Cruise ship income and Seafarers Earnings Deductions: Do I pay tax?

Ship income is still just income

We've had A LOT of questions about income from working on ships. Ship income is just foreign income and we already have this post, so lets keep it snappy. We'll focus on UK-based performers so if you are resident in a different country for tax purposes, this won't apply! If you aren't sure where you are resident - take our Residency Road Trip to find out.

Bad news - if you are a UK tax-resident, you'll probably have to pay tax on all of your ship income (boo!). Good news - if you're using the SansDrama Web App, you just submit all of this income within the correct link and the app will include it in your tax return report for you AND if you're paid in a foreign currency, it'll even translate it into GBP (£) for you.

What about Seafarers Earning Deduction?

Everyone wants it but not everyone qualifies! So forget what your friends friend said about it because, although many of you have heard about the Seafarers Earnings Deduction, lots of what you've heard is not correct.

If you do qualify, you still need to do a tax return, disclose the income, and then apply for the exemption. If you've only done one ship contract and it was for under a year, then this definitely will not apply to you. To qualify, you have to have:

  • worked on a ship (tick)
  • been resident in the UK (or EEA) (tick)
  • worked outside of the UK long enough to qualify for the deduction - usually a minimum eligible period of at least 365 days (where the confusion and misinformation occurs)

Working out if you have an eligible period

The trick with eligible periods is that they are not related to tax years, they are related to individual cruises. When you set off on your first cruise, the eligible period clock starts ticking and if the clock keeps ticking and it gets over 365 days, then all of the cruises within that eligible period are eligible for Seafarers Earnings Deduction (even if this means amending your old tax returns). The clock keeps ticking over multiple cruises so long as:

  1. Each time you get back from a cruise: the total amount of time you have spent on cruise ships in the eligible period is more than the total amount of time you have spent in the UK during the eligible period; and
  2. Each time you leave for your next cruise: you have spent fewer than 183 days in the UK.
If you ever break one of those two criteria, then you stop the current clock and the next one starts the next time you go on a cruise.

If that still confuses you, don't panic! We have a Seafarers Earnings Deduction Calculator, that will do the work for you - just push the button!

Seafarers Earnings Deduction Calculator

Applying for the exemption in your tax return

The exemption applies to employed work only, but it's highly likely you are employed if you have been on the ship long enough to claim this. FYI - most 'dancer' 'singer' contracts with big cruise companies (Royal Caribbean, P&O Cruises, and Cunard etc) are employed. If you're not sure, you can have a look in your contract, ask your agent, or ask your contact in the company for confirmation. Here are the steps to complete during your tax return:

  1. Go to the third 'Tailor your return' page and tick the option for 'Do you want to claim other tax reliefs and deductions, for example, community investment tax relief, venture capital trust shares, maintenance / alimony payments?'.
  2. Add an employer for the ship.
  3. Put in your income and tax from the ship - see our foreign income post if you need help working this out.
  4. When you clicked the '...claim other tax reliefs...' box in the 'Tailor your return' section, it created a new section in your tax return called 'Other tax relief and deductions' within '4. Fill in your return' - in the first page, the top option is for claiming Seafarers Earnings Deduction. Put the amount you earned when at sea into the top box and the name of your ship into the second box. You can leave the rest empty. None of the second page applies to you, but you need to open it and scroll to the bottom to click 'Save and continue'.
  5. Enjoy not paying tax on that income!

Just to reiterate, there's lots of people who falsely think this applies to them and so are incorrectly not disclosing their ship income. Even if it does apply, you need to disclose the income and then apply for the exemption.

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Love Jo and James x