Paying your taxes when freelancing abroad

Last year, there were an estimated 35 million digital nomads living and working across the globe, highlighting the huge impact that remote work has had on the lives of professionals. It should come as no surprise that many digital nomads are freelancers, as self-employment usually affords people more flexibility than most other career paths. But being self-employed also means being responsible for your own taxes, which can complicate your plans to move between different countries.

If you’re a freelancer who’s thinking about working abroad, then this blog will provide you with some much-needed clarity on where your taxes are concerned. Whether you aren’t sure how to calculate taxes or who you should be paying, the information below will help you to feel much more confident.

Record your travels and finances

Before thinking about where you should pay your taxes and when you need to make sure that your bookkeeping practices and organisation skills leave you in good stead. If you’ve been working and travelling for a while, create a list of all the destinations you’ve visited, how long you’ve stayed there and when you went in and out of the country. It’s also a good idea to note down the places you stayed and how many hours you work each day. When it comes to recording your finances, you should consider investing in MTD software, which will not only keep track of all your expenses and income but allow you to stay compliant with HMRC’s changing guidelines for filing your tax return. If you haven’t already heard, Making Tax Digital (MTD) will require all self-employed workers earning over £10,000 per year to pay their taxes online. Using software will help you to ensure all your calculations are accurate and submitted on time.

Which country to pay your taxes to

The country you pay your taxes to can depend on a variety of factors, but your length of stay is typically one of the most important.

Working Abroad for short periods of time

Most freelancers who travel abroad occasionally will still need to pay their taxes to HMRC. This is because the country you pay taxes to is usually determined by whether you’re a resident or not. To be considered a UK resident, you must have been in the country for 183 days or more, or you need to have a home in the UK that you have spent a significant amount of time in.

If you are a UK resident, it doesn’t matter how many times you leave and re-enter the country, nor does it matter how many other countries you’ve visited – you’ll still need to pay your taxes in the UK. Just make sure you keep track of the number of days you’re in the country so you have proof for HMRC.

Working abroad for a year or more

Some freelancers work abroad for longer periods of time, which means they’ll need to read up on tax rules and regulations wherever they’re staying. However, this doesn’t mean you can forget about HMRC completely, especially if you’re leaving the country part way through the tax year. If you have earned money during your time in the UK, you’ll still have to file a self-assessment tax return and pay tax to the UK on that amount. Freelancers who know they won’t work in the UK for an entire tax year will also have to fill out a form. Instead of a self-assessment, complete form P85 before leaving the country to make sure all your tax affairs are in order.

Dual residency and double taxation

Freelancers can sometimes experience problems with their taxes when they’re considered to be residents of two places at once. For example, if you split the tax year between two countries equally, they might both require you to pay tax. If you do get taxed twice, more often than not you’ll be able to claim some of your money back if the country you’ve been living in has a double taxation treaty. If you’re yet to leave home and freelance abroad, you must bear this in mind when choosing a destination. Matters become even more complicated when applying for tax relief in countries that have two different tax rates, so it’s a good idea to plan ahead. Fortunately, the UK has tax treaties with over 100 countries, which means freelancers have a great deal of choice when looking for the best place to work abroad.