Crossing Borders: Navigating UK Self Assessment and Foreign Income Tax for the Self-Employed
- Robert Webb
- Feb 10, 2024
- 2 min read
When you're self-employed in the UK and have also worked abroad, resulting in foreign tax being deducted at source, this situation impacts your UK Self Assessment tax return due to the potential for double taxation (paying tax on the same income in both the UK and the foreign country). Here's how it generally works:
Reporting Foreign Income
Declare All Income: On your Self Assessment tax return, you need to declare all your income, including what you earned abroad. This ensures that HM Revenue and Customs (HMRC) is aware of your total worldwide income for the tax year.
Foreign Tax Credit
Claim Foreign Tax Credit: To avoid double taxation, the UK has double taxation agreements (DTAs) with many countries. These agreements allow you to claim a credit for the tax you've already paid abroad. When completing your Self Assessment, you can claim relief for the foreign tax paid. This is known as Foreign Tax Credit Relief (FTCR).
How to Claim Relief
Use the Foreign Section: On your Self Assessment tax return, you'll fill in the foreign section (SA106) where you detail your foreign income and the tax paid on it. You'll calculate the relief you're entitled to based on the foreign income and tax paid, which will be used to reduce your UK tax liability.
Documentation and Records
Keep Records: It's crucial to keep detailed records of the foreign income earned and taxes paid. This includes payslips, bank statements, tax certificates from the foreign country, or any other relevant documents. HMRC may request these if they need to verify the details of your claim.
Special Considerations
Non-Resident for Tax Purposes: If you were a UK non-resident for tax purposes during the year you worked abroad, the situation might be different. Non-residents are typically taxed only on their UK income. However, residency status can be complex and depends on various factors, including the number of days you've spent in the UK.
Double Taxation Agreements (DTAs): The exact method of claiming relief and the amount of relief you're entitled to can vary depending on the specific DTA between the UK and the country where you worked. Some DTAs specify how income should be taxed and how tax paid in one country can be credited against the liability in the other.
Seek Professional Advice
Given the complexities of dealing with international tax issues, it's often wise to seek professional advice. A tax advisor or accountant with experience in international tax can help ensure you're compliant with both UK and foreign tax laws, help you navigate the DTAs, and ensure you claim the maximum relief possible.
This approach prevents paying more tax than necessary and ensures your Self Assessment tax return accurately reflects your international work and taxes paid abroad.
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