More than 5.5 million British nationals are estimated to live permanently overseas. Among the most popular destinations are Australia with approximately 1.2 million UK citizens, the USA with 715,000, and Canada with 530,000. Other common countries of residence include Spain, Ireland, New Zealand, France, South Africa, Germany, and Italy. These locations appeal for various reasons, including lifestyle, work, and retirement.
While many older British expatriates rely on pensions or retirement savings, others continue to earn an income from employment or self-employment. If you reside abroad permanently, your foreign income is usually taxed in the country where you are domiciled. That means overseas income is not typically subject to UK taxation. However, the situation becomes more complex when you earn income from UK sources while living abroad.
Earning UK Income While Living Abroad
Many British nationals living overseas continue to receive income from the UK. Whether from rental properties, employment, pensions, or investments, this UK-sourced income may still be subject to UK tax rules. If you are planning to move abroad but still expect to earn income in the UK, it is important to understand how the UK tax system treats such cases.
UK income for non-residents generally includes:
- Wages from UK-based employment
- Rental income from properties located in the UK
- Interest from UK bank accounts and savings
- Dividends from UK companies
- Private or workplace pensions
This income may still attract UK tax even though you no longer live in the UK.
Determining Your Tax Residency
Tax obligations in the UK depend significantly on whether you are classed as a UK resident or not. The Statutory Residence Test provides the criteria for establishing residency. The most well-known rule is the 183-day rule: if you spend more than 183 days in the UK during a tax year, you are usually considered a UK resident.
However, even those who spend fewer days in the UK may be deemed residents depending on their ties to the UK, such as family, property, or work. This makes it essential to check your residency status every tax year if you maintain links to the UK.
Your tax liability is affected by both residency and domicile. While residency relates to where you currently live, domicile refers to your long-term or permanent home. You could be non-resident for tax purposes but still be UK domiciled, which can have implications for inheritance tax.
Understanding the UK Tax Rules for Non-Residents
According to HMRC guidance, individuals who are not UK residents must still pay UK tax on their UK-sourced income. This includes:
- Employment income earned in the UK
- Income from UK rental properties
- Interest from UK-based savings and investments
- Workplace and private pensions
However, not all types of UK income are taxed at source. For example, interest earned on UK savings is not automatically subject to tax deductions. In such cases, it is your responsibility to declare and pay any tax due.
You may be entitled to the UK Personal Allowance, which is the amount of income you can earn each tax year without paying Income Tax. If you are eligible, you can claim this by completing and submitting form R43 to HMRC at the end of the tax year in which you received UK income.
The State Pension is typically not taxed in the UK if you are a non-resident. But all other UK income must be reported, particularly if it is untaxed at source. This includes self-employment earnings, dividends, and rental profits. To fulfil your obligations, you must file a Self Assessment tax return with HMRC.
When You Need to File a Self Assessment Tax Return
If you are a non-resident receiving untaxed income from the UK, you must complete a Self Assessment tax return. Common scenarios include:
- Receiving income from property rentals in the UK
- Earning self-employed income in the UK
- Receiving UK dividends or savings interest that has not been taxed
- Claiming the Personal Allowance as a non-resident
If you are not yet registered for Self Assessment, you must do so before the 5 October deadline following the end of the tax year in which you received UK income. Failure to register and file your tax return on time may result in penalties.
UK tax returns for non-residents must include the SA109 form. This form outlines your residence and domicile status and must be submitted alongside the standard SA100 Self Assessment tax return.
Submitting Your Tax Return from Abroad
HMRC’s online filing system does not support the SA109 form, which means non-residents must use alternative methods to submit their Self Assessment returns. You can either:
- Download the SA100 and SA109 forms, complete them manually, and post them to HMRC
- Use tax return filing software that supports supplementary forms like SA109
Posting forms from overseas can take time, and postal delays may cause issues if your return is close to the deadline. Using software solutions allows for faster and more reliable submission. These tools often include prompts and error checks that reduce mistakes and ensure all required information is completed.
Avoiding Double Taxation
If you live in a country that also taxes your UK income, you could be taxed twice on the same earnings. To prevent this, the UK has double taxation agreements with many countries. These agreements ensure that you do not pay tax on the same income twice.
Double taxation relief usually takes one of two forms:
- Exemption: The income may be taxed only in one country, usually the country of residence.
