How Do Taxes Work if You Work Remotely: A Guide to Navigating Your Taxes


By edward

If you worked from home before the pandemic, the rules on claiming expenses were broadly the same as they are now. That is, if you were employed, you can only claim if you did not have the option of working in an office, or if your job requires you to live a long way from your place of work. If you are relocating for the first time from 1 January 2021, the regulations for EU countries are governed by the terms of the new UK-EU protocol on social security coordination. However, these regulations are only applicable if it is not feasible to stay in the UK National Insurance system if the remote working agreement is projected to last beyond two years. For example, U.S. contractors must pay self-employment taxes, typically taken care of by the business you work for. However, these employees need to handle taxes themselves, meaning they will need to make payments to the areas where they operate.

  • The guidance[footnote 13] says a journey that is at least 10 miles longer, each way, would not be regarded as substantially the same.
  • With the regular method, you’ll need to keep records of your eligible home office-related expenses such as homeowners insurance, mortgage interest, utilities and repairs.
  • If you’re employed, one of the easiest ways to check if you’re eligible to claim this tax relief is by using the government’s online tool.
  • As in Andrew’s case his Canadian taxes were higher than the US taxes calculated on his Canadian salary, he won’t pay any US taxes on this income.
  • You should always consult with a qualified legal or financial professional before making any decisions about your taxes.

For example, if you spend 183 days in one state and 182 in another, you’ll be billed for the former, as it’s technically where you spend most of your time living. Because each state has its own tax rules, knowing the differences between these states is vital. Below, we will go through a few of the more common issues related to taxes between states. The changes implied by remote work could present an opportunity to a territory, to either become more competitive and attract economic activity or to raise more revenues.

Hybrid and distance working report: exploring the tax implications of changing working practices

76.2% of total respondents said that things had become more flexible for them since the pandemic, whilst only 2.8% of respondents answered that things have become less flexible. 9.5% replied that nothing had changed and for the remaining 11.5% it was not applicable as they were not in their current job before the pandemic. Over half of respondents who answered the question replied that their employer employed over 1,000 people (56.4%), followed by 27.3% who replied that their employer employed between 101 and 1,000 people. 10% of respondents how are remote jobs taxed replied that their employer employed between 31 and 100 people, 3.5% between 11 and 30 people and 2.8% of respondents said that their employer employed up to 10 people. Respondents felt this was disproportionately costly and complex, especially where relatively little tax may be due. Some noted that, in the example above, the UK headquarters would generally reimburse the German company the costs of the employee, plus an appropriate mark-up to reflect the value they provided and felt this should be a proportionate approach.

There will be an occasion when you have to make biannual tax payments, called “payments on account”. This scheme was created by the UK government to help the self-employed spread their tax burden across two payments in order to cover the supposed tax payment for the current fiscal year. Payments on account deadlines will be 31 July and 31 January of any given tax year. That’s why Deel enables the global workforce with integrated compliance and payment solutions. Explore our global hiring guide to see where Deel operates, or book a demo to see how simple it can be to hire anyone, anywhere. Andrew may also need to file state taxes, depending on the state he last lived in.

Travel Expenses

Check out the website of the Canada Revenue Agency for more information on the taxation of foreign income for Canadian taxpayers. “If you’re moving state to state, talk to your tax professional, let them know your situation and then they can better advise,” Obih says. This can give you peace of mind knowing that you’re in compliance with local and state tax codes and won’t have issues at the end of the year or even years down the road. To avoid paying taxes on the same income twice, the taxpayer can credit the taxes paid in their non-resident state against their home state’s tax liability (or vice versa depending on which state has higher taxes).

remote work taxes

Apportionment rules are in place which allow for UK National Insurance to only be paid on the portion of salary attributable to an employee’s UK duties, but this does not apply where there is a UK employer. It has been suggested that it would make sense for employees choosing to work in another country for a temporary period to remain in their home country social security system to avoid them having a broken and fragmented social security record. The OTS was told that this would make sense, as when an individual is posted to another country, they remain organically linked to their home country and arguably this is the same with someone choosing to work in another country. Respondents told us that it would be simpler for employers, the tax authorities, and the employee, as this would mean less administration generally and would avoid employers having to register and pay in other countries. This complexity can be exacerbated by Status of Forces Agreements (‘Agreements’) or host nation agreements determining the rights of a spouse while they accompany military personnel.

Unemployment tax

You will receive a regular paycheck in your local currency, with tax deducted at the source. The answers, unsatisfyingly, depend on a number of factors, including which states and how long you were there, according to tax experts we spoke with. Ahead of tax season, here’s what to look out for when filing your taxes on remote work.

Sarah is a recruiter who works from home in New York City for Corgico, a UK-based company. It may be the case that your employer is supportive of the fact that you wish to work overseas, particularly if they do not consider that it will have any impact on the work that you do. However, as this article has highlighted, working overseas can have other implications for both you and your employer. It still may be the case that there are some withholding or other compliance obligations in the other country. Higher-rate taxpayers receive 40% tax relief, which equates to £2.40 per week, or around £125 a year. In navigating such tax scenarios, attention to detail becomes crucial for businesses to avoid unexpected financial burdens or reputational damage.

To meet the government’s directive to conclude outstanding work by the end of 2022, the OTS shortened the consultation period to eight weeks. In that context, the OTS is particularly grateful to all those who willingly gave time, ideas, challenge and support over the course of 39 meetings, many with large groups, and 50 written submissions. Everyone the OTS spoke to was supportive of the OTS’s work and the need to highlight the growing complexity in this area, and keen to collaborate and contribute to make this a true reflection of their concerns.