Australian Income While Living in the UK

Introduction

Over the past year we have helped numerous Australian expats living in the UK to understand both their UK and Australian tax obligations. So this week, let’s look at some of the most common scenarios we have advised on where an Australian living in the UK still earns income from back home.

Picture this: you’ve settled into life in London – flat sorted, Oyster card in your wallet, new job underway – but money from Australia keeps landing in your bank account. Maybe it’s rent from your property in Sydney, dividends from an old share portfolio, or even a side project with an Australian client. It’s a nice reminder of your roots, but also raises a tricky question: how does this income get taxed now that you live in the UK?

This is a common scenario for Australians making the move to Britain. The challenge is that both the Australian Taxation Office (ATO) and HM Revenue & Customs (HMRC) want to have their say. Australia taxes non-residents on Australian-sourced income, while the UK taxes its residents on their worldwide income. Without the right planning, you could be caught in the middle – facing complex residency rules, mismatched tax years, and even the risk of double taxation.

The good news is that the Australia–UK Double Taxation Agreement is designed to stop you from being taxed twice. But knowing how to apply it in practice – and how to keep both sets of tax authorities happy – is another matter. That’s where experience counts. At No Worries Accounting, we specialise in helping Australians in the UK make sense of both systems, so you can focus on your career and life abroad while staying compliant on both sides of the world.

Understanding Tax Residency

When it comes to cross-border tax, the first question is always the same: where are you a resident for tax purposes? It may sound straightforward, but residency is defined very differently in Australia and the UK, and the answer can set the course for everything that follows.

Australia’s rules: The ATO applies a series of tests to decide if you are still an Australian resident for tax purposes. These include the “resides” test (whether you still ordinarily live in Australia), the domicile test (whether Australia remains your permanent home), the 183-day test, and a specific rule for certain government employees. Even if you’ve moved to the UK, if you maintain strong ties – for example, you keep your family or home in Australia – the ATO may still consider you resident.

A handy “rule of thumb” used by many advisers is the two-year guideline: if your time away is less than about two years, the ATO is more likely to view you as still resident. Longer, indefinite moves – such as taking up full-time work in the UK and renting out or selling your Australian home – usually tip the balance the other way. And once you do cease Australian residency, the change is effective from the date you physically leave Australia, not the end of that financial year.

The UK’s approach: By contrast, the UK uses a clear-cut Statutory Residence Test. Spend 183 days or more in Britain in a tax year, or establish a home or full-time job here, and you’ll usually become a UK tax resident. This system is more rules-based than Australia’s and easier to predict.

Top Tip: Understand the tax residency rules for both Australia and the UK and plan ahead so you’re treated as resident of one country at a time. It vastly simplifies your tax affairs and helps you avoid the “worst of both worlds” scenario, where the same income risks being taxed at the highest rates in both countries.

Dual residency – the grey zone: It’s common for expats to tick the boxes in both countries at least for the year they move. You might spend enough time in the UK to become resident under the SRT, but still keep enough ties in Australia for the ATO to treat you as resident there too. If that happens, both countries could claim the right to tax your worldwide income.

This is where the Australia–UK Double Taxation Agreement (DTA) steps in. It contains “tie-breaker” rules to decide which country you are treated as resident of for treaty purposes. The test looks first at where you have a permanent home, then at where your personal and economic ties are strongest, and even down to nationality if needed. Importantly, the tie-breaker does not remove your obligation to file in both countries if each considers you tax resident under its own rules. You will still need to declare worldwide income in both places, but the DTA ensures that you won’t actually be taxed twice on the same income by requiring your country of residence to give credit for tax already paid in the other.

Why it matters for Australian-source income: Once your residency is settled, you can work out how your Aussie income will be taxed. If you’re no longer an Australian tax resident, Australia will only tax you on income sourced there – such as rental property, bank interest or dividends. If you remain resident, Australia continues to tax you on everything, including your UK salary, and you’d need to rely on treaty credits to avoid paying twice. That’s why getting residency status right from the start is essential – it dictates what you need to declare, which rates apply, and how much complexity you’ll face each year.

Common Types of Australian Income for Expats in the UK

Once you’ve worked out your residency status, the next step is understanding how different types of Australian income are treated. These are the most common sources we see among Aussies in the UK.

