Digital Nomad Tax Guide: Working for a UK Company Abroad

So, you've gone full digital nomad. Coffee shops in Lisbon, coworking spaces in Bali, beach wifi in Mexico. Living the dream, right? But here's the awkward bit: you're still getting paid by a UK company. And HMRC? They're probably still taking a nice chunk of tax from your payslip every month. Plot twist: you might not actually owe them that money.

‍If you're physically working outside the UK, there's a very good chance you can stop paying UK tax, and even get a refund for what you've already paid. But (and this is a big but) you need to play by the rules, or HMRC will come knocking with a very stern letter. Let's break it down ...
‍

The Golden Rule: Income Is Taxed Where Your Feet Are

Here's the simplest way to think about tax as a digital nomad: Your income gets taxed where you're physically sitting when you do the work. Not where your company is based. Not where your boss lives. Not where the money gets transferred from. If you're tapping away on your laptop in Thailand, that's where your income is "sourced." And if you've left the UK for good (more on that in a second), then the UK usually has no right to tax it. This is the foundation of everything else. Write it on a sticky note. Tattoo it on your arm. Whatever works.

Choose Your Own Adventure: Two Paths for Digital Nomads

Alright, time to pick your path. There are two completely different routes depending on what you're actually doing:

Path A: I'm Still a UK Tax Resident (Just Working Abroad Temporarily)

Maybe you're only abroad for a few months. Maybe you've still got a home in the UK, or you're planning to come back. In this case, you're probably still a UK tax resident under the Statutory Residence Test.

What this means for tax:

• You still pay UK tax on your worldwide income (including what you earn abroad).
• Your UK employer keeps deducting tax from your payslip as normal.
• You might be able to claim Foreign Tax Credit Relief if you also pay tax in the country you're working from (so you're not taxed twice).
• No tax refund here, sorry.

This path is pretty straightforward. Just make sure you don't accidentally become tax resident somewhere else by spending too long there (most countries have a 183-day rule).
‍

Path B: I've Left the UK for Good (Hello, Tax Refund!)

Now we're talking. If you've genuinely left the UK, cut your ties, and you're working abroad full-time, then you can stop paying UK tax on your employment income. Here's how it works:

Make sure you're actually a non-resident

You need to pass the Statutory Residence Test as a non-resident. That usually means:
‍

• You've left the UK and don't plan to come back (at least not as a resident).
• You spend fewer than 16 days in the UK per tax year (or up to 46 days if you weren't UK resident in the previous three years).
• You don't have significant ties to the UK anymore (no home, no family, no work).

If you're not sure, get a UK tax residency assessment before you do anything else.

How to get a refund: P85 form option

You need to fill out a P85 form and send it to HMRC when you leave the UK. The P85 basically says: "Hey HMRC, I've left. I'm not a UK resident anymore. Please stop taxing me." HMRC will review your situation and, if they agree you're now a non-resident, they'll send you a tax refund for any UK tax you overpaid during the year. Once HMRC confirms you're a non-resident, your employer should switch your tax code to "NT" (which stands for "No Tax"). From that point forward, your UK employer won't deduct any UK income tax from your salary. You'll get your gross pay, and it's up to you to deal with tax in whatever country you're now resident in.

How to get refund: self-assessment tax return option

You can file a self-assessment tax return at the end of the tax year including SA109 pages to report your non-resident status to HMRC. You will need to follow this route if you do not want your employer to be notified that you have left the UK.
‍
‍

What About Tax in the Country You're Actually In?
‍

Good question. Just because you're not paying UK tax doesn't mean you're tax-free. Most countries tax you if you spend more than 183 days there in a year. So if you're staying put in one place for a while, you'll probably need to register as a tax resident there and pay local tax. Some digital nomads solve this by being "tax resident nowhere": they keep moving every few months and stay under the 183-day threshold everywhere. It's legal, but it's also complicated and risky.

For a cleaner setup, consider moving to a country with a low tax rate or a special tax regime for expats. Portugal's Non-Habitual Resident scheme, for example, can give you a 0% tax rate on foreign income for 10 years.

What If You're Earning from Multiple Countries?

Let's say you're working remotely for a UK company, but you're also doing some freelance work on the side, or you've got rental income from a flat back in London.

Here's the deal:

• Employment income is taxed where you physically do the work (so not in the UK if you're abroad).
• Rental income from UK property is always taxed in the UK, even if you're a non-resident. Learn more about non-resident landlord tax rules here.
• Dividends from a UK company might be tax-free under the "disregarded income" rules if you're a non-resident. More on that here.

It gets messy fast, which is why most digital nomads eventually get professional help.
‍

Common Mistakes Digital Nomads Make

Let's talk about what not to do:

Mistake #1: Assuming you're automatically a non-resident
Just because you left the UK doesn't mean HMRC agrees. You need to formally notify them with the P85 and meet the Statutory Residence Test.

Mistake #2: Not filing a tax return
Even if you're a non-resident, you might still need to file a UK tax return if you've got UK-source income (like rental income or dividends). Check if you need to file here.

Mistake #3: Coming back to the UK too often
Pop back for too many days, and you'll blow your non-resident status. Keep a log of every single day you spend in the UK.
‍

How to Actually Get Your Tax Refund

Here's the step-by-step:

1. Leave the UK and establish yourself as a non-resident.
2. File a P85 form with HMRC as soon as possible after you leave or file self-assessment tax return at the end of the tax year.
3. Wait for HMRC to process non-resident status (this can take 2-3 months, sometimes longer).
4. Get your refund by bank transfer or cheque.

The refund amount depends on how much UK tax you paid before you left. If you left halfway through the tax year, you'll usually get back a chunk of what you paid in the first half of the year.

Should You DIY This or Get Help?

If your situation is simple (you've left the UK, you're working for one UK employer, you don't have any other UK income), then you can probably handle the P85 yourself.

But if you've got:

• Multiple income sources,
• Rental property in the UK,
• A UK business or dividends,
• Or you're not sure about your residency status,

...then get professional help. The cost of getting it wrong is way higher than the cost of hiring a UK tax advisor for digital nomads.
‍
‍

Final Thoughts
‍

Being a digital nomad and working for a UK company is 100% doable: and you absolutely can stop paying UK tax (and get a refund) if you've genuinely left. The key is doing it properly:
‍

• Understand where your income is taxed (where your feet are).
• File your P85 and get that NT tax code.
• File self-assessment to get tax refund.
• Keep good records.
• Don't accidentally stay a UK resident.
  ‍

If you're not sure where you stand, reach out and we'll help you figure it out.