Any income tax experts for individuals?

Wondering if anyone on here can help !

If i was to live in the UK, but earn 100% from abroad (luxembourg), I would be paying UK tax, i.e. the difference of any tax paid which is less than would under UK rules.

However, what about national insurance? Would this be ignored / voluntary?

Thanks

saafend_seagull said:

Wondering if anyone on here can help !

If i was to live in the UK, but earn 100% from abroad (luxembourg), I would be paying UK tax, i.e. the difference of any tax paid which is less than would under UK rules.

However, what about national insurance? Would this be ignored / voluntary?

Thanks

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Broadly, my understanding is: As a UK resident, tax will ALWAYS be liable when you earn money. NI would also be applicable on the full amount earned as, if you live here, you cannot opt out of either. If the money comes to you other than as earnings, then you may be subject to Tax but not NI. You must complete a self assessment, declare the income you receive from overseas, and then have until 1st Sept (I believe) to pay without picking up a penalty. If you are not paying UK tax at the moment, HMRC my politely ask you to start making payments on account based on expected earnings, quarterly or monthly (because they really don't like waiting for their pound of flesh!).

If you are resident in the UK for less than 90 days a year (days you arrive and/or leave don't count towards that 90) then you don't have to pay UK tax/NI, but you may become liable to tax in another country depending on where you are for the rest of the year.

The other possible "loophole" is to own a consultancy firm, have a contract between that company and your "employer". There are very specific conditions you must meet, but you can set things up so that you withdraw the money from your company as dividend, which is taxable but not subject to NI.

No matter where in the world you work you are "UK Tax domicile" unless you specifically have this changed, eg if you emigrate to another country permanently.

This means you are still taxed based on UK tax rules.
HMRC [the UK tax collector] has connections with many / most countries throughout the world and they share tax transactions of individuals between each other.
So, no matter what tax the Luxembourg tax collector has taken from you, HMRC will adjust [refund or demand more] so that what you end up paying in tax reflects what you would have paid had you earned the money working in the UK.

What you need to check is whether HMRC definitely has a reciprocal tax arrangement specifically with Luxembourg - it may just be one of the few they don't ....

Some of the above is correct but without knowing the full details it's impossible to say how the income will be taxed.

1. You may be employed and taxed by a UK company despite working abroad in which case it would be exactly the same as working here.

2. You may be employed and taxed by a foreign company in which case the dual taxation agreement will apply. In this case you will need to do a tax return and enter the amount paid and amount of foreign tax deducted. If the foreign tax is more than what you would have paid here then you pay nothing but don't get a refund from HMRC. You may be able to get some of the tax refunded from the country of origin though, don't know how it works in Luxembourg (but we do have a dual tax agreement with them). If the UK tax due is more than what you've paid then you pay the difference.

3. You aren't employed you are either self employed or work as a contractor through a Ltd Co in which case no foreign tax will be deducted and you sort things out here the same as if you earned the money here.

There are other more complicated examples but these are the most likely scenarios.

Okay thanks. Helpful. But in Luxembourg I would pay state pension and would also have to pay NI on top of that in the UK? Would seem slightly strange to do that ?

No there wouldn't be any NI charged on foreign employment income.

LlcoolJ said:

No there wouldn't be any NI charged on foreign employment income.

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Cheers!! Many thanks.