- Tax credit: You pay tax in the UK and receive a credit in your country of residence for the UK tax paid.
To benefit from these agreements, you must understand the terms of the treaty between the UK and your country of residence. In many cases, you need to apply to HMRC or your local tax authority to claim relief.
Case Example: Working Professional in Australia
A British professional who has moved to Australia but continues to earn consulting fees from UK clients would need to pay UK tax on that income. However, since Australia has a double taxation agreement with the UK, the individual can claim relief in one of the two countries, depending on the nature of the agreement.
The UK tax paid can typically be claimed as a credit against Australian tax liability, ensuring no income is taxed twice. Maintaining proper documentation and declaring all income in both countries is essential to remain compliant.
183-Day Rule and Its Role in Residency
The 183-day rule is a simple but critical tool for determining tax residency. If you spend more than 183 days in one country during a tax year, you are generally considered a tax resident of that country. For individuals splitting their time between the UK and another country, this rule can determine where they are liable to pay tax.
Even if you spend less than 183 days in the UK, other factors such as having a home in the UK, close family ties, or working regularly in the UK can affect your residency status. The Statutory Residence Test incorporates all these criteria, so it’s important to assess your status every tax year.
What You Need to Prepare for Filing
To complete your Self Assessment tax return correctly, gather all necessary documents, including:
- UK bank statements and savings interest summaries
- Rental income records, including expenses and receipts
- Pension income statements
- Employment income summaries
- Details of any double taxation relief claimed
You should also ensure you have your National Insurance number and Unique Taxpayer Reference (UTR) number available when completing your return.
Completing the forms correctly is essential to avoid penalties. If your circumstances are complicated, consider getting assistance from a tax advisor who understands UK and international tax rules.
Introduction to UK Rental Income for Non-Residents
One of the most common sources of income for British nationals living abroad is rental income from property owned in the UK. Whether it’s a former home now let out to tenants or an investment property, rental earnings from the UK are subject to UK tax laws. For non-residents, understanding how rental income is taxed and what rules apply under the Non-Resident Landlord Scheme is vital for compliance and efficient tax planning.
We’ll explore in detail the tax treatment of UK rental income for those who live abroad, how to register and file under the scheme, allowable expenses, and what to consider when managing rental income from overseas.
UK Rental Income: A Taxable Source for Non-Residents
The UK government taxes income from UK property regardless of the landlord’s country of residence. If you are a non-resident landlord, you are liable to pay Income Tax on any profit you earn from letting property in the UK. This includes both residential and commercial property.
Profit from rental income is calculated by subtracting allowable expenses from the total rental income received. Expenses might include property maintenance, letting agent fees, mortgage interest, and utility bills paid by the landlord.
Defining Non-Resident Landlord Status
HMRC considers you a non-resident landlord if you spend more than six months of the tax year living outside the UK. This applies whether you are a UK citizen or not. If this is the case, you fall under the Non-Resident Landlord Scheme, a specific framework designed to handle tax on rental income earned by individuals who live abroad.
Registering for the Non-Resident Landlord Scheme
To be taxed correctly under the Non-Resident Landlord Scheme, you must register with HMRC. This involves completing and submitting the NRL1i form. There are two main routes you can choose from under this scheme:
Receiving Rental Income in Full
Under this option, your tenant or letting agent pays you the full rent without deducting tax at source. To qualify, you must apply using the NRL1i form and agree to comply with HMRC’s Self Assessment filing requirements. Once HMRC approves your application, they will notify your letting agent or tenant that they may pay your rent in full.
This arrangement offers the benefit of improved cash flow since you receive the total rental amount upfront. However, it also places the responsibility on you to declare your income, calculate your tax liability accurately, and pay it on time through Self Assessment.
Having Tax Deducted at Source
Alternatively, your tenant or letting agent can deduct basic rate tax (currently 20 percent) from your rental income before passing the remainder to you. They then submit the tax to HMRC on your behalf each quarter. At the end of the tax year, they will provide you with a certificate confirming the amount of tax deducted.
While this method ensures tax is paid regularly, it reduces your immediate cash flow. Also, if your actual tax liability is less than the amount deducted, you will need to file a Self Assessment tax return to claim a refund.
