Paying tax on UK income if you live abroad permanently

An estimated 5.5m British people live overseas permanently. About 1.2m reside in Australia, while other popular choices include the USA (715,000), Canada (530,000), Spain (300,000), Ireland (293,000), New Zealand (270,000), France (177,000), South Africa (130,000), Germany (98,000) and Italy (65,000).

Although many older “ex-pats” live off their retirement 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 “domiciled” (ie the place that’s your permanent home), you do not pay UK tax on it.

So, what if you live in another country, yet continue to earn income in the UK? Maybe you’re considering moving overseas, while still earning income in the UK and you’re wondering about the tax implications.

Tax on UK income

As explained on government website GOV.uk: “You usually have to pay tax on your UK income even if you’re not a UK resident. Income includes: pension, rental income, savings interest and wages. If you’re eligible for Personal Allowance you pay Income Tax on your income above that amount. Otherwise, you pay tax on all your income.”

If you’re not a UK resident, you’ll need to claim the Personal Allowance at the end of each tax year in which you have UK income by sending form R43 to HMRC.

Non-UK residents don’t normally 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 British yet live permanently overseas, earn income from renting out property in the UK, work for yourself in the UK or have other untaxed income from a UK source, you’ll need to fill out and send a Self Assessment tax return each year, so that you’re UK tax liability can be calculated by HMRC. You’ll need to register for Self Assessment, if you’re not already registered.

Need to know! The country in which you live overseas might tax you on your UK income. If a ‘double-taxation agreement’ exists between that country and the UK, you may be able claim tax relief in the UK or in the country you are resident to avoid being taxed twice.

Submitting your Self Assessment tax return

Those who live overseas permanently cannot use HMRC’s online services to file their Self Assessment tax return. You must complete a SA109, which is a supplementary tax form that confirms your residence and domicile status. You submit it with your Self Assessment tax return SA100. 

You could download, fill out, print and send both by post to HMRC from overseas before the paper-filing deadline. However, for speed, convenience and peace of mind, many people living overseas use Self Assessment filing software. Moreover, some struggle to fill out the SA109 form because they find it complex. But GoSimpleTax makes the task much simpler, so you can avoid non-resident tax return penalties because your SA100 and SA109 forms are completed quickly and accurately, so you can file in good time. 

Did you know? The “183-day rule” provides a simple way to determine residency for tax purposes. If someone spends more than half of the year (ie 183 days or more) in one country, they become a tax resident of that country.

What about UK rental income?

You must pay UK tax on your rental income if you rent out a property in the UK, even if you’re tax residency is in another country. HMRC consider those who live overseas for six months or more a year to be “non-resident landlords (NRL)”.

You can get your rent in full and pay tax on it through Self Assessment by filling in the NRL1i form and sending it back to HMRC. It’s an application form and if approved, providing your tax returns and payments aren’t late, HMRC will tell your letting agent or tenant not to deduct tax from your rent. You’ll then need to declare your rental income in your Self Assessment tax return (as explained above).

Alternatively, under the Non-resident Landlord (NRL) Scheme, you can have your tax deducted by your letting agent (if you use one) or tenant. They’ll deduct basic rate tax from your rent (after also deducting any expenses they’ve paid) and provide you with a certificate at the end of the tax year saying how much tax they’ve deducted. They must pay the tax to HMRC every quarter. See GOV.uk for more information about the NRL Scheme.

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.