So you want to be a digital nomad?

But what about tax?

The digital nomad existence does sound idyllic. You wake up in an exotic location, and head down to the beach bar with your laptop. After a couple of hours working away at your remote business, you spend the rest of the day on the beach. Or working away with views over a fabulous bay / mountains / rain forest …or whatever is on offer at your latest location.

But whilst this is a great way to travel the world, and also a chance to escape from the not always clement weather of the UK, it is important to know where you stand when it comes to tax if you want to avoid any nasty surprises. Just because you are working abroad, moving from country to country, does not necessarily mean that you are not liable to tax.

Are you liable to pay tax in the UK?

You may need to pay UK income tax on your foreign income if you work abroad. Whether this is the case does not depend on the country in which you are working, rather the tax rules that apply to you will depend on whether you are classed as ‘resident’ in the UK for tax purposes.

If you are considered to be UK resident, you will normally pay tax on your foreign income. Non-residents only pay tax on their UK income – they do not pay UK tax on their foreign income.

What is classed as being resident in the UK for tax purposes?

Whether you are UK tax resident generally depends on how many days you spend in the UK in a tax year (6 April to 5 April the following year). For these purposes, a ‘day’ is generally any day on which you were present in the UK at midnight.

You will only be resident in the UK if both of the following apply:

• you meet one or more of the automatic UK tests or the sufficient ties test
• you do not meet any of the automatic overseas tests

Otherwise, you will be non-resident for UK tax purposes.

What are the UK tests?

You will be resident under the automatic UK tests if:

• you spent 183 or more days in the UK in the tax year
• you had a home in the UK for a consecutive period of 91 days or more and you visited or stayed in it for at least 30 days in the tax year concerned
• you worked full-time in the UK for any period of 365 days and at least one day of that period was in the tax year in question.

What is the sufficient ties test?

If you don’t meet the automatic UK test requirements, your residence position will be determined by looking at the number of ‘ties’ you have to the UK. These ties to the UK include:

• having family members in the UK,
• retaining accommodation in the UK,
• working in the UK, and
• having spent more than 90 days in the UK in at least one of the two previous tax years.

If you are leaving the UK, you also need to consider whether you have spent more days in the UK than any other country during the tax year. The number of ties you have will determine how many days you can spend in the UK without being treated as UK resident.

What are the automatic overseas tests?

You are usually non-resident if either:

• you spent fewer than 16 days in the UK (or 46 days if you have not been a UK resident for the 3 previous tax years)
• you worked abroad full-time (averaging at least 35 hours a week), and spent fewer than 91 days in the UK, of which no more than 30 were spent working.

If you’re not UK resident

If you’re not UK resident, you will not have to pay UK tax on your foreign income. However, you may have to pay tax in the country, or countries, in which you are working, and it should form an essential part of your research to find out the tax requirements of each country. 

This may change depending on where you are working and for how long, for example, many (but by no means all) countries will consider you tax resident once you have spent 6 months there in a year. However, tax laws are complex and vary from country to country – specialist advice should be obtained.

The country where you live might also tax you on any UK income although you should be able to claim credit for this in the UK to avoid being taxed twice.

So can I become a tax nomad?

The answer to this will depend on whether you are classed as UK resident and the countries you work in but, theoretically, you can be a tax nomad. If you are non-UK resident and are moving from country to country it may be that you do not incur a tax liability. However, we would always advise caution and that you take specialist tax advice. If you think the issues in this post may affect you, please get in touch.