If you’re a UK sole trader who is an EU citizen living abroad as a digital nomad, handling your tax return can be complex due to the intersection of different countries’ tax laws. Here are the steps and considerations you should take into account:
Determine Tax Residency: Your tax obligations primarily depend on your tax residency status. The UK typically considers individuals tax residents if they spend 183 or more days in the UK in a tax year or have their main home in the UK. If you’re living abroad, you may become a tax resident of that country depending on local rules.
Self-Assessment Tax Return: If you are still regarded as a UK tax resident or if your business is conducted from the UK, you are required to submit a UK self-assessment tax return and report all income, even if you reside abroad.
Double Taxation Agreements (DTAs): Examine if a DTA exists between the UK and the country you’re residing in. DTAs are designed to prevent residents of one country from being taxed on the same income in both countries. Understanding this agreement will help you avoid double taxation.
HMRC Guidance on Living Abroad: You should refer to HMRC guidance on moving or living abroad. There are specific forms (such as the P85 form) and advice on international tax obligations that could be applicable depending on your circumstances.
National Insurance Contributions: While abroad, check whether you need to pay UK national insurance contributions. Depending on how long you intend to stay outside the UK and your ongoing ties, you might be able to continue contributions voluntarily.
Local Tax Obligations: As an EU citizen living in another EU country, verify the local tax obligations. EU countries have different tax rules which could affect your digital nomad income.
Professional Advice: Given the complexity of international tax regulations, especially for digital nomads, it is advisable to consult with a tax professional who specializes in international taxation to ensure compliance and optimize your tax situation.
By understanding these aspects and seeking professional help, you can effectively manage your tax obligations while enjoying the perks of being a digital nomad.