Working abroad - it's one of the great perks to working in our industry BUT it can leave us confused over where we stand on how it affects our tax situation. There's 3 big considerations to be in the know about when you're earning abroad. Have a read through and if you have any questions, give us a shout!
1. Were you resident in the UK for the tax year?
Handily, we've got a Residency Road Trip post for checking out whether or not you were resident in the UK for the tax year. If you were resident in the UK, then you need to disclose your worldwide income, not just the money you earned in the UK. However, if you were NOT resident, then you don't need to disclose your non-UK income, only money relating to work in the UK.
2. Did you pay foreign tax on the income?
If you DID NOT pay tax on your foreign income, then go ahead and skip onto section 3 - when it comes to your tax return, just treat the income as any other employed/self-employed income.
If you DID pay tax on it, you need to keep hold of your payslips and ensure you have proof of the tax paid. When you are completing your tax return, in the 'Tailor your return' bit, select 'Yes' for 'If you received any foreign income, do you need to complete the foreign section?'. Complete this section with your foreign income and tax, make sure you also include it within the normal employed/self-employed sections. This is included within our Tax Return step-by-step guide.
Remember, if the work was employed, you will only get a PAYE reference number if the company you worked for is UK-based. If the company you worked for is a non-UK based company, then you won't get a PAYE reference number. So add the employer and declare the income but leave the PAYE reference box blank when you do your tax return.
3. Did you get paid in a foreign currency?
If you are paid in Pounds (GBP / £), then there's nothing complicated here, just record your income like you would if you were working in the UK and disclose in the same way when it comes to completing your tax return. But what to do if you are paid in a different currency? Well you have a few options:
If you are paid into a GBP/£ account:
- If you HAVEN'T had tax or other deductions taken A conversion from the foreign currency into £s has been done for you and you can just use this number as your income, as a conversion will have been done for you.
- If you HAVE had tax or other deductions taken Use the rate that it was converted at and apply this to your gross income (the amount before anything is taken off) and to any deductions.
If you are paid into a foreign currency account (e.g. onto a cash card on a cruise ship):
- If you transfer all of the money you are paid: you can just use the amount that goes into your GBP/£ bank account.
- If you keep the income in a foreign currency or spend in foreign currency (often the case for cruise ship performers): you need to convert the total income amount and any relevant deductions (e.g. tax) into GBP (£). We've made a little tool to help with this. It pulls the exchange rate from the European Central Bank and converts on your behalf. We've taken this straight out of the SD Web App. If you record as you go with the app, then your foreign income needn't be more complicated than your UK income.
It's pretty straightforward for us to add more currencies to this, so let us know if you need one added.
Bonus question: Was this income on a ship?
Here's our post on cruise ship income but, for most cases, being on a ship is the same as any other foreign income - if you are UK resident for tax, then you should be paying tax on it. If not, then you shouldn't. Heard of Seafarer's Earnings Deduction? Thought so! It's a tax exemption for people who spend an extended period of time off-shore. Please do not assume that this applies to you just because you have been on a ship - it definitely does not apply if you have only done a single cruise ship contract and it was under 1 year.