UK and Ukrainian Income and Tax
As this is the first time many Ukrainians will have been abroad from a work perspective, there are some situations to be aware of regarding working in another country like the UK.
Both HMRC and the Low Incomes Tax Reform Group have provided some general guidance, which we have referred to in order to create this guide. We are not knowledgeable about how tax works in Ukraine, and it would be difficult to find UK-based experts on this, so here we give some general pointers around income, tax and double taxation to inform you of what might be relevant to you. It is not to be taken as legal or tax advice.
This is a complex topic, and we do not assert by any means that our information is a complete and accurate reference. There are many nuances to consider when it comes to tax. We recommend you find appropriately qualified professionals in either or both UK and Ukrainian tax matters to clarify your own situation.
For the purpose of this webpage, we make the following assumptions:
- You live in the UK and receive income from work – this is considered taxable income by the UK tax authorities (above a minimum threshold)
- You may have received UK benefits – these are (mostly) not considered taxable by the UK tax authorities
- You may receive a sponsor ‘thank you’ payment if you are sponsoring other Ukrainians – this is not considered taxable by the UK tax authorities
- You don’t receive other sources of taxable income in the UK (e.g. you don’t rent out a flat in the UK, or receive dividends from investments made in the UK)
i.e. your only taxable income in the UK according to the UK tax authorities is from work that you do while based in the UK.
We also assume you might have sources of income in Ukraine, even though you do not live there (such as rental income, or pension income), although we expect this to be the exception.
Tax to be paid to the UK authorities whilst living and working in the UK – principles
As a principle, whilst you are physically based in the UK and working, you are liable to pay tax to the UK authorities on the income you receive for your work.
Working for a UK employer / self-employed in a UK business
- If you are working for a UK employer, this is straightforward as your employer will most likely be deducting tax at source through the Pay As You Earn (PAYE) system.
- If you work for yourself and your business is set up in the UK, you can pay UK taxes owed by registering as self-employed and completing a self-assessment tax return by the appropriate tax submission deadline. You are recommended to use an accountant to help you complete your tax return.
Working for a Ukrainian employer / self-employed in a Ukrainian business
If you are in the UK and working for a Ukrainian employer, you are likely to be liable to pay tax to the UK tax authorities on your earned income from your employment, as you are physically based here. In this case, there could be 3 scenarios:
- If your Ukrainian employer has an office in the UK, it will be set up to deduct tax and National Insurance contributions, and pay these directly to the UK tax authorities
- Your Ukrainian employer may continue to deduct tax and pay it directly to the Ukrainian tax authorities.
- Your Ukrainian employer may be asked to stop deducting tax for the Ukrainian tax authorities (e.g. via you informing the Ukrainian tax authorities to get this adjusted).
In the case of 1., the UK tax owed from your employment income has been taken care of automatically.
In the case of 2. and 3., you may need to use the Direct Payment Scheme, or complete a self-assessment tax return to pay tax owed in the UK. See https://www.gov.uk/guidance/paying-taxes-in-the-uk-if-you-work-for-an-employer-based-in-ukraine for further information. If you have paid tax twice on the same income (to the Ukrainian tax authorities, and to the UK tax authorities), you would most likely need to apply to the Ukrainian tax authorities to request a refund from them.
If you are self-employed and your business is set up in Ukraine, then you may need to fill in a self-assessment tax return for the UK to pay the tax owed to the UK tax authorities. If tax has also been paid to the Ukrainian tax authorities, then you may additionally need to apply to the Ukrainian tax authorities to claim back any tax already paid to them.
IMPORTANT NOTE when completing a self-assessment tax return: Income earned while living in the UK and working online for yourself or a Ukrainian employer is not ‘foreign income’ for tax purposes; it is ‘UK income’ as it is sourced in the UK. This applies even if payment for the work done is received in Ukraine.
If there are any difficulties experienced with claiming a refund of tax paid from the Ukrainian tax authorities, you can contact HMRC’s Mutual Assurance Procedure (MAP) team (see below). If you are facing financial hardship in settling your tax bills, discuss this with HMRC.
