Expat Tax Advice: The Essential Guide to Keeping More of Your Income

Rayhaan Moughal

28.03.2025

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If you live or work outside the UK, your tax situation doesn’t just change—it becomes a strategic opportunity. With the right planning, you can significantly reduce your tax liabilities, avoid penalties, and keep more of your income, while still remaining fully compliant.

Let’s break it down.

Step 1: Understand Your UK Residency Status

Your residency status is the single most important factor in determining how much UK tax you need to pay. The UK uses the Statutory Residence Test (SRT) to decide whether you’re a resident for tax purposes.

How Does the Statutory Residence Test Work?

You are automatically a UK resident if any of the following apply:

You spend 183+ days in the UK in a tax year
Your only home is in the UK and is available to you for at least 91 days
You work full-time in the UK for more than a year

If you don’t meet these conditions, your status will depend on:

How many days you spend in the UK (the more, the more likely you are to be classed as a resident)
Your ties to the UK, such as property ownership, UK-based work, and family connections

Critical Mistake: Many expats assume that leaving the UK means they’re automatically non-resident for tax purposes. Wrong. Even if you live abroad, if you spend too much time in the UK, you could still be liable for full UK taxation.

Step 2: What Happens If You Work Abroad?

The amount of UK tax you pay depends on whether you are classified as a resident or non-resident.

If You Work Abroad Temporarily (Still a UK Resident)

You must pay UK tax on your worldwide income
You may be able to claim foreign tax credits if your new country also taxes your income
You must still file a UK tax return

If You Work Abroad Permanently (Non-Resident for Tax Purposes)

You do not pay UK tax on foreign income
You only pay UK tax on UK-sourced income (e.g., UK rental properties)

Pro Tip: If you plan to work abroad permanently, ensure that your departure is properly structured to meet the UK’s non-residency rules. Otherwise, HMRC could still class you as a UK tax resident—even if you live overseas.

So, make sure to speak to a tax specialist before leaving the UK to structure your exit in a tax-efficient way.

Step 3: Do Expats Still Pay UK Tax on UK Income?

Even if you’re classed as non-resident, you may still have to pay UK tax on:

Rental income from UK properties
UK pension income
UK-based dividends and interest

Tax on UK Rental Income

If you own a rental property in the UK, HMRC will tax your rental income.
You may need to register under the Non-Resident Landlord Scheme (NRLS), where tax is deducted at source.
However, you can deduct property expenses (repairs, insurance, maintenance) to reduce your taxable income.

Pro Tip: Many expats don’t realise they can legally offset certain expenses to reduce rental income tax liabilities. Make sure you’re claiming all eligible deductions.

Tax on UK Pensions

If you receive a UK pension while living abroad, you may still be liable for UK tax—unless your new country has a double taxation agreement (DTA) with the UK.

Solution: Some expats transfer their pensions into a Qualifying Recognised Overseas Pension Scheme (QROPS), which can provide tax benefits, but beware—there’s a 25% tax charge on certain transfers.

Step 4: Avoiding Double Taxation

If you live in a country that has a Double Taxation Agreement (DTA) with the UK, you can avoid paying tax twice on the same income.

How Does a DTA Help?

Prevents the UK and your new country from taxing the same income twice
Allows you to claim tax relief on income that’s already been taxed abroad
Reduces or eliminates UK tax on certain income sources

Pro Tip: Not all DTAs work the same way—some allow you to claim full exemptions, while others provide partial relief. Always check the specific agreement between the UK and your new country.

Step 5: National Insurance & State Pension – Should You Keep Paying?

Even if you live abroad, you may want to continue paying National Insurance (NI) contributions to keep your entitlement to a UK state pension.

You need at least 10 qualifying years to receive any UK state pension
You need 35 years for the full pension amount
Voluntary Class 2 NI contributions are the cheapest way to top up your record

Pro Tip: If you plan to retire abroad, some countries freeze UK state pension payments—meaning you won’t receive inflation-linked increases. Check before you move.

Solution: Keep paying voluntary NI contributions if you want to retain UK state pension benefits.

Final Thoughts: Expat Tax Doesn’t Have to Be Complicated

Expat taxation is complex, but with the right strategies, you can: