Understanding tax for UK expats: 2025 guide

By Nikki Martin, Associate Director, Carpenter Box.

Navigating the complexities of taxation can be challenging, especially for UK expats. Whether you’re working abroad or have relocated for retirement, understanding your tax obligations is crucial. This 2025 guide will help you understand how tax works for UK expats, including personal tax allowances, residency rules, and the latest tax rates.

How does tax work for UK expats?

As a UK expat, your tax obligations depend on your tax residency status. The UK tax system operates based on residency rather than citizenship. This means that if you are UK tax resident, you may be liable to pay UK taxes on your worldwide income. However, if you are non-resident, you will generally only be taxed on your UK-sourced income. Where income is cross jurisdictional, or you are resident in more than one country, it is important to review any tax treaties between the UK and the other jurisdiction, as these agreements can help prevent double taxation and provide tax relief opportunities.

Tax residency status is governed by the Statutory Residence Test (SRT), which considers factors such as the number of days you spend in the UK, your ties to the country, and your overall lifestyle. It’s essential to establish whether you are resident or non-resident to understand your tax obligations fully. If you move between countries frequently, keeping detailed records of your travel and financial transactions is highly recommended to avoid unexpected tax liabilities.

What is the personal tax allowance for expats in the UK?

For the 2024-2025 tax year, the UK personal tax allowance remains a critical aspect of tax planning for expats. The personal tax allowance is the amount of income you can earn before you start paying income tax. For most individuals, including expats, the personal allowance for 2024-2025 is £12,570.

This allowance is applicable to British citizens and certain other individuals regardless of residency status. However, certain conditions may affect your eligibility, such as the level of your income or the basis under which your tax liability is calculated. It’s important to note that the personal allowance may reduce if your income exceeds £100,000. Due to the interaction of the personal allowance and savings and investment income for non-residents, UK expats who have pensions or rental income from UK properties should carefully assess how these earnings affect their overall tax position. Seeking professional advice can ensure you optimise your tax efficiency.

How long can an expat stay in the UK without paying tax?

The amount of time you can spend in the UK without becoming liable for tax depends on your residency status. Generally, if you spend fewer than 183 days in the UK within a tax year, you may be considered non-resident for tax purposes. However, the Statutory Residence Test also takes into account your connections to the UK, such as having a home or close family in the country.

For example, if you have ties to the UK, you may be UK tax resident – even if you were to spend fewer than 183 days in the UK, which may trigger tax obligations on your worldwide income. Therefore, understanding and accurately recording your days in the UK is crucial for tax planning. It’s advisable to maintain clear documentation of your stays and any professional or financial ties that might influence your tax status.

What are the UK tax rates?

For the 2024-2025 tax year, UK income tax rates remain consistent with previous years. The tax rates are:

• Basic Rate: 20% on income between £12,571 and £50,270.

• Higher Rate: 40% on income between £50,271 and £125,140.

• Additional Rate: 45% on income above £125,140.

These rates apply to UK residents on their worldwide income and to non-residents on their UK-sourced income. Understanding these rates is vital for effective tax planning, especially if you have a mix of UK and foreign income. Different rates apply to dividend income. For example, UK expats with business interests in multiple countries must carefully structure their finances to minimise tax exposure. Consulting a tax expert can help you maximise available deductions and allowances.

Need further guidance?

For expats, tax planning can be complex, requiring a deep understanding of both UK and international tax laws. Our international
services team can provide expert guidance to help you navigate these challenges and ensure compliance with all relevant tax obligations. You can get in touch with a member of our *award-winning tax team by calling 01903
234094 or visit www.carpenterbox.com

*Carpenter Box was named national ‘Tax Team of the Year’ at the 2024 Accounting Excellence Awards.