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How Tax Planning Can Prove Beneficial To Foreign Workers In The UK
Working in a foreign country has its perks and losses. Income-wise, it could be advantageous to a certain extent, but not where taxes are concerned. The good news is if you work in the UK and the country that you are domiciled in has a double taxation agreement, you could save on tax since you don’t need to pay tax on both countries.
However, you can save more if you have a tax plan and you work in the UK at the right time.
Tax planning refers to a process where you analyse your financial situation on a tax perspective. You consider different aspects, including the timing of your income, purchases, selection of investments and retirement plans, tax filing status, common deductions and other expenditures, as a means to minimise tax liability. Properly planned, you could get generous tax savings.
What are common UK tax planning opportunities that you can take advantage of?
Travel & Subsistence Expenses
If you have been seconded by your overseas employer to work in the UK for a limited time, you could obtain tax relief from the money you spent on travel and subsistence, such as accommodation costs. To make the most of Detached Duty or Temporary Workplace relief, as this relief is also known, certain conditions must be satisfied. For instance, you need to work away from your normal work location for a period of a maximum 24 months. If your assignment is correctly structured, you will pay less tax.
Overseas Workdays
You can avoid UK income tax legally for days which you work overseas, especially if you are a non-UK domicile working in the UK and is eligible for tax exemption for non-UK working days. If a proportion of your employment income is earned working outside of the UK, you can claim tax relief provided that it is not remitted to the UK and is delivered to a non-UK bank instead.
Timing Of Assignment
How your work assignment is structured can have an effect on your UK tax liabilities. It can be arranged in such a way that you can obtain tax reliefs and that you can satisfy any conditions of double tax agreement. However, all these should be done while you are still at the planning stage of your assignment, or while the contract is still being drafter. Even if your country doesn’t have a double taxation agreement in the UK and you’re only seconded for short assignments in the UK, you can still enjoy tax savings provided that you have a tax plan in place.
Transfer Of Funds Into The UK
When you need to transfer funds into the UK, there are efficient ways to do it and pay fewer taxes at the same time. To enjoy maximum benefits, however, you must remit to the UK a maximum £2000 of your overseas income and gains that arose in the year. Otherwise, you will automatically forfeit your personal allowance for income tax purposes if you claim for the remittance basis.
Other types of remittances that are exempt from UK tax include a property with a value of less than £1000 items of clothing, jewellery or footwear that are brought to the UK for personal use, and any property that has only been in the UK for less than 275 days.
Knowing your options will make your employment in the UK less complicated and more beneficial on your tax responsibilities.