What is expat tax, and why do UK citizens still owe tax when living abroad? Your tax liability as an expat depends on your residence status and where your income arises. Read on to understand expat tax obligations, key concepts like tax residency and worldwide income, and how to file correctly while avoiding costly penalties.
What This Article Covers
This article introduces the fundamentals of expat tax for UK residents. It outlines how the UK treats overseas income, how to avoid double taxation, and the specific rules that apply to UK expats. We also explore why using a specialist adviser can protect you from penalties and ensure compliance.
Table of Contents
- What Is Expat Tax and Who Pays It?
- Why Do Expats Still Pay Taxes?
- Who Is Considered an Expat for Tax Purposes?
- How Do Expat Taxes Work?
- What Kinds of Income Are Taxed?
- What Are the Main Challenges with Expat Taxes?
- Avoiding Double Taxation
- Navigating Foreign Reporting Requirements
- How to File Your Expat Taxes Correctly
- Filing as a UK Expat
- Should You Use a Tax Adviser for Expat Taxes?
- Final Thoughts – Get Your Expat Taxes Right from the Start
What Is Expat Tax and Who Pays It?
Expat tax refers to the tax obligations that arise for both UK citizens living abroad and foreign nationals who have come to live in the UK. Whether or not you are, or are going to be—liable to UK tax, depends on your UK tax residency status, the source of your income, and specific rules set out in UK tax legislation.
The UK follows a system of residence-based taxation, which means that if you are considered a UK tax resident, you must pay UK tax on your worldwide income. Worldwide income includes income that arises outside the UK. The only way that you may not have to pay UK tax on your overseas income, is if you have already paid tax overseas, and there is a double tax treaty in place between the UK and the overseas country in which you have paid tax. In these cases, sometimes treaty relief is available, which protects you from being taxed twice on the same money. If there is no double tax treaty in place between the UK and the country you have paid tax in, then unilateral relief can save you from paying taxes twice! We will go into double taxation and how to avoid it later in this article.
If you are not a resident for UK tax purposes, only your UK-source income falls within the scope of UK taxation. Any income earned outside the UK or from overseas assets, is generally not taxable in the UK.
Understanding where your income originates and whether you meet the criteria for UK residence is central to understanding what expat tax is, and who pays it—and avoiding double taxation where possible!
Why Do Expats Still Pay Taxes?
UK expats living abroad will only pay UK tax on their global income if they are spending a significant amount of time in the UK each year or if they have strong ties to the UK. The rationale is that if you benefit from a country’s infrastructure and services, you are expected to contribute to its treasury.
Expats still pay taxes when coming from overseas but living in the UK. Again, if they are considered UK resident for tax purposes, because they are spending a significant amount of time in the UK, or forming strong ties to the UK, they will be liable to UK tax on their global income.
The laws apply to both UK expats abroad and foreign expats living in the UK in exactly the same way and therefore fairly. The only difference is that the Statutory Residence Test requires you to have spent more days in the UK if you have just arrived—in order to gain UK resident status—than those who have been living in the UK for some time. Also, if you have recently left the UK, then there is an extra test which asks whether the UK is the country where you have spent the most amount of midnights during the tax year, in order to work out your residency. This test does not apply to people who have just arrived in the UK.
As already mentioned, the UK taxes individuals based on two main criteria.
First, if you are considered a UK tax resident under the Statutory Residence Test, you may be taxed on your worldwide income.
Second, even if you are not resident, you may still be liable for UK tax on income that arises within the UK (known as UK source income).
UK source typically includes rental income, business earnings, or gains from UK-based assets.
This global approach can create double taxation if more than one country claims taxing rights over the same income, but there are rules and agreements in place to prevent being unfairly taxed twice on the same income, which we go into later in the article.
Who Is Considered an Expat for Tax Purposes?
For tax purposes, an expat is a UK citizen who lives abroad, often for work, retirement, or personal reasons. The number of expats has grown globally over recent years, due to more people having the option to work remotely and known as digital nomads.
