Want to save money on taxes as a digital nomad in 2025? Here's what you need to know:

  • Tax Residency: Spend over 183 days in the UK, and you're taxed on worldwide income. Use the Statutory Residence Test (SRT) to confirm your status.
  • Key Deductions: Claim expenses like home office costs, work-related tools, travel, and professional services. Keep records for partial-use items like internet or phones.
  • Double Taxation Relief: Avoid paying tax twice by leveraging Double Taxation Agreements (DTAs) and obtaining a residency certificate from HMRC.
  • Global Tax Options: Consider tax-friendly countries like Malta (0% on foreign income), Hungary (15% flat rate), or UAE (0% personal income tax).
  • UK Tax Rates: Personal allowance is £12,570. Tax rates are 20% (up to £37,700), 40% (£37,701–£125,140), and 45% (above £125,140). National Insurance applies too.

Quick Tip: Keep detailed financial records, separate business and personal expenses, and consult a tax professional for complex situations.

Tax Residency Basics

Tax Residency Rules

Tax residency determines where you're required to pay tax. For UK residents, this often means paying tax on worldwide income under the Statutory Residence Test (SRT).

"Understanding whether you are deemed a UK tax resident or not is essential to paying the correct tax in the UK."

The SRT evaluates several key factors:

  • Days in the UK
    Spending more than 183 days in the UK during the tax year (6 April to 5 April) automatically makes you a UK tax resident.
    Days spent in the UK in the tax year UK ties needed to qualify as a UK resident
    16–45 At least four
    46–90 At least three
    91–120 At least two
    Over 120 At least one
  • UK Home Test
    If your only home is in the UK for 91 days or more, and you stay there for at least 30 days, you qualify as a UK resident.
  • UK Work Test
    Working full-time in the UK for a 365-day period, with at least one day falling within the tax year, also qualifies you as a UK resident.

These rules determine which country has the right to tax your income and influence what expenses you can deduct.

Residency vs Domicile Status

Once you've established your residency, it's important to understand how it differs from domicile, as both impact your tax obligations.

  • Residency: Based on where you live and how many days you spend there, it determines where you owe tax.
  • Domicile: Refers to your permanent home and affects long-term tax on foreign income or gains.
  • Non-domiciled (non-dom) status: Allows you to pay UK tax only on foreign income brought into the UK.

Avoiding Double Taxation

If you're considered a resident in more than one country, you might face tax on the same income in both places. To address this, the UK has Double Taxation Agreements (DTAs) with numerous countries.

  • Obtain a tax residency certificate from HMRC to claim relief under a DTA.
  • Check whether a DTA exists between your home and host countries.
  • Seek advice from a tax professional for more complex situations.

Understanding these rules will help you navigate UK residency requirements and manage your tax liabilities effectively.

Tax Deductions for Remote Workers

Now that residency has been clarified, here are some key deductions you can claim.

Home Office Expenses

If you use part of your home for work, you can deduct a portion of your household costs.

Eligible expenses include:

  • A percentage of your mortgage interest or rent
  • Council tax
  • Insurance for buildings and contents
  • Utilities like lighting and heating
  • Costs for repairs and decorating

To avoid capital gains tax when selling your home, ensure the space isn't exclusively for business. For example, keep personal items in the room. Remember to keep records of all expenses, such as annotated bank or credit card statements and a diary of work activities.

Tools and Technology for Work

Expenses related to work-specific equipment and services can also be claimed, provided they're used solely for business purposes:

  • Computers and office equipment: Fully deductible if used only for work
  • Software subscriptions: Fully deductible if business-related
  • Mobile phone and internet: Deduct a reasonable portion based on business use

Keep detailed records of purchases and how you split personal and business use. Using tools like Nomad Millionaire's tracker can help you log this accurately.

Business Travel Expenses

If you travel for work, certain costs can be claimed under HMRC's travel expense rules:

  • Transportation: Flights, trains, taxis
  • Accommodation: While on business trips
  • Subsistence: Meals and incidental costs while working abroad
  • Visa and inoculation fees

You can also claim for return journeys for your spouse and up to two children if you've been abroad for over 60 consecutive days.

Professional Services and Subscriptions

You can deduct costs for professional services and subscriptions directly tied to your trade, such as:

  • Fees for membership in professional bodies
  • Subscriptions to cloud services and workspaces
  • Costs for accounting or business software
  • Professional indemnity or liability insurance

These expenses must be entirely for business purposes to qualify.

