What if I work abroad temporarily?
It is important to understand that just because you leave the UK, you do not automatically drop out of the UK tax system. If you are going to work abroad temporarily, you may find that you are still treated as UK tax resident.
Since 6 April 2013 there is a Statutory Residence Test to determine your UK tax residency status. Your residence status will depend on whether you meet any of the ‘automatic overseas tests’ or the outcome of the ‘sufficient ties test’.
Factors that can be important include:
- the purpose of your time abroad
- how often you visit the UK after you have left
- the purpose of your visits to the UK
- what connections you keep in the UK, such as family, property, work or business connections.
As more and more students are spending time abroad, working and volunteering as well as studying, there are more details about residency and the other things you need to think about if you are leaving the UK in our ‘Going abroad’ section.
The result of remaining UK tax resident is that, if you work abroad you may be taxable in the UK on those earnings – even if you paid tax abroad when you earned the money. However, you will normally be able to claim relief for tax paid abroad – the overall result being that, if the countries have different tax rates, you suffer tax at the higher of the two rates of tax. You will find more information on this in our ‘Double taxation’ section, but this is a complex area and you should take advice if you are in this situation.
If you stay outside the UK for the whole of a tax year and work full-time abroad, or are leaving the UK more or less on a long-term basis, the situation might be different, and you might become non-resident. It is important to get your tax residency status correct because if you leave the UK and become not resident, you will only pay UK tax on your income arising in the UK (subject to the provisions of any relevant double tax agreement between the UK and the country you are now working and living in). You may be exempt from UK capital gains tax on gains arising in the UK, but not if you own the assets when you leave the UK. There are also special rules relating to UK residential property that is sold while you are resident overseas. You can read more about this on GOV.UK.
You will need to consider whether there are tax issues arising in the country in which you are working.
If you leave the UK to work full-time abroad it is worth trying to understand the HMRC advice contained in their leaflet RDR1.
When you leave the UK you need to work out whether there is any change to your tax affairs and notify HM Revenue & Customs (HMRC). You may need to complete a Self Assessment tax return and/or you might be able to claim some tax back by completing a form P85.
You can find more information in our ‘Going abroad’ section.
If you are going to work abroad temporarily, you should tell HMRC. They can confirm whether you need to start the process of taking yourself out of the UK tax system and/or apply for a tax repayment if you may have one due.
To confirm the next steps to you, HMRC will probably ask you for details about:
- your reasons for leaving the UK
- what you will be doing while you are abroad
- any assets or income you will leave in the UK.
Student loan borrowers should also read the guidance we provide in our ‘Going abroad’ section.
Special provisions apply to people who are UK government employees working abroad or those who go to work for EU government institutions. Similarly, if you work on a ship, gas or oil rig or are a volunteer development worker, you should seek advice from HMRC.