HMRC Rules for UK Income While Abroad

Introduction

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Living abroad doesn’t mean you can forget about your UK tax obligations — especially if you still receive UK-sourced income. Whether you’re working remotely for a UK employer, self-employed with UK clients, or drawing a UK pension, it’s crucial to understand what income needs to be declared and what HMRC expects from you.


In this blog, we break down the UK tax rules for non-residents and explain how employment income, self-employment income, and pension income are treated. We also cover how double taxation agreements (DTAs) can work in your favour — and when you may not owe any UK tax at all.

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📌 UK Residency Status – The Foundation of Your Tax Obligations

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Before we dive into income types, the most important factor in determining your tax obligations is your residency status. HMRC uses the Statutory Residence Test (SRT) to decide whether you are a UK resident for tax purposes. If you are non-resident, you typically only pay UK tax on UK-source income — not on your worldwide income.

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Once you achieve non-resident status, your UK tax liability is limited to:


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• Employment income where work is physically exercised in the UK
• Self-employment income where business is exercised in the UK
• Interest from UK banks
• Dividends from UK companies
• Rental income from UK properties
• Pension income from schemes established in the UK


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This is why non-resident UK tax advice is so valuable — as it restricts HMRCs taxing rights over incomes.

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👔 Employment Income: Working for a UK Employer from Abroad

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If you're living overseas but still employed by a UK-based company, you may wonder if your salary is taxable in the UK. The answer depends on where the work is physically performed and your residency status.


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If you are non-resident, you are only taxed on income earned for duties performed in the UK. This means:


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• If you work entirely overseas for your UK employer, your income may not be taxable in the UK.
• If you travel to the UK for work (e.g., meetings, projects), the portion of your income earned while physically in the UK is taxable.

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HMRC generally accepts workday-based apportionment, which means your income is split based on the number of UK vs. overseas workdays. For example, If you spent 20 out of 200 days working in the UK, only about 10% of your salary may be subject to UK tax.

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🧾 Self-Employment Income: Overseas Contractors and Freelancers

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Many British expats work for themselves, whether offering freelance services to UK clients or running a UK-based business from abroad.


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If you are non-resident, you are only taxable on self-employment income arising in the UK. This includes:


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• Income for services physically performed in the UK
• Income from a business with a permanent establishment in the UK 


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If all your self-employed work is done while you’re abroad, and you don’t have a UK base of operations, your self-employment income may not be taxable in the UK.


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However, if you regularly travel to the UK to meet clients, deliver services or conduct business, you must apportion your income based on UK vs. non-UK activities.

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🏠 Tax on UK Property and Rental Income

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Even after you leave the UK, HMRC is still interested in your UK property income. If you let out a UK home or investment property, you’ll remain liable for UK income tax.

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If you are considered a non-resident landlord, meaning that you are overseas for more than six months of the year, the letting agent or tenant are obligated to withhold basic rate tax from rental profits. To prevent this, you can submit NRL1 form to HMRC to request approval to receive rental profits gross.

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You must report your rental profits to HMRC via self-assessment on an annual basis.

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🧓 Pension Income: Tax Free Retirement

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Pension income remains taxable in the UK for non-residents unless a double taxation agreement (DTA) provides an exemption under international tax law.


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DTAs can sometimes shift taxing rights to your country of residence, but each treaty is different. The UK has treaties with over 130 countries, including many popular expat destinations such as Spain, Australia, and the UAE.


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💡 Important: You must claim treaty relief through a self-assessment return or apply using a form like DT-Individual to avoid double taxation.

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📈 Capital Gains Tax (CGT) for Expats

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Since April 2015, non-residents have been subject to Capital Gains Tax on UK residential property. This also extends to commercial property and indirect disposals (like shares in property-rich companies) since 2019. The main points are:


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• Only gains accrued since 6 April 2015 are taxable
• Private Residence Relief may still apply if the home was previously your main residence
• You must report and pay CGT within 60 days of the sale


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If you're planning to sell UK assets, seek non-resident UK tax advice before doing so — timing and structure can make a significant financial difference.

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🛂 Double Taxation Agreements (DTAs)

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A Double Taxation Agreement helps you avoid being taxed twice on the same income by allocating taxing rights between the UK and your new country of residence. DTAs cover:


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• Employment income
• Self-employment income
• Interest income
• Dividend income
• Rental income
• Pension income 


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Understanding and applying these treaties is essential. A qualified tax adviser can help interpret your specific DTA and claim treaty benefits when completing your Self Assessment.

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📆 Key Tax Deadlines for Expats

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🔸 6 April – 5 April: UK tax year

🔸 31 October: Paper tax return deadline
🔸 31 January: Online tax return deadline and payment due date


If you’re claiming non-residency, it’s best to file early and ensure all residence and treaty claims are properly documented.

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🧠 Final Thoughts

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Moving abroad may feel like a clean financial break from the UK — but for tax purposes, it’s rarely that simple. From rental income and pensions to CGT, your UK ties can follow you across borders.


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Whether you’ve just left the UK or you’ve been living overseas for years, proactive UK tax planning when abroad is the best way to protect your wealth and ensure peace of mind. Seek personalised non-resident UK tax advice tailored to your situation — because when it comes to taxes, what you don’t know can cost you.