When the Scheme Is Mandatory
Letting agents must operate the Non-Resident Landlord Scheme if they collect rent for landlords who live overseas for more than six months a year. The scheme also applies to tenants who pay rent directly to a landlord without an agent and the annual rent exceeds £100 per week.
If the landlord has not been approved to receive gross rental income, the tenant must deduct tax at the basic rate from the rent and pay it to HMRC. This means that even individual tenants could be responsible for tax compliance under certain conditions.
Filing Your Tax Return for Rental Income
Regardless of whether you receive gross rental income or have tax deducted at source, you must file a Self Assessment tax return if you are a non-resident landlord. This ensures that your total income is reported and your final tax liability is calculated correctly.
The rental income section of the tax return allows you to declare:
- Total rental income received
- Allowable expenses incurred
- Tax already deducted (if applicable)
In addition to the SA100 form, you must include the SA109 form to declare your residence and domicile status. This combination ensures that HMRC understands you are filing as a non-resident and can apply the appropriate tax rules.
Allowable Expenses for Landlords
Non-resident landlords can deduct a range of expenses from their rental income to reduce their taxable profit. Common allowable expenses include:
- Letting agent fees and property management charges
- Accountant or legal fees related to the rental property
- Interest on a mortgage used to buy the property
- Maintenance and repair costs (but not improvements)
- Utility bills paid by the landlord
- Ground rent and service charges
- Buildings and contents insurance
- Advertising for new tenants
It is crucial to keep accurate records and receipts for all expenses you plan to deduct. In the event of a tax enquiry, HMRC will require evidence to support any claims.
Depreciation and Capital Expenditure
Costs associated with improving a property or purchasing items of lasting value (like adding an extension or fitting a new kitchen) are considered capital expenditures and are not deductible against rental income. However, these costs may reduce your Capital Gains Tax bill if you sell the property later.
Depreciation of property or contents is not an allowable expense under UK tax rules, so landlords cannot deduct it from their rental income.
Managing Currency Fluctuations
If you receive rental income in a different currency or pay expenses in foreign currency, you must convert amounts to UK pounds using the exchange rate on the date of the transaction or an average rate for the tax year. HMRC provides guidelines on acceptable exchange rate sources.
All entries in your Self Assessment return must be in GBP, and consistency in your currency conversion approach is important for accuracy and compliance.
Tax Planning for Non-Resident Landlords
Efficient tax planning can help reduce your overall liability. Some strategies include:
- Timing major repairs to fall within the same tax year to increase deductions
- Ensuring you claim all legitimate expenses
- Considering joint ownership options for income splitting
- Monitoring changes in UK property tax legislation
Staying informed and keeping good financial records throughout the year will make tax filing more manageable and may reveal opportunities for savings.
Double Taxation Considerations for Rental Income
If the country where you live also taxes rental income, you may be able to avoid double taxation through a tax treaty. The UK has agreements with many countries that provide relief in one of two ways:
- Exemption in one country for income taxed in the other
- A tax credit in your country of residence for UK tax paid
To claim relief, you may need to fill out additional forms and provide documentation of taxes paid. It’s important to understand the rules of both tax systems and seek advice if needed.
Case Study: A Landlord Living in Canada
Consider a British national who has moved permanently to Canada and rents out a property in Manchester. Since Canada and the UK have a double taxation agreement, the landlord must pay UK tax on rental income but can claim a tax credit in Canada. The landlord chooses to receive full rent and applies via the NRL1i form.
At the end of the tax year, they submit a Self Assessment return including SA100 and SA109 forms, deduct all allowable expenses, and pay the appropriate UK tax. They also declare this income to the Canadian tax authority and apply for a credit for the UK tax paid. This ensures they do not pay tax twice on the same income.
Staying Compliant from Abroad
Managing rental income and tax obligations while living overseas requires organisation and understanding of the relevant rules. Keep the following in mind:
- Register for the Non-Resident Landlord Scheme if applicable
- Choose the most suitable method for handling rental income and tax deductions
- Maintain thorough records of income, expenses, and correspondence with HMRC
- Use accurate currency conversion when dealing with foreign transactions
- File your Self Assessment return and SA109 on time each year
Failing to comply with the rules can result in penalties and interest charges. Non-resident landlords must remain proactive and ensure they fulfil their UK tax obligations even while residing abroad.
Other Types of UK Income for Non-Residents
In addition to rental income, many UK nationals living overseas continue to receive various other forms of income from UK sources. These can include pensions, savings interest, dividends, and earnings from self-employment or consultancy. Each income type has specific tax treatment, and it’s crucial for expatriates to understand how to comply with UK tax obligations while ensuring they are not unfairly taxed in both the UK and their country of residence.
We explored how other UK-sourced income is taxed for those who have left the UK permanently, including rules around Self Assessment filing, eligibility for Personal Allowance, and double taxation relief.
Understanding UK Pensions for Non-Residents
Many British nationals who retire abroad continue to receive income from UK pensions. These may include:
- State Pension
- Workplace pensions (defined benefit or defined contribution schemes)
- Private personal pensions
The UK State Pension is generally not taxed at source, and in most cases, it is not subject to UK Income Tax if you are non-resident. However, you may need to declare it in your country of residence.
For workplace and private pensions, the tax treatment varies. If you are non-resident, these pensions may still be subject to UK tax unless a double taxation agreement exempts them. In some countries, the pension is only taxable in the country where you reside, while in others, you may need to claim a tax credit.
If tax is deducted at source from your pension in the UK and you believe this is incorrect due to your residency status, you may be able to claim a refund or adjustment through Self Assessment.
Tax on UK Savings Interest
Non-residents may still maintain savings accounts with UK banks or building societies. While interest earned from these accounts is no longer automatically taxed at source under UK rules, this income remains taxable and must be declared.
If you live abroad permanently and receive UK savings interest, you must:
- Declare the interest as part of your UK income on your Self Assessment return
- Submit the SA109 form to confirm your non-resident status
You may be able to claim the UK Personal Allowance if you qualify under the relevant tax treaty or if you are a citizen of a country entitled to claim it. If your total UK income, including interest, falls below this threshold, you will not pay UK Income Tax. However, if your interest earnings exceed the allowance, you must pay tax on the excess.
Some countries also require you to report foreign interest income on your local tax return. In such cases, a double taxation agreement may allow you to avoid being taxed twice.
UK Dividends and Non-Residents
If you receive dividends from UK companies while living abroad, the good news is that UK dividends are not subject to withholding tax. This means the company paying the dividend will not deduct any tax before paying you.
However, dividends are still considered UK-sourced income and must be declared in your UK tax return if your overall income exceeds the threshold that requires Self Assessment filing.
As a non-resident:
- You may not benefit from the tax-free Dividend Allowance unless you are eligible for the UK Personal Allowance
- If you are not entitled to the Personal Allowance, all UK dividend income may be taxable in the UK
The applicable tax rate on dividends depends on the total amount you receive and your tax band. You may also need to declare the income in your country of residence, depending on local rules.
In countries with a double taxation agreement with the UK, relief is often available to ensure that you are not taxed twice on the same income. The agreement may state which country has taxing rights over dividends or allow you to claim a credit for UK tax paid.
Self-Employment or Consultancy Income from the UK
If you are living abroad but continue to carry out freelance, consultancy, or other self-employed work for UK clients, you are still liable to pay UK tax on the earnings arising from that work.
Income from services provided in the UK, or where the economic benefit is received in the UK, is considered UK-sourced. As a non-resident self-employed individual, you must:
- Register for Self Assessment if not already registered
- Submit annual tax returns declaring all UK income
- Include relevant expenses and deductions
- File the SA109 form alongside the SA100 return to confirm your residence status
You may also need to consider VAT registration if your turnover exceeds the UK VAT threshold and your services are supplied to UK customers.
If you also pay tax on this income in your country of residence, the existence of a tax treaty can again help to prevent double taxation.
Income from UK Trusts and Estates
Non-residents may be beneficiaries of UK-based trusts or estates. Any income you receive from these sources may be subject to UK Income Tax, depending on the type of trust or the nature of the estate income.
Discretionary trusts, for example, pay tax at the trust level, and distributions may come with a tax credit. You may be required to report this income and the associated tax in your UK tax return. Again, double taxation relief may be available under certain treaties.
If you are entitled to income from a UK estate (for example, as a beneficiary of a will), the executor may deduct basic rate tax before making payments. This tax must be reported, and you may need to claim relief if taxed again abroad.