An expat can also be someone that is living in the UK that is a foreign national. An expat can be considered as a person who is not living in their original home country.
The key issue is not just where you are physically located, but whether you are considered UK tax resident. The UK’s Statutory Residence Test determines this by applying various tests including the comparison of days spent in the UK with ties such as work, family, and accommodation.
How Do Expat Taxes Work?
Expat taxes work to ensure that taxes are levied fairly and take into account a person’s location and the money they are earning. Expats need to understand both, where they are considered resident and where their income arises. You may be taxed on your foreign income, your UK income, or both—depending on your residence status and the source of your income.
What Kinds of Income Are Taxed?
When you’re a UK expat, understanding which income streams are taxable can feel complex—but it doesn’t have to be. As mentioned already, your liability depends on two key factors: your UK tax residency and the origin of your income.
First, let’s clarify residency. The UK tests each person’s tax status using the Statutory Residence Test, which examines—broadly—how many days you spend in the UK, whether you have a home here, work ties, and other connections. If you meet the criteria, you’re considered UK resident for that tax year; if not, you’re non-resident and this changes what income is in scope.
As we have already covered, if you are a UK resident, you are subject to UK tax on your worldwide income. But what is worldwide income and what does it include? Worldwide income includes any income whatsoever from anywhere in the world! This includes any salary payments, paid either from a UK or overseas employer, any income from investments you hold, any rental income, pension income, and any income made by selling assets. It’s all your income—regardless of where it arises.
If you’re non-resident, you’re only taxed on your UK-source income. UK source income includes any income which arises in the UK. So whether it’s UK income gained from selling a car in the UK and making a profit, turning a trade in the UK, or rental income from a UK property, even as a non-UK resident, you must still declare this income to HMRC and calculate if any tax is due.
Employment Income and Salaries
UK source income seems straightforward, but in practice it can be a little more tricky to spot. Employment income is a good example. Most people would assume a UK salary paid by a UK company would be UK source income. However, the source of the income is actually where the work is performed. In essence you are the source of the income! If you perform your duties wholly and exclusively outside the UK, then your salary won’t be liable to UK tax!
However, if any part of your duties are carried out in the UK, that portion of your income becomes taxable here. Remember that this rule only applies to non-UK residents—so UK expats living outside the UK.
For UK residents, employment income is always taxable, even if it is earned from overseas—although foreign tax paid may be relieved via double tax treaties or foreign tax credit relief.
Dividend and Interest Income
Investment income, such as dividends and interest, is another important category. For UK residents, dividends from foreign companies and interest from overseas bank accounts are taxable in the UK and must be declared on your self-assessment tax return. If you’ve already paid tax on these abroad, you may be able to claim a foreign tax credit to avoid double taxation.
If you’re not tax resident in the UK for a full tax year, you may still receive income from UK sources like dividends from UK companies or interest from UK bank accounts. Normally, this type of income would count as UK-source and be taxable in the UK. However, special rules—known as the disregarded income provisions—can apply to non-residents. These rules mean that although the income is technically taxable in the UK, it’s treated differently: you’re taxed only on the amount of tax actually deducted at source, and you can’t use the UK personal allowance to reduce the taxable amount.
So, if no tax was withheld on the income, and you’re fully non-resident for the entire tax year, then no UK tax is due on that income—even though it’s still classed as UK-source. This effectively makes it tax-free in the UK, though you may still need to declare it on your tax return if requested by HMRC.
As of the 2024/25 tax year, the rules have become even simpler in practice. UK banks are no longer required to deduct tax at source from interest paid to non-residents. Previously, some banks withheld 20% tax by default, even if you lived abroad. Now, interest is usually paid gross (in full), meaning that unless HMRC asks for a return or you’ve triggered another UK tax liability, that interest won’t be taxed in the UK.
It’s still important to keep proper records and check your residence status each year. If your status changes, or if you have other UK income—such as rental profits—different rules may apply, and you could lose the disregarded income benefit.
Rental Income
If you’re a non-UK resident and rent out property located in the UK, that income is always taxable in the UK, regardless of where you live. This is because rental income from UK land or property is considered UK-source income, and non-residents are not exempt from UK tax on it.
