These past two pandemic years have fundamentally changed the way UK employees work. For many, this simply means working from home. But for others, moving abroad and exploring the benefits of remote work is the major shift. During the pandemic, many UK employees took advantage of clocking in online and even relocated abroad. As well, many employers have been open to accommodate such a temporary arrangement. But is it a viable option for the long run? Can you work for a UK company and live abroad on a permanent basis?
If you are considering taking advantage of remote work by working for a UK company from another country, there are several potential consequences for both you and your employer. Therefore, working overseas can trigger all sorts of tax complications, social security obstacles and other legal issues.
But while working in a UK company and living abroad isn’t as straightforward as we might think, particularly post-Brexit, it can still be done. So let’s take a look at how!
How to work in the UK and live abroad
Working remotely isn’t something unusual or niche anymore, and it can most definitely be done from another country. While working your remote UK job from abroad, you need to keep in mind all the legal implications one might encounter, especially due to the Brexit fallout.
UK companies will have to consider whether or not their employees might create risks of income tax or social security liability in the country they are working from.
Many firms will also check if they have to establish a branch abroad for corporation tax purposes. These types of barriers can cause your UK employer unnecessary headaches.
Working remotely abroad from the employment standpoint
While working abroad as a UK employee, you will most likely acquire employment rights from your host country if you are living there permanently. This is prevalent in European Union countries (EU). Some local employment laws might apply to you after staying in one country for a while, even if you are working for a foreign company.
These rights, on the other hand, could be very different from UK employment rights concerning matters such as maximum working hours, paid time off and termination rules. For example, in some countries, it’s very difficult to fire an employee because you staff members have a right to claim enhanced protections to prevent any attempts to terminate a work contract.
These differences may create additional issues for UK employers. Consequently, your boss might not approve you to remote work in order to avoid future complications.
Working remotely from another country after Brexit
Before Brexit, the UK had bilateral agreements with most major countries in the world that prevented double taxation, including all EU states. Luckily, in these post-Brexit times, those arrangements continue to apply and ensure that people working abroad won’t be taxed twice.
Immigration and residence permits
Employees need to be cognisant of immigration issues that may arise when they decide to live abroad while working for a UK employer. For example, in some countries, UK employees will need to have permission from the employer to remain in a different country and work.
UK citizens have been considered non-EU citizens ever since January 1st of 2021, thus they need to follow special rules in order to work abroad legally. This is especially the case when it comes to European countries. Many states have signed a Withdrawal Agreement, where UK citizens can enjoy free movement in the EU for 90 days.
Moreover, after Brexit, British citizens no longer automatically have the right to work in the EEA or Switzerland, as they previously could do.
So, if UK nationals want to stay for a longer period in an EU or EEA country, they must also apply for a residence permit the same way non-EU citizens have to. This will typically need to be done from outside of the destination country before they travel abroad.
Furthermore, someone with a residence permit in the UK must pay attention to how long they can be absent until their permit isn’t valid anymore, otherwise they could lose their status in the foreign country they are in.
How might your UK employer react to your request to work abroad?
You can expect the following policies and requirements imposed on you by your UK employer when requesting to work from abroad:
- They might only accept your request if your role in the company can be effectively performed remotely and carried out lawfully from another country.
- The shorter the period you want to work abroad, the higher the chance of getting approval. Consider setting a time limit for the duration of your stay abroad.
- They may express that your UK pensions, private healthcare, income protection and life insurance may be impacted by a move abroad.
- They might implement a working arrangement from abroad in writing.
Your working arrangement from abroad will usually state that:
- You are liable for any additional income taxes or social security which may be charged abroad.
- You are responsible for any personal tax declarations that may need to be made.
- You are continuing to work solely for the UK business.
- You don’t have the authority to enter into contracts with local customers while in the host country and should not grant yourself such authority.
- You take responsibility for ensuring you have the necessary technology and arrangements in place to enable you to work effectively.
- You accept that you are working from home/abroad at your own risk and that the employer will not be liable for any loss you suffer.