Claiming the UK Personal Allowance as a Non-Resident
Not all non-residents are entitled to the UK Personal Allowance. Eligibility depends on:
- Whether the UK has a tax treaty with your country of residence
- Whether the treaty includes a clause allowing non-residents to claim the allowance
- Your nationality or former UK residency status
If eligible, the Personal Allowance lets you earn a set amount of UK income each year before paying any Income Tax. If you’re not eligible, all your UK income is taxable from the first pound.
To claim the allowance, complete form R43 and submit it to HMRC at the end of the tax year. You must also indicate your eligibility within the Self Assessment return.
Using the SA109 Form to Declare Non-Residency
All non-residents who receive UK income must include the SA109 form when filing a Self Assessment return. This form confirms your residence and domicile status and is essential for:
- Ensuring your income is taxed appropriately
- Claiming tax relief under double taxation treaties
- Establishing your eligibility for Personal Allowance
SA109 is not supported by HMRC’s standard online filing system. Therefore, you must either submit a paper return or use third-party software that supports the full range of Self Assessment forms.
Accurate completion of the SA109 is key to avoiding tax errors or disputes, especially in cases where international tax rules apply.
Common Filing Scenarios for Non-Residents
To clarify the process, consider the following examples:
A Retired UK Citizen in France Receiving Pension and Savings Interest
The individual receives a private pension from a former UK employer and has a UK bank account generating interest. As a non-resident, they must report this income on a Self Assessment return, including SA100 and SA109.
France and the UK have a double taxation agreement that allows some types of pensions to be taxed only in France. The savings interest may also be taxable in France, but UK tax can be avoided through treaty provisions. Any UK tax mistakenly deducted can be reclaimed by submitting the appropriate forms.
A Freelancer Living in Dubai with UK Clients
The freelancer provides digital consultancy services to several UK businesses while living in Dubai. Although they are non-resident, their income from UK clients is considered UK-sourced and subject to UK tax.
They must register for Self Assessment, complete the SA100 and SA109, and declare all UK earnings. Since Dubai has no income tax and no double taxation treaty with the UK, the individual pays full UK tax on that income but none in Dubai.
Practical Considerations When Managing UK Income Abroad
Living abroad can complicate your financial life, particularly when dealing with two tax systems. To stay compliant and avoid unnecessary costs:
- Maintain up-to-date records of all UK income and related documentation
- Check tax treaties between the UK and your country of residence
- Keep track of Self Assessment deadlines and required forms
- Be aware of currency conversion requirements for reporting foreign transactions
- Consider consulting with a tax adviser who specialises in international tax matters
Accurate and timely filing ensures you meet your UK obligations and helps you claim any relief or refund due to you. Failing to report income or missing deadlines can lead to penalties, regardless of where you reside.
Conclusion
Living abroad permanently does not exempt British nationals from their UK tax obligations, especially when they continue to receive income from UK sources. Whether it’s earnings from property rentals, pensions, savings interest, dividends, or self-employment, such income is often taxable under UK law, even if the individual is no longer a resident.
Outlined the importance of determining your tax residency and domicile status, as these influence how and where your income is taxed. It also explained the need to register for Self Assessment and file annually using supplementary forms like SA109, especially when you claim the UK Personal Allowance as a non-resident.
We delved into the specifics of rental income and how the Non-Resident Landlord Scheme applies to individuals living outside the UK for more than six months per year. Whether choosing to receive gross rental income and self-report through Self Assessment or having tax deducted by an agent or tenant, non-resident landlords must stay compliant with HMRC’s requirements. Allowable expenses and effective tax planning can help reduce taxable rental profits.
We explored additional types of UK income that may affect those living overseas, such as pensions, bank interest, dividends, consultancy income, and trust or estate distributions. Each income source has unique rules and tax treatment, and double taxation agreements between the UK and other countries can offer relief where income would otherwise be taxed twice.
Remaining tax-compliant while living abroad requires awareness of both UK and local tax rules, timely filing, and accurate reporting. For many, using tax filing software or seeking expert advice is a practical way to stay on top of these obligations and avoid penalties.
Ultimately, understanding how UK tax law applies to your income while living overseas will allow you to manage your finances efficiently, reduce the risk of double taxation, and ensure peace of mind knowing that your legal obligations are being met, no matter where in the world you call home.