To ensure tax is collected properly, HMRC runs a system called the Non-Resident Landlord Scheme (NRLS). Normally, the default is that either your letting agent or tenant is legally required to deduct basic rate tax (currently 20%) from the rent they pay you as a non-resident landlord—before passing the rest on.
Your tenant or agent must then pay that tax directly to HMRC on your behalf. This is true even if the rent is being paid abroad or into a foreign bank account. As you can imagine, this would discourage many tenants from renting from a non-resident landlord.
So, there is an option under the NRLS that allows non-resident landlords to apply to receive their rental income in full, without any tax being deducted at source. To do this, you must fill out form NRL1 (or NRL2/NRL3 for companies or trusts) and agree to file annual Self-Assessment tax returns. If HMRC approves your application, you’ll receive the full rental amount and account for the tax due yourself when you submit your return.
Even if you’re receiving the full rent without deductions, you still need to report the income and pay any UK tax that’s due. You’re allowed to deduct qualifying expenses—like letting agent fees, repairs, mortgage interest, and service charges—before working out the taxable profit.
In short, UK rental income stays within the UK tax system for non-residents, but you can choose whether HMRC collects tax through your tenant or agent, or whether you do it yourself through a Self-Assessment return.
Foreign Property Income
Foreign property income is also taxable for UK residents. So if you’re letting out a villa in Spain while living in Portugal but still meet the UK Statutory Residence Test, then that income must be reported to HMRC. Again, foreign tax credit relief or unilateral relief may apply if you’ve paid tax abroad.
Pension Income
Pension income has its own complex rules. If you receive a UK state pension, workplace pension, or personal pension, and are a UK resident, this income is taxable under UK law. If you’re non-resident, UK pensions are still often taxable in the UK unless a double tax treaty provides an exemption or shifts taxing rights to the other country.
For instance, the UK-US treaty allows for exclusive taxation in the country of residence for certain pensions. The tax treatment of foreign pensions received by UK residents varies depending on whether the pension is from an overseas occupational scheme, government scheme, or private fund. These must usually be declared and will form part of your UK taxable income.
Bringing these rules together, what matters most is your residence position, the source of the income, and whether any double tax agreement applies. Tax planning becomes crucial for expats navigating employment, investment, rental, and pension income—especially where multiple tax jurisdictions may claim taxing rights. Knowing your reporting obligations can help ensure compliance and avoid unexpected liabilities.
Most other countries adopt similar approaches—taxing non-residents only on locally sourced income. Understanding how each jurisdiction treats cross-border income is crucial, particularly when there is no tax treaty to fall back on.
What Are the Main Challenges with Expat Taxes?
Avoiding Double Taxation
Double taxation occurs when two jurisdictions claim the right to tax the same income. This can happen because a person meets the tax residency criteria in more than one country.
To resolve this, the UK operates both tax treaties, along with unilateral relief provisions where no treaty exists.
When a double tax treaty applies, it sets out rules to determine which country has taxing rights over each category of income or gain. Typically, the treaty allows one country to tax the income and the other to offer relief by way of a tax credit.
Where an individual is resident in both countries, according to each country’s residency rules, the treaties also include “tie-breaker” clauses that help determine which country the individual is deemed to be resident in for the purposes of applying the rules in the treaty. The tie-breaker often considers factors such as where the person has a permanent home, their centre of vital interests, their habitual abode, and their nationality.
Treaty relief is available where tax has been withheld overseas, and the amount of relief you can claim is capped at the lower of the tax withheld or the rate specified in the treaty. If the foreign country has applied a higher rate, you may be able to reclaim the excess, but not reduce your UK tax liability by more than the treaty allows.
Where no treaty exists, or the treaty doesn’t cover a particular type of income or foreign tax, UK tax law allows for unilateral relief. This means the UK allows you to deduct the foreign tax paid from your UK tax liability on the same income. However, relief is only granted up to the amount of UK tax due on that income, so excess foreign tax is not refundable.
