Do I need to pay UK tax if I work overseas?
Numerous factors can influence someone’s decision to leave the UK, such as lifestyle preferences, employment opportunities, or some other personal circumstances.
However, if you work abroad for a period of time it doesn’t stop you from being a UK resident and taxpayer in the eyes of the UK taxman. If you are in the UK for more than half the year it’s likely that you’ll be considered to be a UK resident and will be subject to UK income tax.
People who are non-resident in the UK only pay tax on their UK income and don’t pay tax on their foreign income. UK residents will normally pay UK tax on all of their income whether it was earned in the UK or abroad. There are special rules in place for people who are UK residents but are permanently domiciled abroad.
The Statutory Residence Test
Moving away from the UK can sometimes occur at short notice, with the person intending to establish non-residency immediately. However, for tax purposes, the commencement and conclusion of non-residency are determined by the Statutory Residence Test (SRT).
Although the SRT is complex, it provides a degree of certainty regarding the actions an individual must take to attain non-resident status for UK tax purposes. It’s essential to maintain comprehensive records that support your residence status because each person’s situation is unique.
The Statutory Residence Test comprises three components: an automatic non-resident test, an automatic resident test, and a sufficient ties test. These tests should be assessed in sequence.
You will be non-resident if you are present in the UK at midnight for less than a certain number of days as noted below:
- 1. If you were a resident in the UK for the past three tax years then if you are in the UK for less than 15 days you are non-resident.
- 2. If you were not a resident in the UK for the past three tax years then you have 45 days to be in UK.
- 3. If you work overseas full-time which is considered 35 – 40 hours a week and you have no major break in the region of a month, then the days are 90. You cannot be working in the UK also and there is a 3 hours rule.
For most clients who have lived in the UK in past tax years and want to go overseas to work, then you will likely fall under the automatic resident test rules as follow. Then you have to look at the sufficient ties test. You will be considered a resident automatically:
- 1. If you were in the UK for more than 183 days in a tax year.
- 2. You have a home in the UK.
- 3. You work in the UK for a period of 365 days.
If you still have consideration for the residency test then you have to consider the following which is referred to as the Statutory Residency Test. The ties are as below. If you leave the UK permanently with no intention to return it is different.
- 1. A family tie. This is wife and family so will be 1.
- 2. An accommodation tie. This is your UK house so is 2.
- 3. A work tie. Assuming you will do no work over 3 hours a day here won’t be included.
- 4. You will be tied to the 90 days rule if in past 2 tax years you have spent more than 90 days in the previous 2 tax years this will be your 3 tie.
- 5. Country tie which simply means you are in the UK at midnight as much as or matching what you are in another single country. So UK is 120 days, America 125 days Australia 120 you are okay but if the 125 days were UK and the other 2 120 each you have a tie.
So the days in UK at midnight and the ties work out as follows:
- Less than 16 days you will be non-resident
- 16 – 45 days non-resident if you have three or less
- 46 – 90 days non-resident if you have two or less
- 91 – 120 days non-resident if you have one or less
- 121 – 182 non-residency only if you have no ties
- 183 or more you will be considered a resident for tax always in a tax year
If you leave part way during a year and need guidance drop us an email at taxguidance@callan-group.com and we’ll be happy offer guidance on how to comply with tax guidelines.
