A total of 5.5m British people live overseas permanently. About 1.2m live in Australia, while other popular choices include the USA, Canada, Spain, Ireland, New Zealand, France, South Africa, Germany and Italy.
Although many older ex-pats live off their savings and pensions, others continue to work, either because they need to or want to. Income earned overseas is subject to tax in the country in which you’re “housed” (i.e., the place that’s your permanent home); you do not pay UK tax on it.
What happens if you reside in a different country and still earn income from the UK? Perhaps you’re thinking of moving abroad and still earning money in the UK and are wondering what the tax implications might be.
TAX ON UK INCOME
As explained on the government website GOV.uk, you generally have to pay tax on your UK income if you’re not a UK resident. Income includes pension, rental income, savings interest and a salary. If you’re eligible for a Personal Allowance, you pay Income Tax on your income above that amount.
Still, you’ll need to claim the Personal Allowance at the end of each tax year in which you have UK income by submitting form R43 to HMRC if you’re not a UK resident.
Non-UK dwellers don’t generally pay UK tax on their State Pension, while Income Tax isn’t automatically deducted from the interest you earn on UK savings and investments; you need to declare it.
If you’re earning an income from renting out property in the UK, working for yourself in the UK or having other untaxed income from a UK source, and yet live permanently overseas, you’ll need to register for Self Assessment if you’re not formally registered.
It is good to know that you may be taxed on your UK income in the country you live in overseas. However, if a double-taxation agreement exists between that country and the UK you can claim tax relief to avoid being taxed twice.
SUBMITTING YOUR SELF ASSESSMENT TAX RETURN
Those who live overseas permanently can’t use HMRC’s online services to file their Self Assessment tax return. You must complete an SA109, a supplementary tax form that confirms your residence and living status, and submit it with your Self Assessment tax return SA100.
Before the paper-form deadline, you could download, fill out, print, and post to HMRC from overseas. Still, many people living overseas use Self Assessment software for speed, convenience, and peace of mind. Also, some struggle to fill out the SA109 form because they find it complicated.
The Taxman UK makes the task far simpler so you can avoid tax return penalties because we ensure your tax forms are accurately completed and filed in good time.
Did you know? The “183- day rule” provides a simple way to determine residency for tax purposes. If a person spends more than half of the year (183 days) in a single country, they become a tax resident.
WHAT ABOUT UK RENTAL INCOME?
If you live outside the UK, you’re a non-resident landlord (NRL) and must pay tax on your rental income. HMRC will consider you an NRL if you spend over 6 months out of the country.
You can opt for the Non-resident Landlord (NRL) scheme and have the rental paid without tax deduction at the source. You pay the tax via your annual Self Assessment tax return. To apply, you must complete the NRL1i application form and return it to HMRC. Once approved, HMRC will tell your landlord or tenant not to take tax deductions from the rent. You’ll then have to declare the rental income in the form of a Self Assessment tax return (as described above).
A specialist non-UK tax advisory services provider like The Taxman UK will advise and guide you with your NRLi form for an all-inclusive fee.