This also applies where a treaty exists but doesn’t extend to specific income types—such as certain US state taxes not covered by the UK–US treaty.
Choosing the correct relief method, and documenting the details appropriately in your self-assessment tax return, is essential to avoid being taxed twice or denied relief altogether.
Navigating Foreign Reporting Requirements
If you’ve moved abroad or hold any kind of financial interests overseas, it’s important to understand how global tax transparency rules may affect you. Over the last decade, countries around the world—including the UK—have tightened their reporting systems to make sure people aren’t hiding income or assets offshore.
The UK is part of the Common Reporting Standard (CRS), a global agreement between over 100 countries that allows tax authorities to share information about things like foreign bank accounts, investments, and certain types of income. That means if you’re living in Spain with a UK account—or vice versa—there’s a good chance HMRC is already aware of your foreign assets.
Alongside CRS, the UK has signed a series of Tax Information Exchange Agreements (TIEAs), which allow HMRC to formally request more detailed financial information from other countries when needed. These agreements cover not just bank accounts, but also trusts, overseas companies, and real estate.
So if you’re UK tax resident receiving income from overseas, it doesn’t matter if you’ve already paid tax on that income elsewhere—you still need to declare any foreign income or gains here in the UK.
Not doing so could trigger penalties, even if the omission was unintentional. The best way to stay on the right side of these rules is to be upfront, organised, and ensure everything is properly reported in your self-assessment tax return.
How to File Your Expat Taxes Correctly
Getting it right starts with knowing your UK tax residence position. This requires accurate records of your travel, ties to the UK, and the nature of your income. If you are non-resident, you may only need to report UK-source income. If resident, your worldwide income is within scope.
Review where your assets are located, whether you’ve sold anything in the tax year, and what you’ve earned from UK and non-UK sources.
Filing as a UK Expat
Many UK expats must file a self-assessment tax return, especially if they have rental income, self-employment income, or significant savings interest. HMRC guidance outlines the rules for non-residents, including how to register, which forms to complete, and what reliefs may apply.
You may be eligible for foreign tax credit relief if you’ve paid tax abroad on the same income, but this needs to be correctly claimed through your return. Being late or inaccurate can trigger penalties.
Should You Use a Tax Adviser for Expat Taxes?
If you live abroad or plan to move, professional advice can save you time, stress, and money. A qualified expat tax adviser will assess your residency, identify tax treaty benefits, and help you structure income in a tax-efficient way. They’ll also ensure you meet tax filing deadlines and avoid costly penalties.
International tax law is complex, and misinterpreting the rules or lack of knowledge, can lead to fines, double taxation, or tax authority inquiries. With HMRC participating in cross-border data exchange, staying informed and compliant has never been more important.
Final Thoughts – Get Your Expat Taxes Right from the Start
Expat tax obligations don’t need to be overwhelming. With proper planning and support from a knowledgeable expat tax adviser, you can stay compliant, avoid double taxation, and meet all your tax filing deadlines. The key is understanding where you are liable, what income is taxable, and which rules apply. If you get this right from the outset, you’ll not only avoid stress and fines—you’ll also make the most of your income, wherever you are in the world.
Need tailored tax help?
Understanding the UK tax system can be tricky, especially as an expat. Without the right planning, your estate or inheritance could face unexpected costs.
We’re here to relieve tax compliance stress by providing one-on-one tax assistance tailored to your unique situation and tax planning goals. Giving you complete peace of mind and helping you save money, our award-winning tax consultancy network is on hand to help.
Book a consultation with Expat Taxes today for clear, personalised advice, tailored to your situation.
DISCLAIMER: The material in this article is for general information purposes only and does not constitute legal or taxation advice. Legal, financial, investment and taxation advice should be sought before acting or refraining from acting. All information and taxation rules are subject to change without notice. Expattaxes.co.uk Limited (hereafter ‘the parties’) accept no liability for any action taken based on the information in this article or any of the articles on this website.
