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, 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.
The UK left the European Union (EU) on 31 January 2020 and entered a transitional period, currently due to end on 31 December 2020, during which EU law continues to apply in the UK. The UK’s relationship with the EU beyond the end of the transitional period has not yet been finalised. Please note that the guidance below reflects the law as it applied before the UK’s departure from the EU, and as it will continue to apply throughout the transitional period.
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 where you work, 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 need 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. There are strict conditions relating to this, the most important of which are that you spend fewer than 91 days in the UK and have fewer than 31 UK workdays during the tax year (see paragraph 1.7 onwards of HMRC’s booklet RDR3 for the detail). 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 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.
It is important to be aware that when you are considering whether or not your earnings from employment are UK earnings or non-UK earnings, it is the place of performance of your duties which is relevant, not the location of your employer or where you are paid (though these factors may have an impact on your overall position).
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.
If you leave the UK to work abroad temporarily, it does not necessarily mean that you become not resident in the UK for tax purposes.
In the UK 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 at 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 residence 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 earned while non-resident is not taxable in the UK. It is likely to be taxable in the foreign country. 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 (for example, 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 will arise on your foreign employment income earned while resident in the UK. 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.
The answer depends on:
- the country you move to;
- how long you go for; and
- who you work for.
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.
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 GOV.UK.
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.
You can read more about your social security position when you are working abroad in HMRC’s booklet NI38.
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 GOV.UK.
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 GOV.UK.
For a list of countries that have a social security agreement with the UK, visit GOV.UK.
If you are in the armed forces, you might spend time working overseas during your service career. See our page What if I am in the armed forces and working overseas? for some of the specific considerations that apply.
This is a complex area. You might need to seek advice from a professional tax adviser. We tell you how you can find a professional tax adviser in our Getting Help section.