Leaving the UK to work overseas: Income tax and social security
Several areas must be assessed before you leave the UK to work abroad. Below are the common areas of consideration Price Bailey helps clients with when planning a move overseas.
UK tax residency
The first step in apprising an individual’s UK tax position when leaving the UK is to ascertain their residence status. The tax year runs from 6 April to 5 April the following year, and the test is applied to each year individually.
The UK residency test is complex and requires professional analysis in most cases. We have set out details of the statutory residence test with details of how it applies in practice.
Will I pay UK tax if I work and live abroad?
In general, non-UK residents only pay tax on their UK income; they do not pay UK tax on their foreign income. UK residents normally pay UK tax on all their income, whether it’s from the UK or abroad.
It is important to note that tax residency in another territory does not automatically override UK tax residency. In most cases, it is beneficial to file a Self Assessment tax return to ensure the correct UK residence position is recorded, particularly where it is possible to ‘split’ the UK tax year, or if it is necessary to consider the treaty residence position where an individual is a tax resident in more than one territory.
The UK residency position determines the reporting requirements in the UK, and it is therefore key to carrying out the analysis correctly.
Undertaking new employment with an overseas employer
Where the individual is a non-UK resident in the tax year, the earnings from an overseas employer would not be subject to UK tax.
In contrast, UK tax residents will be subject to tax on their earnings from overseas employment. A credit may be permitted for overseas tax paid depending on the provisions of the Double Taxation Treaty with the other territory.
Remaining employed in the UK
Where taxpayers remain employed by a UK company while working abroad, any UK workdays will remain taxable in the UK both to PAYE and National Insurance. Overseas duties may be subject to tax in the other territory. Professional tax advice is recommended in the other country to confirm how the earnings will be taxed overseas.
Whether your overseas earnings can be taken outside UK tax and National Insurance withholding at source depends on your residence position under the statutory residence test, typically the full-time work abroad test or one of the automatic overseas tests. If you meet the relevant test, you or your employer can apply to HMRC (commonly via form P85 or an NT tax code application) to stop PAYE withholding on the overseas portion of your earnings, ahead of your final residence status being confirmed. This isn’t an automatic relief you can simply request; it depends on your residence position being established first.
Social security: National Insurance and overseas schemes
Where you work is only half the picture; which country’s social security scheme you pay into is a separate question, and getting it wrong is a common source of unexpected liability.
If you’re sent to work temporarily in a country with which the UK has a reciprocal social security agreement, including EU and EEA member states, Switzerland, and a number of other countries, you may be able to stay in UK National Insurance and remain exempt from local social security contributions for the duration of the posting. In an EU, EEA or Swiss context, this generally requires an A1 certificate of coverage from HMRC before you leave. For other reciprocal agreement countries, a similar certificate confirms your continued UK National Insurance liability.
Where no reciprocal agreement exists, you’ll typically need to consider local social security obligations in the destination country from the outset, alongside your continuing UK National Insurance position, which depends on your employer and the specifics of your assignment. This area needs advice in both the UK and the destination country before you leave.
Renting out your home while overseas
Many individuals choose to rent out their home while overseas. Regardless of their residency position, the rental income from the UK property will remain taxable in the UK.
Where the property is rented out by a non-resident, the Non-Resident Landlords (NRL) scheme provisions automatically apply. The scheme requires UK letting agents (or tenants) to deduct basic rate tax (20%) from any rent they collect for non-resident landlords.
Provided that an individual’s tax affairs are up to date, an application can be made to request the payments are made without the deduction. Self Assessment tax returns will need to be filed to report rental income and allowable expenses even if no tax is due. In cases where the property is jointly owned, each individual is liable to pay tax., with both the income and expenditure split between the two parties.
It may be beneficial to transfer the ownership between spouses to maximise the tax savings, subject to individual circumstances.
Additionally, two changes affect non-resident landlords from April 2026 onwards that weren’t relevant when the NRL scheme first came in:
- Making Tax Digital for Income Tax now applies to landlords with qualifying gross income over £50,000 from 6 April 2026, falling to £30,000 from 6 April 2027 and £20,000 from 6 April 2028. The test is income-based, not residence-based, so non-resident landlords are caught on the same thresholds and must keep digital records and file quarterly updates through compatible software once in scope.
- Separately, from 6 April 2027, property income moves onto its own dedicated tax rates rather than the main income tax rates, set at 22% basic, 42% higher and 47% additional. This doesn’t change the 20% NRL withholding rate itself today, but it will affect what non-resident landlords ultimately owe once the new rates take effect, and is worth factoring into planning now if your assignment runs past that date.
Selling your home while overseas
Where a UK residential property is sold during the period of non-residency, a separate return will be required for filing with HMRC within 60 days of completion, even if the property is sold at a loss.
If the residence was occupied by the taxpayer as their one and only home for any period of time, then such period would be exempt from tax under the Principal Private Residence relief, in addition to other provisions.
Where the home is retained and subsequently reoccupied as a main residence by the taxpayer, further relief may be available subject to a number of conditions.
Key Takeaways
Individuals planning to undertake employment outside of the UK need to consider what their UK tax and social security obligations will be and make the relevant applications to HMRC to benefit from their anticipated UK non-resident status, both for income and for National Insurance.
Their specific circumstances will determine what the best opportunities available to them are and whether it is beneficial, or necessary, to file Self Assessment tax returns while working overseas.
Price Bailey can help with the assessment of your UK tax residency, make relevant notifications to HMRC, prepare and submit UK Self-Assessment tax returns, advise on planning options available, and refer to an overseas tax specialist for local taxation and social security consultancy. Should you have any questions regarding any of the content detailed within this article, please contact one of our experts using the form below.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information on this page is intended as a general guide only. While we work to keep our content accurate and up to date, we cannot guarantee that it reflects the position at the time you are reading it. No responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm. For more information on our editorial process, click here.
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