Written by Venita Machnicki, CTA (UK), ATT
Venita is a Chartered Tax Adviser with over 15 years of experience specialising in UK and international tax. She is a trusted expert in cross-border tax matters for globally mobile individuals, expats, and business owners. Venita combines deep technical knowledge with a practical, client-focused approach to help people navigate the complexities of UK tax while living and working overseas.
- What Is Expat Tax and Who Pays It?
- Why Do Expats Still Pay Taxes?
- Who Is Considered an Expat for Tax Purposes?
- How Do Expat Taxes Work?
- What Kinds of Income Are Taxed?
- What Are the Main Challenges with Expat Taxes?
- Avoiding Double Taxation
- Navigating Foreign Reporting Requirements
- How to File Your Expat Taxes Correctly
- Filing as a UK Expat
- Should You Use a Tax Adviser for Expat Taxes?
- Final Thoughts – Get Your Expat Taxes Right from the Start
What Is Expat Tax and Who Pays It?
Expat tax refers to the tax obligations that arise for both UK citizens living abroad and foreign nationals who have come to live in the UK. Whether or not you are, or are going to be—liable to UK tax, depends on your UK tax residency status, the source of your income, and specific rules set out in UK tax legislation.
The UK follows a system of residence-based taxation, which means that if you are considered a UK tax resident, you must pay UK tax on your worldwide income. Worldwide income includes income that arises outside the UK. The only way that you may not have to pay UK tax on your overseas income, is if you have already paid tax overseas, and there is a double tax treaty in place between the UK and the overseas country in which you have paid tax. In these cases, sometimes treaty relief is available, which protects you from being taxed twice on the same money. If there is no double tax treaty in place between the UK and the country you have paid tax in, then unilateral relief can save you from paying taxes twice! We will go into double taxation and how to avoid it later in this article.
If you are not a resident for UK tax purposes, only your UK-source income falls within the scope of UK taxation. Any income earned outside the UK or from overseas assets, is generally not taxable in the UK.
Understanding where your income originates and whether you meet the criteria for UK residence is central to understanding what expat tax is, and who pays it—and avoiding double taxation where possible!
Why Do Expats Still Pay Taxes?
UK expats living abroad will only pay UK tax on their global income if they are spending a significant amount of time in the UK each year or if they have strong ties to the UK. The rationale is that if you benefit from a country’s infrastructure and services, you are expected to contribute to its treasury.
Expats still pay taxes when coming from overseas but living in the UK. Again, if they are considered UK resident for tax purposes, because they are spending a significant amount of time in the UK, or forming strong ties to the UK, they will be liable to UK tax on their global income.
The laws apply to both UK expats abroad and foreign expats living in the UK in exactly the same way and therefore fairly. The only difference is that the Statutory Residence Test requires you to have spent more days in the UK if you have just arrived—in order to gain UK resident status—than those who have been living in the UK for some time. Also, if you have recently left the UK, then there is an extra test which asks whether the UK is the country where you have spent the most amount of midnights during the tax year, in order to work out your residency. This test does not apply to people who have just arrived in the UK.
As already mentioned, the UK taxes individuals based on two main criteria.
First, if you are considered a UK tax resident under the Statutory Residence Test, you may be taxed on your worldwide income.
Second, even if you are not resident, you may still be liable for UK tax on income that arises within the UK (known as UK source income).
UK source typically includes rental income, business earnings, or gains from UK-based assets.
This global approach can create double taxation if more than one country claims taxing rights over the same income, but there are rules and agreements in place to prevent being unfairly taxed twice on the same income, which we go into later in the article.
Who Is Considered an Expat for Tax Purposes?
For tax purposes, an expat is a UK citizen who lives abroad, often for work, retirement, or personal reasons. The number of expats has grown globally over recent years, due to more people having the option to work remotely and known as digital nomads.
An expat can also be someone that is living in the UK that is a foreign national. An expat can be considered as a person who is not living in their original home country.
The key issue is not just where you are physically located, but whether you are considered UK tax resident. The UK’s Statutory Residence Test determines this by applying various tests including the comparison of days spent in the UK with ties such as work, family, and accommodation.
