Working from the beach lounger: Tax hurdles for British digital nomads

The dream of a nomadic lifestyle, where one works with a laptop from the beach or in a picturesque café in Europe, is becoming increasingly attainable for many. A quarter of British employees now use hybrid working models that combine commuting and working from home. This proportion has more than doubled since the Covid-19 pandemic. The resulting flexibility opens up the possibility of spicing up the traditional 9-to-5 workday with time spent abroad. But what about the tax implications? Those working abroad from the UK must consider several important tax aspects. Generally, UK taxpayers who spend at least 183 days in the country per year are required to pay taxes on foreign income. For non-domiciled residents (Non-Doms), this rule does not apply as long as their foreign income is below £2,000 and not remitted to the UK. However, starting from April 2025, even Non-Doms will be taxed after four years in the country. Working abroad often comes with additional tax and legal consequences. For instance, tax authorities in the country where the work is physically performed may claim taxation rights. Without a double taxation agreement (DTA), there is a risk of double taxation. The UK has one of the largest networks of DTAs with more than 20 countries, including popular destinations such as Spain, Greece, and Italy. These agreements prevent taxpayers from being taxed on the same income in two different countries. For longer stays abroad, taxes paid abroad can often be reclaimed through the UK tax return. Without a DTA, there is still the possibility of reclaiming foreign taxes via a Foreign Tax Credit. This can offer some relief on the UK tax burden, even without a formal agreement. Employers must also ensure that no new obligations arise, such as paying corporate taxes or social security contributions abroad. It is particularly important to check whether company insurances and other benefits apply overseas. It is advisable to closely examine the timeframe of the stay. In some countries, the 183-day rule applies within a calendar year, in others within a financial year. By strategically planning the move, it may be possible to work almost an entire year without local taxes, which can be particularly advantageous in countries with higher tax rates or without a DTA.