If you earn money in several countries, or split your time between Britain and elsewhere, you could end up in the problematic situation of being taxed twice on the same income.
This situation is not as unlikely as you might think. If you own rental properties abroad, for example, or live overseas but regularly return to the UK, you could end up being a tax resident in more than one country.
And some countries’ tax rules mean residents are taxed on their global income, meaning you could be asked to cough up if you live there.
Fortunately, the existence of double taxation agreements, sometimes called double taxation treaties, mean there are likely to be reliefs available to those being taxed twice. Britain has double taxation agreements with more than 130 countries across the world.
This guide will explain how double taxation works and how to avoid it – although the exact details will depend on where you live or make money.
There are many situations which could mean a double taxation issue arises.
For example, if you live in Britain but own rental properties overseas then that income is likely to be taxable in both the UK and the country in which the properties are located. The same is likely to be true in reverse.
Similarly, if you are a tax resident in another country but maintain some form of taxable income in Britain then this income could be taxable by the country you live in. You could also be considered “tax resident” in the UK if you visit for more than 183 days in a single tax year.
Double taxation agreements exist to provide relief to people in this position and help them avoid paying tax twice on the same income. This could provide full or partial relief on your tax bill upfront, or require you to pay the tax and then claim a refund.
Each double taxation agreement will set out which country you are resident in for tax purposes, which country you will apply for relief to, and how much relief you will get.
It is likely that the two (or more) countries with which you have ties will have different tax rates and rules. In this case you would pay the higher rate of tax. Also remember that the tax year may begin on different dates in different countries.
As double taxation can be very complicated, it could be a good idea to seek professional advice if you think you may be at risk of paying more tax than you need to.
Britain has a double taxation agreement with more than 130 countries, including the following:
There are several different types of double taxation agreement, which allow for reliefs on different types of income or a refund of tax paid. You can check a full country by country guide on gov.uk, which details the agreements that are currently in force and dates when they came into effect.
If the country you live in does not have a double taxation agreement with the UK then you may be able to claim unilateral relief. This can come in the form of a foreign tax credit via a tax return. The credits ensure that you wouldn’t need to pay any more than your UK tax rate on foreign-earned income.
For example, if you’re a basic-rate UK taxpayer and have already been charged 10pc tax on foreign income, a foreign tax credit would give you relief for this 10pc and therefore only charge you the remaining 10pc to make it up to the basic rate of 20pc.
If you live overseas, there are several types of income on which you may be able to claim relief in the UK, including wages, bank interest, dividends and money you make as a self-employed person. Most pensions, including the state pension, are also valid for relief, although most UK government pensions are only taxable in Britain.
You will need to pay capital gains tax (CGT) if you make a profit on any property or land in the UK, but not on other assets such as shares. If you own property overseas and return to the UK it is possible you may be taxed on any gains made by selling it, but double taxation relief is usually available in these circumstances.
However, even though the above applies in many cases, there is no one-size-fits-all approach so it is important to carefully read the terms of the double taxation agreement which applies to you to understand what reliefs may be available to you.
In order to make a claim for any sort of double taxation relief you will need to fill in the correct claim form and send it to the tax office in the country you want to claim relief in.
This could be the UK, but it could also be another country in which you are a tax resident. They will confirm if you are eligible for the relief and then either send the form directly to HMRC or return it to you to send on yourself.
HMRC has a “double taxation digest” on the gov.uk website which will help you through the process. There are also links to download the relevant claim form for the country you are making an application to. If the country is not listed then there is also a standard HMRC form.
IR35 is the name given to the rules regarding who is considered a self-employed contractor for tax purposes. Put very simply, if you only work for one client that determines the type of work you can do and when you do it, you are very likely to be an employee (albeit perhaps a temporary one). In this case, you could be “inside” the IR35 rules.
But if you work for multiple businesses and could, for example, sub-contract your work elsewhere, then you are probably a contractor and “outside” IR35.
The rules have been controversial among contractors and employers, many of whom claim they have been wrongly categorised as an employee and taxed more as a result.
When it comes to double taxation treaties, they also apply to the self-employed. However, if you work for countries around the world or have multiple bases or residencies then determining your tax residency may be a little more complicated. It could be worth speaking to a tax adviser.
It is possible that HMRC may be able to tax you on property you sell for a profit overseas. If you owned the property before leaving the UK and then sold it for a profit then the gain could be liable for UK capital gains tax.
However, if there is a double taxation agreement in place, then you should usually be able to claim relief.
In the 2024 Budget, Chancellor Jeremy Hunt announced significant changes to the “non-dom” regime – and Labour has also spoken of its intentions to shake up the rules.
Non-domiciled people are UK citizens whose permanent residence is registered abroad. The status means you don’t have to pay income tax or CGT on assets held overseas, and there are potential inheritance tax savings to be had, too.
But from April 2025, any “new” non-doms arriving in the UK will start being taxed on their overseas income after four years. Our guide to the non-dom tax status explains this in more detail.
If you have income or savings from overseas that you want to transfer to the UK then you usually do not have to pay UK tax on it. The exception would be if the money was earned while you were a UK resident and not declared to HMRC, in which case it could be taxable.
Savings accrued overseas before you became a British resident are not taxable in the UK.
A double taxation agreement prevents citizens of both countries from paying tax twice on the same income. They are helpful if someone is a tax resident in two countries or has income from overseas which is taxable in their home country. The individual may be able to claim reliefs.
The UK’s existing double taxation agreements with EU countries were unaffected by Brexit.
If you earn money in two countries, or live in a country which taxes its residents’ global income then you may have to pay tax in both locales.
A double taxation agreement could entitle you to reliefs or a refund of all or part of the tax paid.
Yes, there is a double taxation agreement between the UK and the USA. This entitles you to full relief on pensions, interest and several other sources of income. Check HMRC’s digest for more details.
Yes, there is a double taxation agreement between the UK and Spain. This entitles you to full relief on pensions, interest and several other sources of income. Check HMRC’s digest for more details.
Yes, there is a double taxation agreement between the UK and Germany. This entitles you to full relief on interest and several other sources of income. Relief on pensions is available in some cases. Check HMRC’s digest for more details.
Yes, there is a double taxation agreement between the UK and France. This entitles you to full relief on pensions, interest and several other sources of income. Check HMRC’s digest for more details.
Yes, there is a double taxation agreement between the UK and India. This entitles you to full relief on several sources of income, relief of 15pc on interest, but no relief on government pensions. Check HMRC’s digest for more details.
