Guidance

Employees working abroad

PAYE if your employees work abroad, including applying for exemption in the other country.

Introduction to PAYE for employees working abroad

How you calculate and pay PAYE tax and National Insurance contributions (NICs) for employees who work abroad depends on where they’re working and how long you expect them to be working there.

This guide shows you what you need to do about PAYE if your employees are working abroad.

How to calculate PAYE tax

You must continue to calculate and deduct PAYE tax from all payments made to employees who work abroad.

When your employee goes abroad, give them a letter stating:

  • the date they went abroad to work
  • their gross pay from the start of the tax year to the date they went abroad
  • the tax deducted from the start of the tax year to the date they went abroad

Employees who spend most of their time abroad over a period of a year or more may be able to obtain full UK tax relief on their earnings. Ask your employee to complete form P85 and send it to HMRC who will confirm the tax code to use.

If your employee is on an overseas contract, it’s possible that the tax authorities in the overseas country will want to make tax deductions from your employee’s income. Contact the Employer Helpline and the overseas authority to make sure you’re clear about your obligations in both countries.

You must tell the Employer Helpline if one of your employees is going to be working in an offshore area. Usually, you’ll continue to operate PAYE tax as usual for these employees - but there are exceptions.

How to calculate NICs

The rules for NICs depend on which country your employee is going to work in.

Employee working in another European Economic Area (EEA) country or Switzerland

Special rules apply for these employees.

The EEA includes:

Switzerland is not an EEA member but an agreement between Switzerland and the EU means that the rules also apply there.

Usually, your employee pays social security contributions to the country they’re working in. However, they may have to continue paying UK NICs and will be exempt from paying contributions in the other countries where either:

  • the work abroad is not expected to be for more than 24 months
  • they normally work in 2 or more EEA countries

If this is the case, apply to HMRC for a Portable Document A1 (or E101) for the employee so they can continue to pay UK NICs. This will also be evidence that no contributions are due in the other countries. To apply, use form:

  • CA3821 - employer questionnaire you complete when applying for the first time
  • CA3822 - complete for each employee going to work abroad

Non-European Economic Area countries that have a Social Security agreement with the UK

If your employee works in a country with a Reciprocal Agreement or Double Contribution Convention (known as Social Security agreements) they’ll usually pay social security contributions in that country rather than UK NICs.

The countries are:

Barbados, Bermuda, Bosnia-Herzegovina, Canada, Chile, Croatia, Guernsey, Israel, Jamaica, Japan, Jersey, the former Yugoslav Republic of Macedonia, Mauritius, Montenegro, New Zealand, Philippines, Republic of Korea, Serbia, Turkey, USA.

Workers temporarily posted by their UK employer to one of these countries may be able to continue paying contributions to the UK instead of to the country you post them to.

If this is the case, apply to HMRC for a ‘Certificate of Continuing Liability’ for the employee so they can carry on paying UK NICs. This will also be evidence that no contributions are due in the other country. To apply, use form:

  • CA3821 - employer questionnaire you complete when applying for the first time
  • CA9107 - complete for each employee going to work abroad

Non-European Economic Area and non-Social Security agreement countries

You must calculate and deduct NICs for the first 52 weeks your employee works abroad where the country your employee is going to work is either:

  • a non-EEA country
  • one which the UK doesn’t have a Social Security agreement with

Modified PAYE procedures

If you have an agreement with HMRC to operate an EP Appendix 7B scheme to pay NICs on estimated amounts of income during the year, you must include the NICs on the estimated pay on the Full Payment Summary for the payroll under which you have the NT tax code for the employees.

You must establish the correct amount of NICs due and submit a completed form NICs Settlement Return no later than 31 March following the end of the tax year concerned.

Operating separate payrolls

You must complete the starter and leaver information when an employee moves between PAYE schemes, if you have 2 different payrolls for domestic and overseas employers.

Published 12 June 2014
Last updated 1 June 2015 + show all updates
  1. The bilateral Social Security agreement with Chile began on 1 June 2015.This guide has been updated to include Chile in the list of non-EEA countries that have an agreement with the UK.
  2. First published.