‘Going on holiday? Get your taxes in order’ Britons issued tax warning

WITH the bank holiday coming up, many Britons will be looking to go on holiday to take advantage of the time off. With hybrid working being the norm now, some may choose to work abroad for a couple extra days to get more time in the sun. But what are the tax implications of working abroad?

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Alex White, a Tax Expert at accountancy firm Xeinadin Group, is offering the top tax advice holidaymakers and expats need to know if they decide to work abroad. Speaking to Express.co.uk exclusively, Mr White outlined why the pandemic has exacerbated existing trends in home working, which has affected how people pay tax. “As the world attempts to return to some kind of post-Covid normality, business after business has announced more flexible working arrangements for staff who have grown used to working from home and all the benefits that it can bring,” he explained.

“For many, this surge in remote working and the resulting employment policy changes have made the dream of living abroad a more tangible possibility.

“If I can work from home, why can’t that home be near a sun-soaked European beach rather than a dreary commuter town?

“Unfortunately, hopping overseas to work is not quite that simple. One particular consideration is tax.

“Those going to base themselves abroad while working for a UK company should ensure they understand their tax liabilities before making the leap. Here are some key points to consider.”

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Holiday work

Income Tax alert: Tax warning for holidaymakers and expats (Image: GETTY)

According to Mr White, taxpayers should consider a variety of factors before making the decision to work abroad.

Tax residency

His first piece of advice is that workers who are living abroad for a few months should remember they will remain UK tax residents in the books, so any overseas earnings will need to be reported to HMRC.

Mr White said: “If you are required to pay tax on these earnings in the country you are working in then you will receive credit for these against any UK liability.

“If you continue to be paid from the UK on your UK employer’s payroll then PAYE/NI will continue to be applied if you are working abroad for only a short period of time.

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“However, if you leave the UK to work abroad for at least one complete tax year you will need to submit form P85 to HMRC telling them you are leaving the UK.

“If you become a tax resident in another country you will be subject to their tax rules and regulations and will need to register with the tax authorities and in most cases obtain a tax residency certificate.”

Offshore versus UK payroll

Being paid from a UK payroll means your employer will place you on a no tax code so that no UK PAYE is applied.

Holiday work 2

Income Tax Alert: Britons need to be aware of their tax obligations when living abroad (Image: GETTY)

However, you will then need to report and pay tax on these earnings to the tax authorities in your new country.

“It is often better to be paid from an offshore payroll as you will then be paid in the local currency and will not be subject to foreign exchange movements when converting sterling earnings,” Mr White explained.

Work Duties

Any overseas tax resident must deal work duties with revisiting the UK, according to the tax expert.

Mr White said: “HMRC has a list of those duties they consider ‘incidental’ and if people carry out duties beyond that – which could include just responding to an email or a phone call or attending a meeting – then UK tax may apply.”

Other reporting obligations

Non-UK tax residents may have additional financial reporting obligations when living in the UK.

“For example, if someone leaves the UK to work abroad but retains their UK home and rents this out whilst they are away, this rental income would need to be reported to HMRC and will be subject to UK tax if it makes a profit,” Mr White outlined. 

“It will also need to be reported to the overseas tax authorities but credit will be given for any UK tax suffered.”

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