How Do Expat Taxes Work?
Expat taxes work to ensure that taxes are levied fairly and take into account a person’s location and the money they are earning. Expats need to understand both, where they are considered resident and where their income arises. You may be taxed on your foreign income, your UK income, or both—depending on your residence status and the source of your income.
What Kinds of Income Are Taxed?
When you’re a UK expat, understanding which income streams are taxable can feel complex—but it doesn’t have to be. As mentioned already, your liability depends on two key factors: your UK tax residency and the origin of your income.
First, let’s clarify residency. The UK tests each person’s tax status using the Statutory Residence Test, which examines—broadly—how many days you spend in the UK, whether you have a home here, work ties, and other connections. If you meet the criteria, you’re considered UK resident for that tax year; if not, you’re non-resident and this changes what income is in scope.
As we have already covered, if you are a UK resident, you are subject to UK tax on your worldwide income. But what is worldwide income and what does it include? Worldwide income includes any income whatsoever from anywhere in the world! This includes any salary payments, paid either from a UK or overseas employer, any income from investments you hold, any rental income, pension income, and any income made by selling assets. It’s all your income—regardless of where it arises.
If you’re non-resident, you’re only taxed on your UK-source income. UK source income includes any income which arises in the UK. So whether it’s UK income gained from selling a car in the UK and making a profit, turning a trade in the UK, or rental income from a UK property, even as a non-UK resident, you must still declare this income to HMRC and calculate if any tax is due.
Employment Income and Salaries
UK source income seems straightforward, but in practice it can be a little more tricky to spot. Employment income is a good example. Most people would assume a UK salary paid by a UK company would be UK source income. However, the source of the income is actually where the work is performed. In essence you are the source of the income! If you perform your duties wholly and exclusively outside the UK, then your salary won’t be liable to UK tax!
However, if any part of your duties are carried out in the UK, that portion of your income becomes taxable here. Remember that this rule only applies to non-UK residents—so UK expats living outside the UK.
For UK residents, employment income is always taxable, even if it is earned from overseas—although foreign tax paid may be relieved via double tax treaties or foreign tax credit relief.
Dividend and Interest Income
Investment income, such as dividends and interest, is another important category. For UK residents, dividends from foreign companies and interest from overseas bank accounts are taxable in the UK and must be declared on your self-assessment tax return. If you’ve already paid tax on these abroad, you may be able to claim a foreign tax credit to avoid double taxation.
If you’re not tax resident in the UK for a full tax year, you may still receive income from UK sources like dividends from UK companies or interest from UK bank accounts. Normally, this type of income would count as UK-source and be taxable in the UK. However, special rules—known as the disregarded income provisions—can apply to non-residents. These rules mean that although the income is technically taxable in the UK, it’s treated differently: you’re taxed only on the amount of tax actually deducted at source, and you can’t use the UK personal allowance to reduce the taxable amount.
So, if no tax was withheld on the income, and you’re fully non-resident for the entire tax year, then no UK tax is due on that income—even though it’s still classed as UK-source. This effectively makes it tax-free in the UK, though you may still need to declare it on your tax return if requested by HMRC.
As of the 2024/25 tax year, the rules have become even simpler in practice. UK banks are no longer required to deduct tax at source from interest paid to non-residents. Previously, some banks withheld 20% tax by default, even if you lived abroad. Now, interest is usually paid gross (in full), meaning that unless HMRC asks for a return or you’ve triggered another UK tax liability, that interest won’t be taxed in the UK.
It’s still important to keep proper records and check your residence status each year. If your status changes, or if you have other UK income—such as rental profits—different rules may apply, and you could lose the disregarded income benefit.
Rental Income
If you’re a non-UK resident and rent out property located in the UK, that income is always taxable in the UK, regardless of where you live. This is because rental income from UK land or property is considered UK-source income, and non-residents are not exempt from UK tax on it.
To ensure tax is collected properly, HMRC runs a system called the Non-Resident Landlord Scheme (NRLS). Normally, the default is that either your letting agent or tenant is legally required to deduct basic rate tax (currently 20%) from the rent they pay you as a non-resident landlord—before passing the rest on.
