Freelancers' Questions: How to bill a now foreign client and pay the tax?

Freelancer’s Question: I recently completed a one-off freelance job for a Swedish group for a few hundred pounds. I’m Swedish, but am now registered as living, working and paying tax in the UK ,where I’ve just started a permanent job. Being a UK taxpayer, how would I invoice the Swedish entity for my work? Do I get taxed on it in the UK or Sweden, and how taxing will it likely be?

Expert’s Answer: The key to paying tax is that it has to be paid in the country in which you’re working and if the work physically took place in Sweden then that is where the funds should be declared and the tax paid.

However, if you were working remotely in the UK then our recommendation would be to send an invoice to your client for the payment of your consultancy services. And as you’re now a tax resident in the UK, you should declare the funds as additional income on a self-assessment tax return. The amount you will pay on these funds depends on your overall earnings in the UK from your permanent role and any additional income. If you fall in the higher tax bracket, for example, you’ll pay 40% in tax but if you’re in the lower bracket you may only pay 20%.

In the long run, and if the work is becoming more regular, then it might be better to manage these additional funds via an umbrella company that could employ you, the worker, and deduct the tax at source. That way there would be no need to file an end-of-year tax return. And if the additional income from abroad is mounting and moving into the thousands of pounds (as opposed to the hundreds) it might be a good idea to set up a UK limited company to trade through. But ultimately, if the work was conducted outside of the UK then you shouldn’t be taxed by the Swedish authorities.

The expert was Charles Daw, a director at CXC Global, an advisory for UK freelancers working overseas.

Editor’s Note: Related Reading –

Freelancers’ Questions: How to invoice a client overseas?

Freelancers’ Questions: Do I add VAT to my overseas invoice?

Freelancers’ Questions: How to keep my UK clients but live in Italy?


15th February 2016

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