There are potential consequences for both you and your employer if you are considering remote working by working for your UK employer from another country. In this article we have focussed on the income tax and social security aspects for you personally.

Income Tax

For income tax purposes, the important point is that if you physically carry out duties overseas then usually that country will seek to tax the income you receive for those duties.

You may also continue to be taxed in the UK if you continue to be tax resident in the UK as the UK generally taxes its residents on their worldwide income.

To better understand how duties performed overseas could be taxed, you need to firstly work out what your tax residence position will be. In most cases, if you plan to be outside of the UK for less than a complete UK tax year, then you will typically remain tax resident in the UK.

Generally, your risk of becoming tax resident in another country becomes significantly higher once you spend more than six months in that country. However, you could still become tax resident in another country despite you spending less time than that. Even if you don’t become resident there, you may still be taxed on any employment income you earn while you are there. 

Depending on your residence status your next step would be to determine whether the double tax agreement between the UK and the other country protects you from being taxable in the overseas country, despite the fact you are physically working there.

In most cases, provided that you spend no more than 183 days in the other country and you work for a UK-resident employer who bears the cost of your employment, you would usually continue to be taxed only in the UK and not in the other country. It still may be the case that there are some compliance obligations in the other country, this should be checked on an individual.

If you are unable to get protection under a double tax agreement, you should expect to be taxable in the other country on your income for duties performed there. In this situation, you are likely to need to file a foreign tax return and there may be withholding obligations for your employer.

If you are also taxable in the UK on this income, then double taxation will arise. This would generally be resolved by taking a foreign tax credit on a UK Self Assessment tax return.

We at Shaw Gibbs can assist with determining tax residence status in the UK and therefore the likely income tax responsibilities you will have as well as completing UK Self Assessment tax returns to ensure correct reporting.

Social Security 

Social security needs to be considered separately from income tax. Even if you are not taxed overseas, you may still be liable to pay social security contributions there. It is also possible to continue to be liable to UK social security (National Insurance) even where you are taxed overseas and not in the UK. 

Like income tax, the starting point is to assume that you could potentially be liable to social security in the country where you physically carry out your work. 

There may be a social security agreement which protects you from exposure to social security in that country. It is therefore worth considering whether there is an agreement between the UK and the country you are considering working in, and whether that agreement protects you against social security in that country.

If you are moving to an EEA country (or Switzerland), then the co-ordinated social security rules apply for moves from the UK which started before 31 December 2020. 

Otherwise, or if you move for the first time from 1 January 2021, the position for EU countries is covered by the terms of the new UK-EU protocol on social security coordination. Under these rules it is not possible to remain in the UK National Insurance system if the remote working arrangement is expected to last more than two years. 

Where you are not protected by the terms of a social security agreement – or if one does not exist – then you need to consider the domestic social security laws of both countries to determine where you are liable.