UK Tax liabilities whilst working and living abroad

September 8, 2019 12:47 PM

Hi I'm going to be moving to and living in Japan from the UK for a year or maybe two in November. I am currently a school teacher, so have virtually no knowledge of self-assessed / self-employed tax returns or procedures. I would be grateful for answers to a couple of questions.

I own a flat, my sole property, which I will be renting out whilst I am away and have permission from my mortgage provider to do so. The rental payments will be a few hundred pounds higher that my mortgage payments. What would my tax liability be for this and how / when do I pay it?

I will be doing some work by email with a UK company who will pay me as a self-employed worker into my UK bank account. What would my tax liability be for this and how / when do I pay it? Do I have to declare anything in Japan or just in England?

I will also be hoping to pick up some work in Japan as self-employed - presumably I would just declare this in Japan?

As you can tell I'm a bit clueless, so any help / pointers gratefully received. (obviously I also understand that no advice received will be taken as official tax advice.)

Thanks

posted by mairuzu to Work & Money (6 answers total)

There are some quite complicated rules around where you have to pay what tax. These consider factors like your nationality, where you live, where income arises and where you physically do work as well as if there are double taxation agreements between these countries. But chances are your UK income will still be taxable in the UK. I’ve not lived in the UK for a while but I have to do a tax return every year because of my property, the only income I have to declare there is the UK income. When I first left the UK I was entitled to a tax advisor in the UK and they spent a while working out if anything else should be considered as I had to travel to the UK for my non UK employer quite a bit initially. I now have to do my own tax returns and just do what the tool tells me to do.

At a very basic level you take your rental income less any property related expenses such as insurance, repairs, ground rent/service charges and letting agency fees if these things are applicable to you. To that you add the other UK income to get your taxable income. From that you take away your personal allowance and pay tax on the rest.

It gets a bit more complicated when you leave in the middle of the tax year because then you have to consider your earned income and taxes already paid on that under PAYE.

There are tools that help you fill in your tax return and they normally link to relevant guidance. Fun fact, because of the combination of property and living overseas you end up having to buy a tool to do your tax return if you want to do it online. HMRC has a list of compatible options.

Can’t speak to what happens with your Japanese income.

You can learn all these things but you should probably do some research regarding taxes for UK expats in Japan. And perhaps spend an hr with an accountant or a friend who understands how to complete a tax return.
posted by koahiatamadl at 1:39 PM on September 8, 2019

Register as self-employed with HMRC and use their online self-assessment return form - I've found it very easy to use for the past 10 years including time spent abroad.

Keep a note of all expenses regarding your property and note them on the form along with income.

Same for your UK income - just keep a spreadsheet of your income and expenses and enter at end of tax year.

You will have to declare foreign income to the UK. I don’t know about Japan specifically but the UK has tax treaties with many countries so you won’t pay tax twice - just have to look that up.
posted by atlantica at 1:41 PM on September 8, 2019

You will need to file the document for non resident landlords or your tenants have to pay your tax as a part of their payment, which is unnecessarily complex.

Echoing the above: what you earn in the uk you pay tax on in the uk. Japan won't tax foreign income, to the best of my knowledge, which is good because complex foreign tax documents are unpleasant reading. Similarly the uk doesn't care about foreign income if you are nonresident (or non domiciled or whatever the right term is).

For part years you file a split year; what that means is what you earn in the uk - your wages before you leave and the rent after you leave - is filed on a tax form in the uk. That will include the year you leave and the year you return.

Since Japan's tax year is January to January and the UK's is April to April, this can work out quite nicely if you time your entry and exit, but it's usually beneficial regardless as you end up in lower tax bands, or at least with more of your income in a lower tax band.

You may get a rebate that year, because likely your company was paying, per week, 1/52 of what they thought you would owe for the whole year, and particularly if you end up in a lower tax band that can be too much.

For a whole uk tax year away, then you have to me turning a profit of 1000/month on rent and any savings income before you get taxed. You do still have to fill out a form regardless, just to prove you owe nothing. And you do get fined if you don't fill the form out on time.

Letting management fees are typically 10% of rent, plus VAT, if you get someone to do it, and that is deducted from the incoming rent, as are any other fees and repairs. If you don't get someone to manage, make sure you've done the legal requirements - I think that involves a yearly gas safety check and a one off legionnaire's inspection, but don't trust me, go find an authoritative source.

Remember: if you are abroad you have to file on paper - the form is on the website, you just print it - and by 31st October because the filing is not electronic. Or you can use third party software to do it. The software is cheap, but it's dumb and just gives you the fields the original form has with no specific help.

If you've never seen one, go look at a uk tax return - they're pretty easy to fill in and not much help is required.

Remember at tax time you will need your annual interest certificates from your bank accounts in order to copy the numbers.
posted by How much is that froggie in the window at 2:04 PM on September 8, 2019

You may find it useful to borrow a copy of Millionaire Expat from the library. Don't be put off by the title. The author is Canadian, so it's not all relevant, but it's not written solely for a Canadian audience and he has a background in teaching and understands and pays particular attention to the financial implications of overseas teaching (Japan, Middle East, Canada/USA/UK, etc.)
posted by caek at 2:10 PM on September 8, 2019

Stating the obvious, but any self-employed work you do in Japan has to be congruent with your visa there; if you will be there on a teaching visa and will be doing any non-teaching work, you'll want to apply for permission to do work outside the scope of your visa. That done, you should get a 源泉徴収票 from each of your employers which you can submit at tax time.
posted by huimangm at 2:53 PM on September 8, 2019

Not posting because I have definite answer, but because I'd cast doubt on some of the certainty expressed above - if you're living in Japan full time and working freelance for UK clients, that's not necessarily UK income. Being resident in the UK for tax purposes is about where you live, not where your clients are. But rental income on a UK flat will be UK income regardless of where you live.

Source: freelancer who lives and pays taxes in the UK on work done for clients all over the place.
posted by altolinguistic at 7:25 AM on September 9, 2019