‘Tax residence’ and ‘treaty residence’ status in regards to taxable income from all sources
The section above applies to income received for work you do while physically based in the UK – let’s refer to this as your ’employment income’. You will generally be liable to pay tax on your employment income to the country you are physically carrying out the work in i.e. the UK. (We assume you do not work physically in Ukraine at the moment.)
You may also have received income from other sources (benefits income, rental income, share dividends etc) in both the UK and Ukraine – for the purpose of this webpage, let’s refer to this as ‘non-employment income’.
You also need to work out which country (or countries) you are considered a ‘tax resident’ of.
What does it mean to be ‘tax resident’ of a country?
Being a ‘tax resident’ of a particular country means that you might be required to pay that country the appropriate tax on all your worldwide income which they consider taxable (from your non-employment income sources as well as your employment income sources, from all countries). Each country has their own rules as to what they consider as taxable income – and just because there is an amount that you can earn tax-free in one country, or there are some other special exemptions or deductions that you can claim, this does not mean that the same applies in the other country.
For example, in the UK, income received from benefits such as Universal Credit and Pension Credit is generally not considered taxable by the UK authorities, so you don’t need to declare it to the UK tax authorities.
In the UK, income earned in other countries such as the following types of income is classed as ‘foreign income’ and may be subject to UK tax if you are considered a UK tax resident:
- wages if you work abroad (e.g. you spend time physically living and working in another country)
- foreign investment income, for example dividends and savings interest
- rental income on overseas property
- income from pensions held overseas
if you are considered a Ukraine tax resident, then the Ukrainian tax authorities may equally define certain income types as taxable according to their rules, such as benefits income received in another country such as the UK. (We cannot confirm exactly which income types, however.)
Deciding which country you are a ‘tax resident’ of
- To determine if you could be classed as a ‘UK tax resident’ (likely yes if you have lived here > 183 days in a particular tax year), you can use the ‘Start Now’ button at this link to check: Tax on foreign income: UK residence and tax – GOV.UK (www.gov.uk)
- To determine if you could be classed as a ‘Ukraine tax resident’, there will be an equivalent process to follow. There is a description here: Ukraine – Individual – Residence (pwc.com) but we recommend to consult with the Ukrainian tax authorities directly to verify your status (if you have not lived in the UK for very long, you may be classed a ‘Ukraine tax resident’ only)
The country of residence can provide the taxpayer with a ‘certificate of residence’ to confirm that the individual is resident there for tax purposes, in accordance with their own tax laws. This certificate is then presented to the country of ‘non residence’ (the other country).
However, note that it is possible for a taxpayer to be a tax resident of more than one country, at the same time. In this case, you need to look at which country you are ‘treaty resident‘ of.
What does it mean to be ‘treaty resident’ of a country?
If it turns out that you are simultaneously a ‘tax resident’ of both countries, and if both countries are entitled to tax the same income (e.g. employment income), then to avoid doubly taxing the same income, one country takes precedence when it comes to claiming the tax according to criteria set out in the double taxation agreement between the two countries. Article 4 of the double taxation treaty between Ukraine and the UK states that you can only be ‘treaty resident’ in one country:
Where by reason of the provisions of paragraph 1 an individual is a resident of both Contracting States, then his status shall be determined as follows:
(a) he shall be deemed to be a resident only of the State in which he has a permanent home available to him; if he has a permanent home available to him in both States, he shall be deemed to be a resident only of the State with which his personal and economic relations are closer (centre of vital interests)
Being a ‘treaty resident’ of a particular country means it’s this country that has the main right to tax your worldwide income, not the other country. See https://www.litrg.org.uk/tax-guides/migrants/residence-and-domicile/what-if-i-am-liable-tax-two-countries-same-income for more information on being liable for tax in more than one country. If you’ve had to pay tax twice in effect, then you may be entitled to claim a refund or tax credit to avoid having been doubly taxed.
Note that when getting a refund, you may not get back all the money paid – if one country’s tax rate is higher than the other, they may be entitled to keep the difference. So if you are taxed at 20% in one country, and 25% in the other country, you may only get a refund of maximum 20%.
