Tax liability and

employees working abroad

Financial Planning for Employees who Work Abroad

Sometimes, working remotely can mean working across the pond. There are certain positions of employment that don’t require coming to the office each day, which means you may have employees working abroad. However, it is important to think about the impact this may have on income tax and national insurance. So, when it comes to financial planning for employees who work abroad, here are some things to think about.

Income tax for employees working abroad

Tax liability depends on the time in which the employee will continue to work outside of the UK. If the employee is contracted to work overseas full-time for at least a year, they will not be treated as a resident. What’s more, they will also not be considered a resident in the UK, meaning they will not be subject to tax on their overseas earnings if the following conditions apply:

  • The employee works abroad and remains living outside of the UK for an entire tax year.
  • Should the employee visit the UK, they should not visit for more than 91 days per tax year

P85 for employees working abroad

When your employee leaves the UK, it is important that they fill in a P85 form, which you can download via the HMRC website. Once submitted, the employee’s PAYE code is set to NT. This will ensure that they can receive their salary without a deduction of UK income tax. However, the employee may be liable for paying income tax in their country of residence. It would be advisable that you receive local tax advice specific to that country.

National Insurance and working abroad

If the employee has been living and working for you in the UK before moving abroad, there will be national insurance liabilities for 52 weeks after moving away.  Therefore, both you and your employee will have to pay class 1 NICs for 52 weeks while the employee works abroad. However, there may be a reciprocal agreement for social security contributions between the UK and your employee’s country of residence. This will determine where social security contributions should be paid.

If the employee is residing in an EEA country or a country with a reciprocal agreement with the UK, you as the employer should complete HMRC forms CA 3821 and CA3822.

The employee may benefit from continuing to contribute to a UK national insurance fund. This will ensure that their rights to certain benefits and/or state pension are not reduced.

After the 52 weeks, the employee can continue to pay UK national insurance in the form of 2 class contributions. If the employee wishes to get as much as they possibly can from the UK state pension, they should check whether they are likely to receive this based on their UK earnings.

How We Can Help You.

We can help you complete the necessary HMRC forms when your employee goes to work abroad, so please get in touch with F&C today.

Latest news, case studies & events

Business Guidance for Covid-19
Self-Employment Income Support Scheme (SEISS)

The government’s Self-Employment Income Support Scheme will be up and running by 13 May 2020 to make appropriate claims. We…

Business Guidance for Covid-19
Information regarding the new 100% government backed loan scheme for small businesses

Sunak stated: “There will be no forward-looking tests of business viability; no complex eligibility criteria; just a simple, quick, standard…

Business Guidance for Covid-19
Queries from clients in relation to the Covid-19 financial help

Question 1 Andrew and Julie, a married couple, own and operate ABC Ltd, which is a company that provides management…

Business Guidance for Covid-19
Business Support during Covid-19

Chancellor Rishi Sunak has set out a package of temporary, targeted measures to support public services, people and businesses through…

Business Guidance for Covid-19
Business Guidance for Covid-19

As a business owner, this may be a particularly stressful time for you, something that is clear to understand. And…

Self-Assessment Tax Returns

However, you can remove the stress of this with a service that can prepare, complete and submit your self-assessment on…

What our clients say...

Yes this chap has helped me with my accounts and has done a fantastic job Well recommended Very pleased with the outcome

Usman is highly professional, efficient & highly knowledgeable accountant. His effective tax consultancy and accountancy services had made us save and plan tax. We highly recommend him.

Sayeed is a highly professional accountant, his effective strategy & planning saved me from paying a hefty amount of tax which I would have paid should I had not taken his advice.

I would highly recommend F&C Accountants

Mike is a very knowledgeable and professional accountant. He has been my accountant for a long time.

We would highly recommend Mike and his team for their exceptional services

Highly recommended, he listens to his clients! I am extremely grateful for Usman’s sound advice and support over the last six months. I see him regularly at our networking group and one day I expressed my frustration of my then accountant. Usman offered to help with no obligation or payment, so I gave him access and I quickly realised he was going to be a great asset so I switched accountants in June this year. Usman liaised with HMRC to do a review of my accounts dating back to 2017. He kept me informed at all stages and ultimately it allowed me to free up cash to reinvest in the business. I am extremely grateful and can safely say Usman always has the client’s interest at heart and makes them feel at ease even when deadlines are due. If you are frustrated with your current accountant or you’re not getting strategic financial and business advice, I would recommend Usman in a heartbeat knowing your business growth is his primary objective. Thank you Usman, I am forever grateful and will continue to highly recommend you and your team!

I have been a client of Usman’s for many years. He is very professional and reliable always responds quickly to my queries. I can highly recommend his accountancy services.

I highly recommend Mr Usman Nazir as an accountant. His in-depth knowledge and experience helped me immensely and with my tax return. He quickly took the stress out of the process for me and worked through my finances promptly making me savings that I would have not been able to achieve by myself. I am very thankful now to be on his books as I know now I have his experience and input for the next time making the process so much easier.