What if I work abroad temporarily?
If you are going to work abroad temporarily, for example, on a working holiday abroad, you must let HM Revenue & Customs (HMRC) know. This will help ensure that your tax position is correct when you leave the UK. Here, we cover the basics.
You should also let HMRC know when you return, in order that they can confirm what you must do to bring your records up to date for the period you were away.
You may also need to contact the tax authority in the country in which you will be working.
As students often find themselves working abroad during a gap year or as part of a university work placement for example, you can find lots of information about the things you need to consider in our site ‘Tax Guide for Students’.
If you have been working in the UK and you leave the UK part way through a tax year, you may not have used all of your personal allowance for income tax, so you might be able to claim a repayment of tax.
If you normally complete a tax return, you should wait until after the end of the tax year and then complete your tax return as usual. If you do not normally complete a tax return, you should wait until after the end of the tax year and then contact HMRC.
If you intend to be away from the UK for more than one complete tax year, and you do not have to complete a tax return, you should complete form P85 ‘Leaving the UK – getting your tax right’. If you have a form P45 from your previous employer, you should send parts 2 and 3 to HMRC together with form P85.
Form P85 starts the process of taking you out of the UK tax system and applies for a tax repayment if one is due.
Form P85 asks 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.
For more information on what to do when leaving the UK, go to the GOV.UK website.
Your tax residence status is important, because it affects whether or not you pay tax in the UK on foreign income.
Just because you leave the UK to work abroad temporarily, it does not mean that you are automatically not resident in the UK for tax purposes. Nor does it mean that you drop out of the UK tax system.
With effect from 6 April 2013 there is a Statutory Residence Test. Your residence status will depend on whether you meet any of the 'automatic overseas tests' or the outcome of the 'sufficient ties test'. There is more information in the section ‘when is someone resident in the UK?’.
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.
When might I become non-resident in the UK?
To become non-resident in the UK for tax purposes, you would probably need to leave the UK to work abroad on a more or less ongoing, full-time basis. If you think this applies to you, you should seek advice from a professional tax adviser about how to report this situation to HMRC. You can find a tax adviser on the Chartered Institute of Taxation's website.
If you are non-resident in the UK for tax purposes, your foreign employment income is probably not taxable in the UK, and will be correctly taxable in the foreign country only. You remain taxable in the UK on any income that arises here, for example, UK bank interest and UK rental income.
If you were born outside the UK or if the UK is not your permanent home, and you are now leaving the UK temporarily, your case could be quite complex. You should seek advice from a professional tax adviser. You can find a tax adviser on the Chartered Institute of Taxation's website.
What is my tax position if I remain resident in the UK for tax purposes?
If you are a UK tax resident, but you are working overseas, a UK tax liability may arise on your foreign employment payments. You may also have to pay tax in the other location, giving rise to double taxation.
The UK has an extensive network of double taxation treaties with other countries. One of the functions of these treaties is to prevent double taxation. This works by allowing only one country to tax your income or by allowing a credit for foreign tax paid when calculating the UK tax liability.
If you go abroad to work, you may have to continue to pay UK NIC.
The answer depends on:
- the country you move to;
- how long you go for; and
- who you work for.
If you have to pay UK NIC, you might not have to pay social security contributions in the country in which you are working. There is more information on the GOV.UK website.
If you will be working abroad for a foreign employer you will not normally pay UK NIC, but you may have to pay social security contributions in the foreign country.
If you go abroad to work and are no longer within the UK tax system, HMRC can no longer be involved in collecting your student loan repayments. The Student Loans Company (SLC) takes over.
If you go overseas for more than three months, you must let SLC know, so that they can check your financial circumstances and arrange to collect repayments directly from you if necessary – their contact details can be found on the SLC repayment website.
If you have been away overseas and return to the UK for three months or more, you should let SLC know, as you might need to make repayments through Pay As You Earn (PAYE) and you will need to cancel any separate arrangements that you have made direct with SLC.
There is more information on our Tax Guide for Students website.
You can find more information on residence for tax purposes in the ‘migrants and tax section’ of this website.
If you have been working in the UK before you leave to work abroad you might be due a UK tax refund. You can find advice about UK tax refunds in the section ‘what if I pay too much tax?’.
For more information on tax when leaving the UK, go to the GOV.UK website.
You can find lists of double taxation agreements between the UK and other countries on GOV.UK.
You can find more information on NIC if you are going abroad on the GOV.UK website.
For a list of countries that have a social security agreement with the UK, visit the GOV.UK website.
This is a complex area; you might need to seek advice from a professional tax adviser. You can find a tax adviser on the Chartered Institute of Taxation's website.