Working remotely abroad for a UK company

Digital nomadism is no longer niche. If you are working remotely abroad for a UK company, your lifestyle may be flexible, but your UK tax position is not. Before you leave, you need to understand how HMRC will view your residence status, your salary, and any payments that land after you have gone.

This guide focuses solely on UK personal tax for individuals working remotely for a UK employer. It does not deal with overseas local tax, immigration, or employer corporate issues.

The key question is simple. If you leave the UK, when does HMRC stop taxing your employment income?

Why and how to achieve a split year and ongoing non-resident status

Achieving non-resident status is the turning point, because it means UK tax exposure on employment income is limited to duties physically performed in the UK. More on that in the next section.

If you leave the UK part way through a tax year, non-resident treatment can begin from the date you exercise your first workday overseas, through split-year Case 1: full-time work overseas.

To rely on this case you must be in full-time work overseas and manage your day and workday count in the UK. Note that you can be considered in full-time work overseas even if you work for a UK employer, because what matters is where you physically work, not where your employer is located or where you are paid.

A critical point is often missed. To qualify for split-year treatment under Case 1, you must also be non-resident in the following tax year through being in full-time work overseas. In other words, you need to satisfy the criteria in the tax year of departure and in the year after it. Otherwise the split-year claim fails and you remain UK resident for the whole of the tax year in which you left.

For ongoing non-resident status in later years, the practical approach is to satisfy the full-time work overseas criteria under the Statutory Residence Test, by working full-time overseas and managing your day and workday count in the UK.

How employment income is sourced

Where is your salary taxed if you are non-resident? For UK personal tax purposes, employment income is sourced to where the duties are physically exercised, under s27 ITEPA 2003. HMRC looks at where you work, not simply where your employer is based or where your salary is paid.

If you are non-resident, HMRC taxing rights are limited to your UK workdays. To apply this correctly you need to identify the number of days on which duties are carried out in the UK, and compare that with the total employment days in the relevant period.

Image 1 — how workdays are apportioned

By way of example:

●       If 10% of your workdays are carried out in the UK and 90% overseas, HMRC will tax the 10% UK portion only, provided you are non-resident.

●       If 0% of your workdays are carried out in the UK after departure, HMRC has no taxing right over your salary, again provided non-resident status is in place.

This is why record keeping matters. Retain travel records, work calendars and supporting evidence showing where duties were performed.

Bonus and equity: when are they taxable?

What about bonus payments, share awards or other deferred compensation? These are not always taxed by reference to the payment date alone. They are commonly sourced to the period in which they were earned, vested or accrued.

This means leaving the UK does not automatically remove a later payment from UK tax. If the bonus or equity relates to a period when you were UK resident and performing duties in the UK, HMRC retains taxing rights over some or all of that amount.

Bonus example

●       You are resident in the UK for the whole of the 2024 calendar year.

●       You leave the UK on 1 January 2025 and become non-resident.

●       You receive a bonus in April 2025 in respect of the 2024 calendar year.

The bonus is wholly taxable in the UK, because it was wholly earned during your UK resident period. The fact that payment happens after departure does not, by itself, change the source of the income.

Equity example

●       You are resident in the UK for the whole of the 2024 calendar year.

●       You leave the UK on 1 January 2025 and become non-resident.

●       You do not work in the UK at all during the 2025 calendar year.

●       You exercise equity income in April 2026 that was earned over the period 1 January 2024 to 31 December 2025.

HMRC will tax 50% of the equity income, being the portion earned while you were UK resident from 1 January 2024 to 31 December 2024. The remaining 50%, relating to the non-resident period from 1 January 2025 to 31 December 2025, is not subject to UK tax, because the work duties were wholly performed overseas.

Image 2 — equity sourced to the earning period

The key point is that payment timing is not decisive. Even though the equity is paid in April 2026, HMRC sources the income back to the period in which the award was earned.

The personal allowance for UK and EEA nationals

What if you still have UK income after departure? If you are a UK or EEA national you continue to qualify for the UK personal allowance while non-resident. If you are neither, you may still qualify under a double taxation agreement.

HMRC guidance on personal allowance entitlement

In practice this means that even where you receive UK sourced income, such as UK workdays or trailing bonus and equity, there may be no UK tax to pay, because the personal allowance can be set against it.

Using the P85 form to obtain an NT code

How do you stop UK tax being withheld from salary once you have left? You can submit form P85 to HMRC. This tells HMRC that you have left the UK, become non-resident, and wish to be paid gross of taxation.

Provided HMRC accepts the facts, an NT, or No Tax, code will be issued to your UK employer. Your salary can then be paid without UK PAYE withholding, on the basis that your ongoing employment duties are performed outside the UK and you are non-resident.

Two points to be aware of. You cannot use form P85 if you already complete a self assessment tax return, in which case the position is reported through the return instead. And where you continue to have some UK workdays rather than none, an NT code may not be appropriate, because PAYE still applies to the UK portion.

P85 form application

The self assessment route

What if you do not want to use the P85 route? Some people prefer to leave payroll as it is during the tax year and deal with the position afterwards through UK tax return.

In that case, UK PAYE may continue to be deducted from salary in the first instance. You then file a UK tax return to:

●       claim non-resident status

●       apply split-year treatment where available

●       report the correct UK workday allocation

●       reclaim any excess UK tax deducted through payroll

This route can be appropriate if your facts are still developing, if you prefer not to change payroll immediately, or if you want the final position reconciled through the tax return process.

Register for self-assessment