Your tenant or agent must then pay that tax directly to HMRC on your behalf. This is true even if the rent is being paid abroad or into a foreign bank account. As you can imagine, this would discourage many tenants from renting from a non-resident landlord.
So, there is an option under the NRLS that allows non-resident landlords to apply to receive their rental income in full, without any tax being deducted at source. To do this, you must fill out form NRL1 (or NRL2/NRL3 for companies or trusts) and agree to file annual Self-Assessment tax returns. If HMRC approves your application, you’ll receive the full rental amount and account for the tax due yourself when you submit your return.
Even if you’re receiving the full rent without deductions, you still need to report the income and pay any UK tax that’s due. You’re allowed to deduct qualifying expenses—like letting agent fees, repairs, mortgage interest, and service charges—before working out the taxable profit.
In short, UK rental income stays within the UK tax system for non-residents, but you can choose whether HMRC collects tax through your tenant or agent, or whether you do it yourself through a Self-Assessment return.
Foreign Property Income
Foreign property income is also taxable for UK residents. So if you’re letting out a villa in Spain while living in Portugal but still meet the UK Statutory Residence Test, then that income must be reported to HMRC. Again, foreign tax credit relief or unilateral relief may apply if you’ve paid tax abroad.
Pension Income
Pension income has its own complex rules. If you receive a UK state pension, workplace pension, or personal pension, and are a UK resident, this income is taxable under UK law. If you’re non-resident, UK pensions are still often taxable in the UK unless a double tax treaty provides an exemption or shifts taxing rights to the other country.
For instance, the UK-US treaty allows for exclusive taxation in the country of residence for certain pensions. The tax treatment of foreign pensions received by UK residents varies depending on whether the pension is from an overseas occupational scheme, government scheme, or private fund. These must usually be declared and will form part of your UK taxable income.
Bringing these rules together, what matters most is your residence position, the source of the income, and whether any double tax agreement applies. Tax planning becomes crucial for expats navigating employment, investment, rental, and pension income—especially where multiple tax jurisdictions may claim taxing rights. Knowing your reporting obligations can help ensure compliance and avoid unexpected liabilities.
Most other countries adopt similar approaches—taxing non-residents only on locally sourced income. Understanding how each jurisdiction treats cross-border income is crucial, particularly when there is no tax treaty to fall back on.
What Are the Main Challenges with Expat Taxes?
Avoiding Double Taxation
Double taxation occurs when two jurisdictions claim the right to tax the same income. This can happen because a person meets the tax residency criteria in more than one country.
To resolve this, the UK operates both tax treaties, along with unilateral relief provisions where no treaty exists.
When a double tax treaty applies, it sets out rules to determine which country has taxing rights over each category of income or gain. Typically, the treaty allows one country to tax the income and the other to offer relief by way of a tax credit.
Where an individual is resident in both countries, according to each country’s residency rules, the treaties also include “tie-breaker” clauses that help determine which country the individual is deemed to be resident in for the purposes of applying the rules in the treaty. The tie-breaker often considers factors such as where the person has a permanent home, their centre of vital interests, their habitual abode, and their nationality.
Treaty relief is available where tax has been withheld overseas, and the amount of relief you can claim is capped at the lower of the tax withheld or the rate specified in the treaty. If the foreign country has applied a higher rate, you may be able to reclaim the excess, but not reduce your UK tax liability by more than the treaty allows.
Where no treaty exists, or the treaty doesn’t cover a particular type of income or foreign tax, UK tax law allows for unilateral relief. This means the UK allows you to deduct the foreign tax paid from your UK tax liability on the same income. However, relief is only granted up to the amount of UK tax due on that income, so excess foreign tax is not refundable.
This also applies where a treaty exists but doesn’t extend to specific income types—such as certain US state taxes not covered by the UK–US treaty.
Choosing the correct relief method, and documenting the details appropriately in your self-assessment tax return, is essential to avoid being taxed twice or denied relief altogether.
