For UK nationals living abroad — and foreign nationals with UK-based income — understanding how UK income tax applies to expatriates is crucial.
The UK tax system is residency-based, meaning your tax obligations depend on your tax residency status, not simply your nationality. Even after moving overseas, many expats remain liable for certain UK taxes, especially on income from property, investments, and pensions.
At Blacktower Financial Management, we’ve been helping expatriates across Europe and beyond manage their cross-border finances for nearly four decades. Here, we explain how UK income tax applies to expats in 2025, what income may still be taxable, and how to structure your finances for maximum efficiency and peace of mind.
1️⃣ The Basics: Tax Residency and the Statutory Residence Test
Your liability for UK income tax depends on whether HM Revenue & Customs (HMRC) considers you a UK tax resident or non-resident.
The UK uses the Statutory Residence Test (SRT) to determine residency. This test assesses:
- How many days you spend in the UK each tax year.
- Whether you have a home or family ties in the UK.
- Whether you work in the UK for a certain number of days.
In summary:
- UK residents are taxed on their worldwide income.
- Non-residents are taxed only on UK-source income.
Most expats become non-resident for tax purposes once they’ve left the UK and spend fewer than 183 days in the country per year — but this must be proven using the SRT rules.
2️⃣ What Income Is Taxable for Non-Residents?
Even after you’ve left the UK, HMRC can still tax you on UK-sourced income.
Common forms of taxable UK income include:
- Rental income from property located in the UK.
- UK pensions, including State Pension and private or workplace pensions.
- UK savings and investment income, such as interest or dividends.
- Earnings from UK-based employment or directorships.
If you no longer live in the UK but earn income from these sources, you’ll need to file a UK Self Assessment tax return unless your tax is automatically deducted (for example, under PAYE).
3️⃣ The UK Personal Allowance for Expats
Most individuals — including non-residents who are UK nationals or citizens of countries with a UK tax treaty — are entitled to the UK personal allowance, which is:
💷 £12,570 (2024–2025)
This means you can earn up to this amount of UK income before paying any income tax.
However, the allowance can be restricted if your income exceeds £100,000 or if you live in a country without a tax treaty.
4️⃣ UK Income Tax Rates for 2025
The UK operates a progressive income tax system, meaning the rate you pay depends on your total taxable income.
| Band | Taxable Income | Tax Rate (England, Wales, Northern Ireland) |
|---|---|---|
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571 – £50,270 | 20% |
| Higher Rate | £50,271 – £125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |
Note: Scotland applies slightly different income tax bands and rates for Scottish residents.
These rates apply to most forms of UK income, although dividends and savings income are taxed at different rates.
5️⃣ UK Property and Rental Income
Property remains one of the most common links expatriates maintain with the UK — and therefore one of the most frequent sources of UK tax liability.
If you rent out property in the UK while living abroad, you’ll be classed as a non-resident landlord.
- You must declare all rental income to HMRC.
- You can deduct allowable expenses (e.g., repairs, mortgage interest, management fees).
- Net profits are subject to UK income tax.
You can register under the Non-Resident Landlord Scheme (NRLS) to receive rent without tax deducted at source, provided you agree to declare the income via Self Assessment.
Capital Gains on Property
If you sell UK property as a non-resident, you may also be liable for UK Capital Gains Tax (CGT). Since April 2015, all UK residential property disposals by non-residents must be reported to HMRC within 60 days of sale.
6️⃣ Pensions and UK Retirement Income
Even if you live abroad, most UK pension income remains taxable in the UK — including:
- State Pension
- Private and occupational pensions
- Annuities
However, under Double Taxation Agreements (DTAs), many expats can claim relief to ensure their pension income is not taxed twice — once in the UK and again in their country of residence.
QROPS and International Pension Transfers
For long-term expatriates, transferring a UK pension to a QROPS (Qualifying Recognised Overseas Pension Scheme) can offer:
- Tax efficiency in your country of residence.
- Multi-currency flexibility (EUR, USD, GBP).
- Estate planning advantages, such as avoiding UK Inheritance Tax.
A Blacktower adviser can help you determine whether retaining your UK pension or transferring to a QROPS or SIPP is best for your circumstances.
7️⃣ Double Taxation Treaties (DTAs)
The UK has over 130 double taxation agreements with other countries — including all major EU nations and the US.
These treaties ensure that you don’t pay income tax twice on the same income. Typically, they:
- Assign taxation rights to either the UK or your country of residence.
- Allow you to offset tax paid in one country against your liability in the other.
- Determine where specific income (e.g., pensions, property, employment) is taxed.
Example
If you’re a UK expat living in Portugal, your UK pension might be taxable only in Portugal under the UK–Portugal DTA — depending on your residency status.
Blacktower works with local tax specialists to ensure your income is structured efficiently and reported correctly in both jurisdictions.
8️⃣ The Domicile Question and Inheritance Tax (IHT)
Even after becoming non-resident, many expats remain UK-domiciled, meaning they could still be subject to UK Inheritance Tax on worldwide assets.
With the nil-rate band frozen at £325,000 until at least 2028, more expatriates are being drawn into the IHT net.
Proactive estate planning — including the use of life assurance, trusts, and international investment structures — can help mitigate potential exposure.
9️⃣ How to Stay Compliant and Tax-Efficient
Tax rules for expatriates are complex and ever-changing. HMRC’s focus on offshore compliance and reporting has increased dramatically in recent years, with global data-sharing agreements allowing authorities to track assets and income across borders.
To stay compliant and financially efficient, expatriates should:
✅ Determine tax residency each year under the SRT.
✅ Use tax treaties to prevent double taxation.
✅ File a UK Self Assessment return if required.
✅ Review pension and investment structures for international suitability.
✅ Seek professional financial advice before making major financial decisions abroad.
10️⃣ How Blacktower Can Help
At Blacktower Financial Management, we specialise in cross-border financial planning for UK expatriates.
Our advisers help you:
- Understand and manage your UK income tax obligations.
- Structure your pensions and investments for global tax efficiency.
- Coordinate with local tax experts in your country of residence.
- Build a long-term strategy for retirement, wealth preservation, and estate planning.
Whether you’re renting property in the UK, drawing a UK pension abroad, or planning to transfer assets internationally, we’ll ensure you remain compliant — and confident about your financial future.
📞 Book your complimentary consultation today
Speak to one of Blacktower’s expert international financial advisers to discuss your UK income tax position and discover the most effective strategy for your global wealth.
Disclaimer: The above information was correct at the time of preparation and does not constitute investment advice. You should seek advice from a professional regulated adviser before embarking on any financial planning activity.