UK tax when you have an overseas employer

If your employer is classed as a UK non resident for tax purposes this can affect your tax position.

UK resident employers must ensure that they arrange for tax and National Insurance contributions to be deducted from your wages, if you earn these and live in the UK. This is done through a scheme called Pay as you earn or PAYE.

How is it different if my employer is resident abroad?

If your employer resides abroad, then they are not obliged to participate in this system. But you are responsible for ensuring that you make your correct tax and National Insurance payments.

There are three different options available to non resident employers. For your peace of mind, it is worthwhile identifying which applies to your current employment situation. Then you can relax in the knowledge that you are meeting you tax and National Insurance obligations, either through your employer’s, or you own, arrangements.

Option 1 – Business-to-business arrangement

Usually, if another UK business gains from the work that you carry out, this business should arrange for your wages to be taxed. Thus for the purposes of taxation, they will be considered your employer. For example if you remain employed within another country, but have been sent to work in the UK, the UK employer will arrange the tax and National Insurance contributions. The two businesses will normally make an agreement to arrange this.

Option 2 – Employer arrangement

If being in the UK means that your business is running, in part, from the UK, then your employer must ensure your tax and National Insurance Contributions are made, despite them being abroad. This might be the case if you are a senior employee of a company, for example.

Option 3 – You arrange to pay through self assessment

If your situation is neither of the two described above, you must fill in a UK tax return in order to pay your tax. This is done through the ‘Self Assessment process’. In order to pay your National Insurance Contributions, you may have to create a ‘dummy’ payroll scheme, whereby you make payments to HMRC four times a year.