Deciding which country you are a ‘treaty resident’ of
Currently, it is not clear as to whether Ukrainians who end up being classed as both UK and Ukrainian ‘tax residents’ are considered to be UK or Ukraine ‘treaty residents’, and whether this changes based on differences between Ukrainians’ circumstances (e.g. those from occupied territories versus those from Ukrainian held territory). Here is a link from HMRC that you could refer to: https://www.gov.uk/government/publications/dual-residents-hs302-self-assessment-helpsheet/dual-residents-2023-hs302.
Paying taxes owed on your sources of income
If it turns out you are only a UK ‘tax resident’, or you are a UK ‘treaty resident‘, then you may need to declare any non-employment relevant sources of income received in Ukraine via a self-assessment tax return under the section ‘foreign income’, and pay tax on those which are considered taxable to the UK tax authorities. (There may be no such additional sources of income in your case.) If you have already paid tax on those to the Ukrainian tax authorities, you may need to ask for a refund from them. The Ukrainian tax authorities may not be entitled to tax your UK employment or benefits income in this case, but we cannot confirm this.
If it turns out you are only a Ukraine tax resident, or you are a Ukraine ‘treaty resident‘, then it’s possible that you may need to declare all relevant sources of income received in the UK (both employment and non-employment) to the Ukrainian tax authorities as per their processes, and pay appropriate tax on those which are considered taxable to the Ukrainian tax authorities. If you have already paid tax on your employment income in the UK (more than likely), you would probably need to request a tax credit from the Ukrainian authorities for this, to avoid double taxation. Unfortunately, in this scenario, it could be the case that your employment income under £12570 (the UK tax threshold) and benefits income (not taxable in the UK) might be considered taxable income by Ukraine and taxed according to Ukrainian tax rates, but again, we cannot confirm this.
So for example, if you had worked for less than 6 months in a tax year in the UK (so you might not be considered a UK tax resident as yet), and earned £10000, then you might be liable to pay Ukrainian tax on this. If you had earned £15000 in this time instead, then because you’ll have paid 20% UK tax on the amount above £12570, this amount could be claimed as a tax credit from the Ukrainian authorities to avoid being taxed twice on this, but you may still be liable to pay tax on the amount under £12570 to the Ukrainian authorities. (This is a purely hypothetical example and not to be taken as a basis for your tax calculations.)
Help from HMRC in case of ‘double taxation’
Keep a record of what taxes you have paid. If you think you have been taxed twice on the same income (by the UK or by Ukraine) and you are having difficulties getting the appropriate credit or refund from the Ukrainian tax authorities, you can contact HMRC’s Mutual Assurance Procedure (MAP) team and ask them to look into it for you. They can liaise with the Ukrainian tax authorities to determine your treaty residence status and where you should have paid taxes, or try to get a refund for you. Here is the MAP email: firstname.lastname@example.org
Further help and advice
We don’t recommend attempting to handle the more complex situations described above by yourself, or by reference to this page alone.
Here are some places to get further information, help and advice:
- The Low Incomes Tax Reform Group – they have published a helpful guide on being liable for tax where more than one country is involved. Note that they cannot deal with individual tax matters.
- Specifically, the Low Incomes Tax Reform Group have published an article describing tax for Ukrainians and given a simple case study to illustrate. We recommend you read this article.
- TaxAid – they can be phoned on 0345 120 3779, but as they are a charity, they may not be able to deal with a large volume of calls.
- See also https://www.gov.uk/guidance/paying-taxes-in-the-uk-if-you-work-for-an-employer-based-in-ukraine
- Links to the double taxation treaty between UK and Ukraine
- You can also contact HMRC, although they cannot advise on Ukrainian tax rules, only UK tax rules, and how to declare foreign income on your UK self-assessment tax return. Contact them on 0300 200 3310. They may need to transfer you to an internal team known as the ‘technical team’.
- See also https://www.litrg.org.uk/getting-help/who-else-can-help-me-my-tax-or-benefits. Using a professional tax advisor or accountant with knowledge of both UK and Ukrainian tax rules would be the best option.