Go to live abroad is a dream for many. I know plenty of people who have worked hard to achieve their dream. After a lifetime of hard work, they’ve retired and moved to France, Spain and a variety of other countries. However, a significant number of people live abroad while still owning UK businesses, renting out UK property or having other financial interests back home. So one of the questions they will have asked themselves before moving is: “Do I have to pay UK tax if I live abroad”.

It’s a topic that caught my eye recently as I stumbled on this article in The Connexion, a website devoted to French news and views. A reader says they are paying income tax in the UK because their income arises there. They want to know whether they should be paying tax in France as well.

It turns out to be a slightly more complex question that I realised. This is because of something called a double tax treaty.

What is a double tax treaty?

According to the government, a double taxation treaty is an agreement between two states, designed to achieve three things.

  1. Protect against the risk of double taxation where the same income is taxable in both states
  2. Provide certainty for cross-border trade and investment
  3. Prevent excessive foreign taxation

Okay. But do I have to pay UK tax if I live abroad?

It depends. The government has a useful section on its website called Tax on your income if you live abroad.

It’s worth reading thoroughly, but this post gives you a brief overview of the rules.

Tax on UK income

If you have UK income such as a pension, rental income, savings interest or wages, you have to pay tax on it.

If you live in a country that has a double taxation treaty with the UK, you should declare your worldwide income in that country. You can then claim tax relief in the UK to avoid being taxed twice.

That said, there are some forms of income that always get taxed first in the UK. These include:

  • Rental income from UK property
  • ‘Government’ income – such as government pensions (e.g. military, emergency services and state teaching pensions)
  • UK salaries and self-employed income (if the work is carried out in the UK)

Even so, these forms of income must be declared in the country you’re living in. You can then claim a tax credit for the tax paid in the UK.

Do I have to pay UK tax if the taxation rates are different?

If the tax rates are different in the two countries, you pay the higher rate of tax. However, even if the UK tax rate is higher, you’ll still need to pay it in the country where you are resident (unless it is income that is always taxed in the UK first, as covered above).

I divide my time between the UK and my home abroad. Do I pay UK tax?

If you are in the UK for more than 183 days in a tax year, you count as a UK resident for tax purposes.

Can I get help understanding my tax liabilities?

If you live abroad or plan to live abroad, it’s a good idea to understand how the UK taxation system works in conjunction with that in your adopted country. Double taxation treaties can vary from country to country, plus there are special rules covering things like Capital Gains Tax and Inheritance Tax. If you are a THP client, please speak to your account manager for further advice.

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About Karen Jones

Having worked for one of the world’s largest accountancy firms, Karen Jones uses her tax knowledge and skills to help clients obtain substantial reductions to their tax liabilities.

With an expanding portfolio of tax clients, Karen enjoys the variety her work brings her and particularly likes working with new businesses and people. With a growing number of tax clients, she frequently faces a variety of challenges and relishes the experience she gains as she solves them.

Karen likes the THP ethos: “I like the way the team has a professional, but friendly and down-to-earth approach – it creates a productive atmosphere that benefits everyone.”

Karen’s specialist skills:

  • Personal Taxation
  • Tax Efficient Planning
  • Trust Administration
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