected to pay UK income tax on any foreign and/or domestic earnings. However, if you are domiciled abroad (i.e. your permanent home is abroad), you may not be required to pay UK income tax on any foreign earnings.


Determining your country of residency

Determining your residency status can be a rather complicated affair. It depends on a number of things. For example:

• How many days you spend in the UK in any given tax year
• If your only home is here in the UK, how long you have owned it, lived in it or rented it, and how long you spent here in the UK.

For the sake of clarity, it is best to use a trustworthy firm of charted accountants to accurately determine your country of residency and therefore who you have to pay your income tax to. Contact us today for advice and guidance.

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