- You must comply with all applicable public health guidance, both in the country to which you travel and the UK.
As well as the following points:
- The employment contract remains subject to UK law and jurisdiction.
- Any IP created by the employee will be owned by the employer.
Can you be self-employed in the UK and live abroad?
You can be a sole proprietor or own a business in the UK and live abroad. In fact, working as a contractor or freelancer for UK companies is one of the most common ways to live overseas while making a living in the UK.
As a contractor living and working abroad, you will pay business taxes in the UK, and pay your personal income taxes abroad. This income can be counted as dividends or a regular salary.
While being self-employed in the UK, you can still get paid into your UK banking account and be able to write off some costs, such as a trip back home.
Paying taxes while working for a UK company from abroad
Paying taxes while living in one place and working in another is always a dilemma. If you decide to work abroad only temporarily, your UK employer will continue to deduct income tax under the British system. Hence you pay all your taxes in the UK.
Everything becomes more complicated when you stay in one particular country for longer than 183 days in a 12-month period. After that point, you become a tax resident of said country and have to pay taxes on your worldwide income.
Nonetheless, in most cases, you will be protected by the double taxation agreement and will eventually pay taxes only in the country where you spend the majority of your time.
Yet, your employer can face another issue when you are working from abroad. They might need to create a permanent establishment in the country where their employee is a tax resident.
In that case, employers must open a branch in that country, which will create additional tax and financial headaches for everyone.
Here are some common tax situations and guidelines for UK remote workers living abroad :
|Situation||Taxable in the UK||Taxable Abroad|
|Working overseas short-term (less than six months)||Yes||No, but you or your employer may have reporting obligations in the overseas country|
|Working medium-term overseas||Yes – usually with a foreign tax credit||Yes|
|Working long-term overseas (generally at least one UK tax year outside of the UK)||No||Yes|
Double tax treaty
The UK has a double tax treaty with most countries, including all 27 EU countries and most other major world economies. In practice, this means that a short stay abroad in many locations isn’t going to result in the employee becoming liable for income tax.
A problem only arises when you stay for a long time in one place, usually over 183-days in a year. In case you have to pay taxes abroad, the double taxation agreement applies. The host country will give you a tax credit for taxes paid, which you can submit to the UK, so that you don’t pay taxes twice.
What about your tax residence?
When speaking about taxes, your tax residency plays the most significant role, but it can also be the hardest to determine. That’s because it depends on a number of factors, which may differ in each country. The most common identifiers of whether or not someone has become a tax resident are:
- Your stay in one country exceeds 183 days within a 12-month period
- You generate income from this country
- You have a property in that country, such as a rented or owned apartment or car
You also need to consider whether you will lose your UK tax residence while living abroad. Furthermore, someone can become a tax resident of both countries, for which an employer can face liability in both countries too. In that case, you will be a ‘treaty resident.’
Treaty residence refers to the country in which your residence is strongest–where you typically live, work and spend most of your time. Double taxation treaties apply here as well.
When becoming a tax resident abroad, you will be taxed on your worldwide income in the country you’re residing in. The place of income source doesn’t play a role in this case. Any money earned abroad will be subject to taxation.
Your risk of becoming a tax resident in another country is significantly higher once you spend more than six months (183 days) in that country.
But suppose an individual has become a tax resident overseas. In that case, the employer is also likely to be liable to pay the appropriate employment taxes and social security contributions that are due in that country, including pensions.
But even if you don’t become a resident, you may still be taxed on any employment income you earn while you are in another country unless a double taxation agreement protects you. So there are many nuances.
Will you lose your tax residence in the UK?
It depends. In most cases, if you plan to be outside of the UK for less than a complete UK tax year, you will usually remain a tax resident in the UK.
Tax consequences for your UK employer
Nonetheless, you shouldn’t forget that the fact you are working from abroad may cause other issues for your UK employer, for example:
- Payroll withholding
Once you become a tax resident somewhere else, your UK company may be liable for payroll taxes in that country. For example, if you are liable to income tax in another country, your UK employer may need to collect and pay foreign withholding taxes each time you are paid.
