Contracting abroad: the UK tax basics before you take an overseas contract
Direct Answer
Whether you keep paying UK tax on an overseas contract turns mainly on your UK tax residency (set by the Statutory Residence Test). Stay UK resident and you're generally taxed here on your worldwide income, with a double taxation treaty potentially giving relief where the other country also taxes it. Meanwhile your UK company may pay Corporation Tax here and pick up local tax obligations in the country you're working in. IR35 doesn't vanish just because the client is abroad. This is genuinely complex cross-border territory — treat this page as orientation, then get specialist advice.
Important. This is general information, not advice on your circumstances. Cross-border tax — residency, permanent establishment, foreign payroll and treaty relief — is specialist work, and Autobooks's core service does not cover foreign tax filings. Anyone actually taking an overseas contract should take advice from a cross-border tax specialist before signing.
1. Start with residency — it drives everything
Your UK tax position hinges on whether you're UK tax resident, decided by the Statutory Residence Test (SRT). The SRT looks at how many days you spend in the UK and your "ties" here (family, accommodation, work, and previous residence).
- Remain UK resident → generally taxable in the UK on your worldwide income, including what flows through your UK company.
- Become non-resident → the UK generally taxes only UK-source income, but leaving requires meeting the SRT conditions, and split-year treatment may apply to the year you go.
Residency isn't a choice you tick — it's a factual test, and getting it wrong is expensive. Establish it first; the rest follows from it.
2. Your company doesn't automatically travel with you
A UK-incorporated company is normally UK tax resident and pays UK Corporation Tax on its profits wherever earned. But an overseas contract can create problems the domestic contractor never meets:
- Permanent establishment — working in another country for long enough, or with a fixed base there, can give your company a taxable presence in that country.
- Local payroll / withholding — some countries require the work to be taxed or payrolled locally regardless of your UK company.
- Non-recognition — several countries don't recognise a one-person foreign service company and will look through it to tax you personally.
The practical upshot: you can end up with a UK and a local obligation for the same work, which is exactly what treaty relief is designed to soften.
3. Double taxation treaties — the safety net
The UK has double taxation treaties with most countries. A treaty allocates taxing rights between the two countries and provides relief so the same income isn't fully taxed twice — usually by giving a credit for foreign tax paid, or by exempting the income in one country.
Treaties are individual documents — the rule for, say, Germany can differ from the rule for the UAE, and the treatment of company profits, employment income and dividends can each differ within the same treaty. There's no safe "general rule"; the specific treaty and income type decide it.
4. Where IR35 fits when the client is overseas
IR35 doesn't switch off at the border. Where the end client is wholly overseas with no UK connection, responsibility for assessing your status can fall back to your own company rather than the client — but the underlying test (does the engagement look like employment?) still applies. If the overseas client does have a UK presence, the normal off-payroll rules may bite instead. As always, it's contract-by-contract. Start from the IR35 questions guide.
Staying UK-based? We'll keep your company side straight.
Autobooks handles your UK limited company accounts, Corporation Tax and Self Assessment — and we'll tell you when a contract needs specialist cross-border advice. From £89+VAT/month.