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Wednesday, 3 October 2023

Money, tax and benefits

Money, tax and benefits

Tax on overseas earnings from employment

If you work for an overseas employer or you work overseas for a UK employer, the tax you'll pay depends on where your employer's based, where you work and whether you're 'resident', 'ordinarily resident' or 'domiciled' in the UK.

Republic of Ireland and employment - UK or overseas?

An employer based in the Republic of Ireland counts as a UK employer. But working in the Republic of Ireland counts as working overseas.

Meaning of 'resident', 'ordinarily resident' and 'domiciled'

Resident

  • if you're in the UK for 183 days or more in a tax year, you're a 'resident' for that year for tax purposes
  • if you come to live in the UK permanently or to remain for three years or more you're resident from the date of arrival
  • you're also treated as resident if you're in the UK for an average of 91 days or more in a tax year (worked out over a maximum of four consecutive tax years)

Ordinarily resident

  • if you're resident in the UK year after year you will normally be treated as 'ordinarily resident'
  • you're treated as ordinarily resident in the UK from the date you arrive if it's clear that you intend to stay for at least three years

Domiciled

  • your domicile is normally acquired at birth, but this is a general law concept covering a range of factors

More than one of these definitions can apply to you - or even none of them at all.

If you're not resident in the UK for tax purposes

If you're not resident in the UK for tax purposes you won't pay UK tax for work done overseas (but it may be taxable in another country).

However, you will pay UK tax on overseas earnings from work you do in the UK. Your employer might have to operate Pay As You Earn (PAYE - where tax is deducted from your wages) and you might have to fill in a Self Assessment tax return.

There are special rules for when you become or stop being UK resident part way through the tax year. There are also special rules for seafarers. See the separate sections below.

Working wholly outside the UK for a UK employer

If you're:

  • resident and ordinarily resident, you'll pay tax on all your earnings
  • resident but not ordinarily resident, you'll only pay tax on earnings you bring into the UK

It makes no difference whether or not you're domiciled in the UK.

Working partly in and partly outside the UK for a UK employer

If you're resident and ordinarily resident, you'll pay tax on all your earnings.

If you're resident but not ordinarily resident:

  • for work you do in the UK, you'll pay tax on all your earnings
  • for work you do overseas, you'll only pay tax on any earnings you bring into the UK

It makes no difference whether or not you're domiciled in the UK.

Working wholly outside the UK for an overseas employer

If you're resident but not domiciled:

  • you'll only pay tax on earnings you bring into the UK - it makes no difference whether or not you're ordinarily resident

If you're resident and domiciled:

  • you'll pay tax on all your earnings if you're ordinarily resident
  • you'll only pay tax on earnings you bring into the UK if you're not ordinarily resident

Working partly in and partly outside the UK for an overseas employer

If you're resident and ordinarily resident, you'll pay UK tax on all your earnings.

If you're resident but not ordinarily resident:

  • for work you do in the UK, you'll pay tax on all your earnings
  • for work you do overseas, you'll only pay tax on any earnings you bring into the UK

In either case, it makes no difference whether or not you're domiciled.

Special rules for UK resident seafarers

If you're a UK resident seafarer and you spend long periods abroad, you may be able to claim 100 per cent relief, called 'Seafarers' Earnings Deduction'.

If you become resident or non-resident part way through the tax year

If you come to or leave the UK part way through a tax year, you may become or stop being UK resident. If this happens, you'll usually be taxed on your overseas income for the part of the year when you were in the UK. When leaving the UK you may need to complete form P85 Leaving the UK - getting your tax right to tell HMRC.

Double taxation agreements

The UK has 'double taxation agreements' with many countries to make sure you'll only pay tax in one country.

If there's no agreement and you have already paid tax overseas you can usually claim either of the following:

  • 'unilateral relief' in the UK - relief against the amount that would have been payable in the UK
  • a deduction from your taxable earnings for the foreign tax you've paid

Note that you can't claim relief for more than the UK tax that's due on the same income. Check the tax return foreign pages help notes for details.

Declaring your overseas earnings on your tax return

You declare your overseas earnings on the employment pages of your tax return, and make any claims for tax already paid on the foreign pages.

If you fall into any of the groups below you are eligible for UK tax-free allowances. These reduce the amount of tax you need to pay.

UK tax-free allowances - who can claim

  • UK residents
  • EEA (European Economic Area) citizens (including British)
  • Crown employees (or former employee)
  • members of certain other special groups

If your tax-free allowances are more than your income you won't pay any UK tax.

Where to go for help

If you have any questions about your tax and your employer can't help, you can contact:

  • your employer's Tax Office if you've got a UK employer or an overseas employer that operates PAYE - ask your employer for details
  • your local Tax Office

More useful links

Useful contacts

Provided by HM Revenue and Customs

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