- Corporation tax and ‘permanent establishment’
All employees should be aware that their stay abroad may make UK employers liable to corporation tax abroad. However, the risk of permanent establishment is low if you work abroad, but not from a fixed place of business that your employer can use.
Furthermore, if the overseas working arrangement is temporary, then the chances of that causing trouble to UK employers are also low. The OECD has published guidance on this subject which may be helpful.
Social security while working remotely
Like income tax, while living and working abroad, you might become liable to social security in your host country. If you are exposed to social security liability overseas, your employer may also have withholding obligations as a result.
Usually, you and your employer contribute to social security in the country where work is physically performed.
The UK has set-up social security agreements with several countries, including EU and EEA states. Hence, if you have moved to the EU after January 1st of 2021, the social security issue is covered by the terms of the new UK-EU protocol on social security coordination.
Hence, in countries where the UK has an agreement, an employee can remain within the UK tax system and not pay local social security contributions for up to five years (depending on the country).
However, in most cases, it’s not possible to remain in the UK National Insurance system if your remote working arrangement is expected to last more than two years. Therefore, in most cases, remote workers in the EU will remain under UK social security for at least two years if the employer is in the UK.
In other countries, where no agreement exists, such as China, India or Australia, the UK employer must continue to deduct employee UK NICs (National Insurance Contributions) and pay employer NICs for the first 52 weeks of your stay abroad.
Check out whether the UK has a social security agreement with the country you are considering living in. After that, you need to weigh whether or not that agreement protects you against social security in that country.
Most agreements state that you remain liable to your home country’s social security system if your employer sends you abroad.
Because the UK doesn’t have a social security agreement with all countries, you need to consider both countries’ domestic social security laws to determine where you are liable.
Working from abroad after COVID-19
Working remotely, and even from abroad, was relatively easy during COVID-19. Companies had no choice but to respect their employees’ security and health, and allowed them to enjoy work from the comfort of their homes.
But how does it look now, when so many people are vaccinated and back in the office? Will you have the same amount of freedom and flexibility?
According to an InterNations survey in 2021, nearly four in five expats surveyed can work remotely, among which 39% work entirely remotely.
Furthermore, remote working arrangements continue to be extended, while new requests from employees to work remotely from abroad become more and more common. Many UK employees are considering working from abroad – perhaps in a country with a warmer climate.
However, employers made themselves aware of several legal issues and considerations that may apply when employees work from home, and that “home” is located in another country.
But there are still old-fashioned companies out there that might not be cool with their employees working from abroad. Some UK employers still might think twice before agreeing on some working-from-home deal.
What to expect from your UK employer?
As we explained, your stay abroad can have financial and legal consequences for an employer. So companies will request you to define the duration of your remote work abroad and might limit it to less than six months.
The employer may also define some rules to remote work policy covering, e.g., working hours for someone located in a different time zone.
Furthermore, employers will, of course, consider whether such an arrangement is even viable for them. If an employee needs to attend the workplace regularly or on short notice, they won’t be given permission to work from abroad.
However, for someone who never needs to show up in the office, it will make no difference for the employer whether you are in the UK or abroad.
What else to consider when working remotely for a UK company and living abroad?
- Employer liability: are you covered under any public liability insurance your employer may have?
- Health and safety: your employer’s legal responsibilities regarding your health and safety during work must be reviewed if you change your workplace.
- Medical insurance: does your current medical insurance cover you abroad or do you need to sign-up for an additional one?
- Coronavirus travel restrictions: what are travel restrictions in the country you are living in or visiting? Will you be able to return to the UK?
Want to work remotely and live abroad?
Do you want to have a job and travel or live abroad at the same time? Then apply for one of our open positions today! Here, at Support Adventure, we hire talented people from around the world and give them the opportunity to work from anywhere.
We are an expat outsourcing company established in the UK. Our employees specialize in IT, in particular, the IT help desk. If you have experience or background in IT, don’t wait and apply for a remote job with us!