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Paying tax outside the UK

Overseas work placements

You will pay UK income tax if you are resident in the UK. So, if an individual is resident in the UK, they are taxed on their worldwide income. However, if an individual is not resident in the UK, they are only liable to pay UK income tax on UK-sourced income.

New legislation was brought in by HMRC from 6 April 2013, to determine an individual’s UK residence position for tax purposes. The ‘statutory resident test’ determines the residence position based on the number of days spent in the UK and the number of ties to the UK (for example having an available home in the UK, working in the UK, family in the UK) during the year.

If you work overseas but do not break UK residence, you may have to pay tax on your earnings both in the UK and in the other country. Overseas savings and investment income is also liable to UK tax. You are therefore classed by HMRC as having foreign income, which is one of the criteria for completing a UK tax return. If you do not usually complete a tax return, you should complete form P85 before you leave the UK.

Residence is a complex area of UK taxation and you are encouraged to seek professional advice if a residence position needs to be considered.


Non-domiciled status

‘Domicile’ is a separate concept from tax residence and is a complex area. There is no strict definition of domicile, however it is generally regarded as the place where an individual intends to remain for the rest of their life. An individual has a domicile of origin that is the domicile of their father at the time of their birth. It is difficult for an individual to change their domicile.

From 6 April 2017, this distinction has been removed for non-domiciled individuals who have been resident in the UK for 15 or more of the previous 20 tax years.

More information on domicile status


Do I need to pay UK tax if I am not domiciled in the UK?

All income received in the UK is subject to UK tax regardless of your residence or domicile status. However, the non-UK income tax of a non-domiciled individual is different to the tax of a UK-domiciled individual receiving non-UK income.

More information on this complex area


Double tax relief

It is possible for income, capital gains or assets to be taxable in more than one tax jurisdiction. If a double tax agreement exists between the relevant tax jurisdictions, this will be used to determine which country has the taxing rights on the relevant source and where foreign tax credits are available to be claimed. This is a very complex area and you are strongly advised to speak to a tax adviser.