UK Tax Basics for Founders Living Abroad

You have a UK limited company but you live in Bali. What does that mean for your taxes? A plain-English guide to the basics.

Disclaimer: This article provides general information only. Tax situations are individual, and you should consult with a qualified tax advisor for advice specific to your circumstances.

Running a UK company while living abroad is increasingly common. The internet has made it possible to run a business from anywhere, but the tax systems haven't quite caught up.

The result is a lot of confusion. Let's clear some of it up.

The Two Separate Tax Questions

First, understand that there are two completely separate tax questions:

1. Company tax: What does your UK limited company owe?
2. Personal tax: What do you personally owe, as an individual?

These are handled differently and have different rules. Let's take them one at a time.

Your UK Company's Tax Obligations

A UK limited company has certain obligations regardless of where the directors or shareholders live.

Corporation Tax

Your company pays corporation tax on its profits. The current rate is 25% for profits over £250,000, with a small profits rate of 19% for profits under £50,000 (and marginal relief in between).

Key points:

• Corporation tax is due 9 months and 1 day after your accounting period ends
• You must file a Company Tax Return (CT600) within 12 months of the accounting period end
• This applies even if the company made no profit

Companies House Filings

Separate from HMRC, Companies House requires:

• Annual accounts (filed within 9 months of year-end for private companies)
• Confirmation statement (annual, confirming company details are correct)
• Updates whenever company details change

Late filings result in automatic penalties and can lead to your company being struck off.

VAT

If your company's taxable turnover exceeds £90,000 (2024/25 threshold), you must register for VAT. Even below this threshold, you might choose to register voluntarily.

VAT rules for digital services are complex, especially when selling to customers in different countries. The basic rule for B2C digital services is that VAT is charged where the customer is located, not where your company is based.

Employer Obligations

If your company pays you a salary (even a small one), it needs to operate PAYE. This means:

• Registering as an employer with HMRC
• Running payroll and reporting via RTI (Real Time Information)
• Deducting income tax and National Insurance
• Paying these to HMRC monthly

Your Personal Tax Position

This is where it gets more complicated. Your personal tax obligations depend on where you're considered tax resident.

UK Tax Residency

The UK uses the Statutory Residence Test (SRT) to determine if you're tax resident. It's based on several factors, including:

• How many days you spend in the UK
• Whether you have a home in the UK
• Your ties to the UK (family, work, accommodation)

Generally speaking:

• If you spend 183+ days in the UK, you're automatically resident
• If you spend fewer than 16 days (or 46 days if you weren't resident in the previous 3 years), you're automatically non-resident
• In between, it depends on your UK ties

If You're UK Tax Resident

You're taxed on your worldwide income. This includes:

• Salary from your UK company
• Dividends from your UK company
• Any other income from anywhere in the world

You'll need to file a Self Assessment tax return and pay income tax on everything.

If You're Non-UK Tax Resident

You're only taxed on UK-source income. This typically includes:

• Salary from your UK company (taxed via PAYE)
• Dividends from your UK company (potentially, depending on circumstances)
• UK rental income, UK employment, etc.

Non-residents often still need to file a UK tax return for UK-source income.

Tax in Your Country of Residence

Here's the bit many people forget: if you're living in another country, that country probably wants to tax you too.

Most countries tax their residents on worldwide income. So if you're tax resident in Portugal, Indonesia, or Thailand, you may owe local taxes on your UK company income.

The specifics depend entirely on the country and its tax treaty with the UK (if any). Some countries have very favourable regimes for foreign income; others don't.

Paying Yourself: Salary vs Dividends

How you extract money from your company has significant tax implications.

Salary

• Tax-deductible expense for the company (reduces corporation tax)
• Subject to income tax and National Insurance
• Requires operating PAYE

Dividends

• Paid from post-tax profits (no corporation tax deduction)
• No National Insurance
• Lower tax rates than salary (for UK residents): 8.75% basic rate, 33.75% higher rate, 39.35% additional rate

Many UK-resident founders take a small salary (around the National Insurance threshold) and the rest as dividends. This minimises overall tax.

If you're non-UK resident, the calculation changes. You might not owe UK income tax on dividends, but you might owe tax in your country of residence. And there are anti-avoidance rules to consider.

Common Pitfalls

1. Assuming You're Automatically Non-Resident

Just because you live abroad doesn't mean you're non-UK tax resident. The SRT is complex, and UK ties (like keeping a home available) can keep you resident even with limited UK days.

2. Forgetting About the Country Where You Live

You might successfully become non-UK resident, only to find you owe significant taxes in your new country. Research local tax rules before you move.

3. Place of Effective Management

If your company's "central management and control" is exercised from abroad, it might be considered resident in that country for tax purposes. This can create complex dual-residency issues.

4. Not Keeping Records

You need evidence of where you were and when. Keep travel records, flight receipts, and anything else that proves your location. HMRC can and does challenge residency claims.

When You Need Professional Advice

This article covers basics, but tax planning for international situations requires professional advice. Specifically, consider consulting a specialist if:

• You're leaving or returning to the UK
• You spend significant time in multiple countries
• You're extracting substantial amounts from your company
• You're selling your company or a significant asset
• You're setting up new business structures

The cost of good advice is usually far less than the cost of getting it wrong.

The Bottom Line

Running a UK company from abroad is entirely possible, but it requires understanding both your company's obligations and your personal tax position. The key points:

• Your UK company has UK obligations regardless of where you live
• Your personal tax depends on your residency status
• The country where you live probably wants to tax you too
• Professional advice is worth the investment

Stay compliant, keep good records, and don't let tax complexity prevent you from building the location-independent life you want.