PAYE Tax and Employing from Abroad

Hiring someone from abroad can be a really good move for your company. Once you make the decision to extend your employee search, you’ll have access to a much wider talent pool, which can obviously be very beneficial for your business.

Unfortunately, employing from overseas does have its complications, and one of these relates to tax – PAYE tax, to be exact. Although this will generally still need to be paid, there may be some differences in making deductions when it comes to calculating your new worker’s wage.  

Let’s take a look at this in a little more detail…

How It Should Work

As a rule, employees who move to the UK to work will still need to have PAYE tax and national insurance contributions deducted from their wage in the usual way, irrespective of whether they are working for you on a temporary or permanent basis.  

This is the case even if they officially continue being employed by an overseas business and you don’t actually pay their salary; you will still be viewed as their employer, and therefore liable for recording and reporting their earnings and making PAYE deductions. These workers are known as ‘seconded employees’. The correct tax code to use under these circumstances can be found online.   

Getting Set Up

Assuming that you have a new employee who has only recently moved to the UK from abroad, they will not have a P45 form, so there’s a good deal of information that you will need to get from them, including:

• Their full name
• Date of birth
• Gender
• Address (including postcode)
• National insurance number

You’ll also need some additional information, in order to calculate the deductions that ought to be made from their pay. This will require you to obtain both an employment declaration, and information on whether they have a student loan which has not yet been repaid.

The employment declaration is simple, and only needs them to select an option pertaining to which of the following statements applies to them: yours is their first job since the 6th April, their only job currently (but they have worked in another role since the above date), or a second job or source of income. The information provided by them must be recorded and sent to HMRC as part of your Full Payment Submission.   

To help you complete this admin work, we recommend taking a look at the helpful ‘Starter Checklist’ that’s available on HMRC’s website.

Our handy guide should be a great way to give yourself a head start, but if you’re still struggling to understand how it all works, don’t hesitate to bring in the professionals. Whether it’s a specialist accountant or legal experts like Withers Worldwide, they should have you back on track in no time.