What if I work abroad temporarily?
If you are going to work abroad temporarily, for example, on a working holiday abroad, there are tax points to consider and you may need to let HM Revenue & Customs (HMRC) know. Here, we cover the basics.
As students often find themselves working abroad during a gap year or as part of a university work placement for example, you can find comprehensive guidance on the tax and social security implications of working abroad temporarily in the ‘Going abroad’ section of our site ‘Tax Guide for Students’.
What do I need to consider if I am working abroad temporarily?
If you work abroad temporarily, you will need to consider your tax position in the UK and the overseas country separately. If you work overseas, you are likely to be taxable in the overseas country. Whether or not you remain taxable in the UK will depend on your residence position. This is determined by the Statutory Residence Test. The most likely scenarios are as follows:
- You work abroad for less than one complete tax year and/or on a casual basis. In this case you should expect to remain resident and taxable in the UK, but you will need to confirm this by working through the Statutory Residence Test. You may be to file a UK Self Assessment tax return in order to report your overseas earnings and claim any double taxation relief (more on this below).
- You work abroad on a more or less ongoing, full-time basis for the whole of one complete tax year. In this case we would expect that you would cease to be UK resident and hence not liable to UK tax on earnings from outside the UK. If you leave the UK part way through a tax year to work overseas on this basis, you should be able to ‘split’ that tax year into a resident and non-resident part. As such, you may be due a refund on any pre departure employment earnings. This is because you will only have received part of your tax free personal allowance under the Pay As You Earn (PAYE) system, when you are actually entitled to the whole amount.
This depends on whether or not you expect to break UK tax residence. The key things to consider are whether or not you need to register for Self Assessment as a result of your working abroad, and whether or not you need to file a form P85.
You should normally register for Self Assessment if you work abroad, unless you cease to be UK resident and you do not expect to have any source of income which is taxable in the UK while you are overseas (more on this below). In this case, you should consider filing a P85 ‘Leaving the UK – getting your tax right’ as you may be entitled to a refund.
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.
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. Your refund will be dealt with as part of this process.
For more information on when to file a P85 and when to file a Self Assessment tax return, go to the ‘Going abroad’ section of our site ‘Tax Guide for Students’.
Your tax residence status is important, because it affects whether or not you pay tax in the UK on your 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 tests' or the outcome of the 'sufficient ties test'. There is more information in the section ‘When is someone resident in the UK?’.
If you were born outside the UK and/or the UK is not your permanent home, working out your UK residency status if you leave the UK for a temporary absence could be quite complex and you may need to take professional advice for your specific circumstances.
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.
Special provisions apply to people who are UK government employees working abroad (e.g. those in the armed forces) 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.
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.
There is more information on double taxation relief in the ‘Going abroad’ section of our site ‘Tax Guide for Students’.
If you go abroad to work, you may have to continue to pay UK NIC, but this usually only applies if you are sent to work abroad by a UK employer.
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.
There is more information about your social security positon if you work abroad for a foreign employer in the ‘Going abroad’ section of our site ‘Tax Guide for Students’.
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.
For more information on tax when leaving the UK, go to the GOV.UK website.
For more detailed, technical information on tax when leaving the UK, see HM Revenue & Customs' (HMRC) RDR1 booklet on GOV.UK.
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.
If you are in the armed forces, you might spend time working overseas during your service career. See our dedicated website section for some of the specific considerations that apply.
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.