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Tax liabilities when working overseas

17 June 2019


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If you are thinking of moving overseas or are being seconded abroad your tax position should be one of the first things to consider.


The amount of time you will be spending out of the U.K., and how many days you plan on returning, will affect your tax situation. For example, a long term assignment where you will be spending three years outside the U.K., only returning for a few days, may have different tax consequences to a commuting assignment due to your U.K. residency. Being away for three years plus means you are likely to break your U.K. residency where for a short term trip your residency and tax position are likely to remain unaffected.

There is a possibility you could become resident in the overseas country and remain resident in the U.K. If there is a treaty between the U.K. and the overseas country then this can usually be used to avoid double taxation.


Assignments vs Local Contracts

Whether you are being seconded on assignment or transferring to an overseas contract can also have an effect on the way you are taxed. If you are on assignment you could be gross paid, i.e. responsible for your own taxes, or tax equalised, which is where hypothetical tax is deducted as if you were still in the U.K. and your company will use this money to pay your U.K. and overseas taxes. This is something you should discuss with your employer prior to your secondment.

Whether you are on assignment or local contract can also affect your national insurance liability. Those on an assignment may be able to continue to pay national insurance in the U.K. where those who have signed onto an overseas contract will usually have to look into paying social security in their assignment country. If social security is being paid in the overseas country then there may be a possibility to pay voluntary contributions in the U.K. while you are working abroad to maintain your U.K. record.


Pension contributions

There is more press than ever on the need to save into a pension for your future, and these too can be affected when working abroad.

If you are on a short term assignment then your pension contributions will usually remain unaffected, it is for those who become non-residents of the U.K. that the matters may change. There are limits on the amount of employee pension contributions that can you receive tax relief on dependent on net relevant earnings for the year. So, if you become non-resident and are not paying tax in the U.K. then the amount you can receive tax relief on may be significantly decreased. However, if you have a trailing bonus in a year of non-residence then the limit may be higher.


There are many more taxation aspects to consider when working abroad. Our award winning international tax team can talk you through all of your concerns and ensure that you are paying the correct tax in the correct place.

For more information please contact us by submitting an enquiry or calling +44 (0)118 9590261