Navigating Foreign Reporting Requirements
If you’ve moved abroad or hold any kind of financial interests overseas, it’s important to understand how global tax transparency rules may affect you. Over the last decade, countries around the world—including the UK—have tightened their reporting systems to make sure people aren’t hiding income or assets offshore.
The UK is part of the Common Reporting Standard (CRS), a global agreement between over 100 countries that allows tax authorities to share information about things like foreign bank accounts, investments, and certain types of income. That means if you’re living in Spain with a UK account—or vice versa—there’s a good chance HMRC is already aware of your foreign assets.
Alongside CRS, the UK has signed a series of Tax Information Exchange Agreements (TIEAs), which allow HMRC to formally request more detailed financial information from other countries when needed. These agreements cover not just bank accounts, but also trusts, overseas companies, and real estate.
So if you’re UK tax resident receiving income from overseas, it doesn’t matter if you’ve already paid tax on that income elsewhere—you still need to declare any foreign income or gains here in the UK.
Not doing so could trigger penalties, even if the omission was unintentional. The best way to stay on the right side of these rules is to be upfront, organised, and ensure everything is properly reported in your self-assessment tax return.
How to File Your Expat Taxes Correctly
Getting it right starts with knowing your UK tax residence position. This requires accurate records of your travel, ties to the UK, and the nature of your income. If you are non-resident, you may only need to report UK-source income. If resident, your worldwide income is within scope.
Review where your assets are located, whether you’ve sold anything in the tax year, and what you’ve earned from UK and non-UK sources.
Filing as a UK Expat
Many UK expats must file a self-assessment tax return, especially if they have rental income, self-employment income, or significant savings interest. HMRC guidance outlines the rules for non-residents, including how to register, which forms to complete, and what reliefs may apply.
You may be eligible for foreign tax credit relief if you’ve paid tax abroad on the same income, but this needs to be correctly claimed through your return. Being late or inaccurate can trigger penalties.
Should You Use a Tax Adviser for Expat Taxes?
If you live abroad or plan to move, professional advice can save you time, stress, and money. A qualified expat tax adviser will assess your residency, identify tax treaty benefits, and help you structure income in a tax-efficient way. They’ll also ensure you meet tax filing deadlines and avoid costly penalties.
International tax law is complex, and misinterpreting the rules or lack of knowledge, can lead to fines, double taxation, or tax authority inquiries. With HMRC participating in cross-border data exchange, staying informed and compliant has never been more important.
Final Thoughts – Get Your Expat Taxes Right from the Start
Expat tax obligations don’t need to be overwhelming. With proper planning and support from a knowledgeable expat tax adviser, you can stay compliant, avoid double taxation, and meet all your tax filing deadlines. The key is understanding where you are liable, what income is taxable, and which rules apply. If you get this right from the outset, you’ll not only avoid stress and fines—you’ll also make the most of your income, wherever you are in the world.
Need tailored tax help?
Understanding the UK tax system can be tricky, especially as an expat. Without the right planning, your estate or inheritance could face unexpected costs.
We’re here to relieve tax compliance stress by providing one-on-one tax assistance tailored to your unique situation and tax planning goals. Giving you complete peace of mind and helping you save money, our award-winning tax consultancy network is on hand to help.
Book a consultation with Expat Taxes today for clear, personalised advice, tailored to your situation.
DISCLAIMER: The material in this article is for general information purposes only and does not constitute legal or taxation advice. Legal, financial, investment and taxation advice should be sought before acting or refraining from acting. All information and taxation rules are subject to change without notice. Expattaxes.co.uk Limited (hereafter ‘the parties’) accept no liability for any action taken based on the information in this article or any of the articles on this website.
Written by Venita Machnicki, CTA (UK), ATT
Venita is a Chartered Tax Adviser with over 15 years of experience specialising in UK and international tax. She is a trusted expert in cross-border tax matters for globally mobile individuals, expats, and business owners. Venita combines deep technical knowledge with a practical, client-focused approach to help people navigate the complexities of UK tax while living and working overseas.
