Double Tax Dilemma – What to Do If You’re Paying Tax in Two Countries
When “Global” Becomes a Tax Headache
In today’s world, it’s easier than ever to work across borders. You might be:
-
A UK contractor working for a company in Dubai.
-
An IT freelancer with clients in the US and Europe.
-
A business owner living part of the year in Spain but running a UK limited company.
It sounds exciting—until the tax bills arrive.
That’s when many people ask: “Why am I being taxed twice?”
At Rothstone Accountants, we help clients untangle this exact problem. Double taxation can be stressful, but with the right advice, you can often avoid it altogether—or at least minimise the impact.
What Double Taxation Actually Means
Double taxation happens when two different countries both want to tax the same income.
Example:
-
You’re a UK tax resident earning £60,000 from a consultancy contract in Germany.
-
The UK wants to tax you because you’re UK resident.
-
Germany wants to tax you because the work was performed there.
Without reliefs, you could face two full tax bills on the same income.
The Role of Double Taxation Treaties (DTTs)
The UK has tax treaties with over 130 countries. These treaties:
-
Decide which country has the main right to tax certain income (employment, dividends, pensions, etc.).
-
Allow you to claim tax relief in one country if you’ve already paid in the other.
📊 Table 1: Common Income Types & Who Gets Tax Rights (UK Treaties)
| Type of Income | Typically Taxed In | Notes |
|---|---|---|
| Employment income | Country where work is performed | Exceptions for short-term stays |
| Dividends | Both countries, but reduced rate in source country | Relief usually given in resident country |
| Pensions | Country of residence | Some exceptions for government pensions |
| Business profits | Country of residence | Unless you have a “permanent establishment” abroad |
👉 Rothstone tip: Treaties are not all the same. The UK–France treaty is different from the UK–India treaty. We read the fine print for you.
Tax Residency Rules
Another layer of complexity is tax residency. You can be UK resident if you:
-
Spend 183+ days in the UK, OR
-
Have ties (home, family, work) under the Statutory Residence Test.
If you’re considered resident in more than one country, treaties include tie-breaker rules (e.g., where your “centre of vital interests” is).
📌 Example:
A client split time between the UK and UAE. By applying treaty tie-breaker rules, Rothstone Accountants confirmed their primary residency as UAE, meaning their UK tax exposure dropped significantly.
How Rothstone Accountants Solve the Double Tax Problem
Here’s how we approach it:
-
Residency analysis – We apply the Statutory Residence Test and treaty tie-breakers.
-
Relief claims – We ensure you claim Foreign Tax Credit Relief (so UK tax is reduced by what you’ve already paid abroad).
-
Structuring advice – We may recommend invoicing through your UK company, shifting income timing, or using pensions to reduce taxable income.
-
Compliance – We file UK Self Assessments correctly, including foreign income sections, so HMRC doesn’t raise flags.
✔️ Checklist: If You Think You’re Paying Tax Twice
Which countries are claiming tax on your income?
Do they have a double tax treaty?
Are you sure about your residency status?
Have you claimed foreign tax credit relief?
Do you need professional help to restructure your affairs?
Real Client Story
One Rothstone Accountants client was a software engineer working remotely for a US firm while living in the UK. The US withheld tax on his earnings, and HMRC wanted full UK tax too.
We:
-
Applied the UK–US treaty.
-
Claimed foreign tax credit relief.
-
Reorganised his contract so tax was withheld at a reduced treaty rate.
Result: He avoided double taxation, reclaimed thousands in overpaid US tax, and now pays only the correct UK amount.
Paying tax in two countries doesn’t have to mean paying twice. The rules are complex, but the solutions exist—through treaties, reliefs, and smart structuring.
At Rothstone Accountants, we specialise in helping contractors, freelancers, and global entrepreneurs manage cross-border tax without the stress. Whether you’re juggling HMRC and the IRS, or Spain and the UK, we’ll make sure you only pay what you owe—no more, no less.
👉 If you’re worried about double taxation, let Rothstone Accountants guide you. Visit www.rothstone.uk today.