Expense Deduction Overview

Expense Category Fully Deductible Partially Deductible
Office equipment (dedicated) ✓
Home internet ✓
Personal phone use ✓
Bank charges (up to £500) ✓
Professional insurance ✓
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Tax Rules by Country

Once you've maximised your deductions, it's essential to consider country-specific tax rates and treaties to refine your tax planning.

UK Tax Requirements

For digital nomads, understanding tax rules in the UK is key. For the 2025–2026 tax year, the personal allowance is £12,570. Income tax rates are structured as follows:

  • Basic rate: 20% on earnings up to £37,700
  • Higher rate: 40% on earnings between £37,701 and £125,140
  • Additional rate: 45% on earnings above £125,140

National Insurance contributions are also applied:

  • 8% on earnings between £12,570 and £50,270
  • 2% on earnings above £50,270
Annual Income Income Tax Rate National Insurance Rate
Up to £12,570 0% 0%
£12,571 – £50,270 20% 8%
£50,271 – £125,140 40% 2%
Above £125,140 45% 2%

Next, consider exploring countries with lower tax regimes to maximise your deductions.

Global Tax Advantages

Certain countries offer tax-friendly options, which can significantly impact your post-tax income. Here are a few examples:

  • Spain: Digital Nomad Visa offers a 24% tax rate on earnings up to €600,000.
  • Malta: No tax on foreign income.
  • Hungary: Flat 15% tax rate.
  • UAE, Bahrain, Antigua, Barbados: Zero personal income tax.

These reduced rates enhance the value of your deductions, leaving you with more disposable income.

Country Income Requirement Tax Rate Visa Duration
Malta €3,500 per month 0% on foreign income 1 + 3 years
Hungary €3,000 per month 15% flat rate 1 + 1 year
Spain €2,646 per month 24% up to €600,000 3 + 2 years

Tax Treaty Benefits

Double Tax Agreements (DTAs) are designed to prevent digital nomads from being taxed twice on the same income. These agreements set limits on double taxation. To benefit, ensure you have HMRC residency certificates and records of your income sources.

Tax Records and Compliance

Keeping precise records is the foundation for meeting tax obligations and claiming deductions.

Log all income and expenses in pounds (£) using accounting software. For foreign income, record it at the transaction's exchange rate. If you deal with cryptocurrency, note the date, type of activity (buying, selling, or earning), amount in pounds, and any fees. Tools like Blockpit can help automate this process.

For easier management, try Nomad Millionaire's finance tracker, which can handle transaction logging and currency conversions automatically.

Keep business and personal finances separate. For mixed expenses, divide them appropriately:

Expense Type Business Portion Personal Portion
Mobile Phone Work-related calls and usage Personal calls and leisure apps
Internet Hours used for business tasks Evening and weekend browsing
Travel Trips for client meetings Holidays or personal journeys
Equipment Work-related tools and software Personal devices and apps

UK Tax Return Steps

Here’s what you need to do:

  • Register for Self Assessment: Deadline is 5 October 2025.
  • Gather essential documents: Include income statements, bank records, expense receipts, and cryptocurrency logs.
  • Submit your return: Paper returns are due by 31 October 2025, while online returns (and any tax payments) must be completed by midnight on 31 January 2026.

When to Get Tax Help

It’s worth seeking advice from an international tax expert if you’re dealing with:

  • Income from multiple countries
  • Cryptocurrency transactions
  • Complex business structures
  • Unclear tax residency status

For particularly tricky issues involving multiple jurisdictions, cryptocurrency, or residency, hiring a qualified accountant is highly recommended.

Conclusion

Key Takeaways

This guide covered residency tests, deductible costs, jurisdictional rates, and record-keeping. Here are the main points to keep in mind:

Tax residency management:

  • Keep track of your days abroad to ensure you meet residency thresholds.
  • Understand the differences between territorial and worldwide taxation, and document your work locations.
  • Maintain detailed records of your travel dates for accurate reporting.

For more details on country-specific regimes, check out the Global Tax Advantages section.

What’s Next with Nomad Millionaire?

Nomad Millionaire

Take advantage of our tools to manage your tax obligations across jurisdictions and uncover potential deductions. Our relocation and banking framework is designed to support long-term wealth strategies.

Here's how we can assist:

  • Log your obligations across different jurisdictions with our trackers to find legal deduction opportunities.
  • Explore our relocation and banking resources to build a sustainable wealth plan.

If you need tailored advice, our consultation service can create a personalised plan based on your income and lifestyle. Professional tax advice is especially helpful for managing multiple income sources or navigating complex international setups.

Leverage Nomad Millionaire's tools to stay on top of your obligations and put these strategies into action.