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Thursday 2nd December 2021

Fancy becoming a Digital Nomad? Here’s what you need to know

For all of the devastation coronavirus has caused, it has also led to a much-welcomed looser relationship with the office.

Gone are the days of trudging into the workplace five days a week. Now many of us are happily – and productively – working from the comfort of our homes.

Some people have taken it a step further and decided to jet off to a foreign country while continuing to work for their employer back in the UK.

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It seems that what was once a dream has become reality for lots of people.

However, while the idea of doing Zoom calls on a beach in Croatia might sound appealing, it’s not as simple as just packing your bags and hopping on the next plane.

There are actually lots of (quite boring and complicated) things you need to sort out to avoid falling foul of local tax laws and labour rules.

Here is a brief check list of things you need to consider before you jump online and buy that plane ticket.

Speak to your employer

If you plan to ditch your job and become a freelancer, then skip this step. But if not, and you plan to keep your current job, then your first port of call should be to talk to your employer.

For example, they may decide that your job is unworkable if you’re in totally different time zone. If that’s the case, you’ll want to find out sooner rather than later.

But even more important is that working for a UK company when you live abroad can open both you and your employer up to unwanted tax, social security and even legal issues.

For example, your employer might be liable to pay into the local social security system or might even have to set up a subsidiary in your chosen country.

They might also have to dedicate time and money to ensure they are complying with local employment laws, which vary from country to country and can be a minefield.

In short, working for a UK-based employer from a seaside flat in Southampton is very different to working from the beach in the Seychelles.

And, remember, you have as much responsibility as your employer to ensure you are dotting all of the i’s and crossing all of the t’s.

So get these discussions out of the way early to avoid a nasty surprise further down the line.

Get tax advice

The biggest headache you’re likely to face when you become a remote worker abroad is tax.

In short, if you plan to work in a foreign country, then that country’s tax collection agency will want to tax you on that income.

At the same time, if you’re still classed as a UK resident, HM Revenue & Customs (HMRC) has a claim to all income you earn, even if you’ve earned it overseas.

Many countries have so-called ‘double tax agreements’ to stop you being taxed twice on the same income, but these can be hideously complicated.

Therefore, it’s a good idea to seek tax advice, both here in the UK and in the country you plan to work in – even if you pay for just one session.

There are also some good resources out there to find out which countries the UK has double tax treaties with (link here) and how you might be affected (link here).

Glenn Collins, head of technical, policy and strategic engagement at ACCA UK says it’s important for people to understand residence rules.

Working out your tax and residency status is complicated, but typically speaking, if you live in a different country for 183 days or more, you’ll usually be regarded as a tax resident in that country.

He says: “For businesses and individuals it’s really important to get good advice to navigate the tax and employment regulations, so we’d recommend finding a chartered certified accountant to help you if you’re unsure about your stance as a digital nomad and your work and tax position.”

Check local working requirements

As you’ve already seen, working abroad for a UK based company is not as easy as packing your bag and jumping on the next flight.

You’ve also got to consider the local visa requirements, even if you are planning on being self-employed.

Each country has different entry and visa requirements, so do your research well in advance.

If you’re employed, you might need a letter of confirmation from your employer. Or, if you are self-employed, you’ll need to prove it. For more information on these requirements, visit gov.uk.

And remember, following Brexit it’s much more difficult to move to and work in the European Union if you’re a British citizen. So, again, check what hurdles you need to clear well before you leave.

Even if you are an EU citizen moving to another EU member state, you should check what is required of you. For example, some countries require you to register with the local authorities if you stay longer than three months.

Many countries also require that you have comprehensive medical insurance in place before you enter the country so you are not a burden to their health system. If you have insurance in place, make sure it covers you if you’re abroad.

Normal travel insurance policies (the kind you take out for a two week holiday) won’t typically cover you in this regard, as most are designed for short-term stays abroad. You must look at proper health insurance options for expats from the UK or locally in your chosen destination.

Banking

Banking is often one of the last things people about when they move abroad, but it’s also one of the most important.

It’s important to keep an account open back home to receive payments in sterling or to cover your UK bills and debts. The problem is many banks insist on you having a UK address to do so.

If you aren’t keeping a UK address, look for a bank that doesn’t require one. HSBC, for example, have a more relaxed attitude and will allow you to open an account even if you live in the EU.

You’ll also need a way to convert your pounds into the local currency. That’s where a multi-currency account comes in handy.

For example, providers such as Revolut and Wise allow you to transfer your cash into dozens of different currencies.

However, be careful as neither of them are classed as ‘banks’ in the UK yet, meaning your money is not protected under the Financial Services Compensation Scheme (FSCS) in the unlikely event they go out of business.

Therefore, it’s a good idea to open up a local bank account and simply use Revolut or Wise to convert your pounds into the appropriate currency.

A local bank account is important because sometimes landlords or utility companies won’t allow you to set up direct debits or make payments with a foreign bank account. This is known as ‘IBAN discrimination’.

All European bank accounts have an IBAN, or International Bank Account Number, to identify which country the bank account comes from.

For example, German bank accounts have an IBAN beginning with ‘DE’, while those in the UK start with ‘GB’.

While it’s illegal to refuse a foreign IBAN it is a real problem, which is why a local bank account is a must.

If you’re being paid in pounds but are spending in a different currency, be aware that you will be at the mercy of exchange rates.

If, for example, the euro strengthens against the pound, you’ll find your money won’t go as far in the eurozone.

What else do I need to consider?

All of what we set out above is simply what you need to consider before you land in your chosen country.

You’ll also need to think of where you are going to live, how you are going to get about and how you will be able to access the internet to do your job.

Expat forums and Facebook groups can be a goldmine for this type of information and don’t be afraid to reach out to people you know who have moved abroad. Their advice can be invaluable.

If you plan on working abroad long-term, you also need to consider how this will affect any pensions and investments you have back in the UK.

You won’t, for example, be able to carry on paying into a tax-free UK ISA while you’re abroad and it may affect what tax relief you get on any private pensions you pay into.

While it can be a major headache moving to another country, you also need to remember why you wanted to do it in the first place: perhaps to experience a new culture, meet new people or to learn a new language.

So, by all means, go for it. But make sure you plan ahead.

Photo by Peggy Anke on Unsplash

Dana Raer

Reporter

Dana is a reporter at Mouthy Money, having previously worked for Times Money Mentor and the BBC.

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