Rental property income

If you own a rental property back home, you’ll still need to lodge an Australian tax return each year to report the rent and claim allowable deductions. As a non-resident, you’re taxed from the first dollar of net income, with no tax-free threshold, and at higher rates than residents. On the UK side, HMRC will also expect you to include the rental profit on your Self Assessment. Here’s where the rules diverge: Australia allows a full deduction for mortgage interest, but the UK only gives a 20% tax credit. That means a property that runs at a small loss under Aussie rules can appear profitable to HMRC. On top of that, all figures need to be converted to pounds, usually using average exchange rates. It’s a common trap for expats to end up with a UK tax bill on a property they think is “breaking even” in Australia.

Dividends from Australian companies

Australian dividends are split into two categories. Franked dividends (where company tax has already been paid) are not taxed again in Australia for non-residents, but you can’t use the franking credits in the UK. Unfranked dividends may have Australian withholding tax deducted, capped at 15% under the tax treaty, and that withholding can be credited against your UK tax bill. In practice, most big ASX-listed companies pay franked dividends, so Australia doesn’t usually tax them at source. But the UK still wants its share, so you’ll need to report them in full on your UK return. Overall, receiving dividends from an Australian company while tax resident in the UK tends to be tax inefficient because franking credits are unavailable in the UK.

Freelance or consulting income from Aussie clients

Plenty of expats keep working for old Australian clients after moving to the UK. The key is where the work is performed. If you’re sitting in London doing the work, that income is not Australian-sourced and won’t be taxed by the ATO. Instead, it’s treated in the UK as self-employment income, so it goes through your Self Assessment and is subject to both income tax and National Insurance. If you fly back to Australia and do some of the work there, the portion earned during that time may fall under Australian tax, though the treaty generally ensures short stints don’t create double taxation. Naturally, No Worries Accounting offers tax and accounting support to both limited company contractors and sole traders, so if you are freelancing for Australian clients while in the UK, we have you covered.

Investments and capital gains

If you’ve kept shares or managed funds in Australia, the rules can get complex. Once you cease to be an Australian tax resident, Australia generally only taxes you on gains from “taxable Australian property” (mainly real estate and large land-rich holdings). Ordinary share sales or managed fund disposals are usually outside the ATO’s scope, but the UK will tax them in full because you’re a UK resident. One wrinkle is Australia’s “deemed disposal” rule: when you cease residency, you’re treated as if you sold and immediately reacquired non-property assets, unless you elect to defer. If you defer, Australia steps back from taxing them until an actual sale, but that means you could face both Australian and UK CGT on a later disposal, with treaty credits needed to smooth it out. These choices can have big cash flow consequences, so it pays to get advice before leaving.

Example

Sophie moves from Melbourne to London in July 2025. She owns A$80,000 of ASX-listed shares (original cost A$40,000) and keeps her old flat in Melbourne as a rental property.

1. On ceasing residency, the shares are treated as sold for A$80,000 under the deemed disposal rule. Sophie can either pay Australian CGT immediately on the A$40,000 gain, or elect to defer. If she defers, the shares stay in the Australian tax net until she actually sells them.
2. The Melbourne flat is different. Because it is “taxable Australian property”, there is no deemed disposal. Australia will continue to tax the property’s rental income and any capital gain on a future sale, regardless of Sophie’s residency.

This shows how portfolio investments can trigger a departure tax event, while real estate remains taxed in Australia no matter what.

Top Tip: Think carefully before paying Australian capital gains tax on departure. The UK does not recognise Australia’s “deemed disposal” event, so any tax you pay then won’t reduce your future UK bill if you sell the asset while UK resident. In many cases, electing to defer is more efficient, as it allows you to use the tax treaty’s credit system later and avoid being taxed twice on the same gain.

Avoiding Double Taxation

How the Australia–UK DTA works in practice

The Double Taxation Agreement (DTA) sets out which country gets first claim to tax different types of income. For example, income from real property (like Australian rental income) may be taxed in Australia where the property sits. The UK, as your country of residence, can also tax the same income, but must then give relief for the Australian tax paid.

Credit relief: claiming Australian tax against your UK bill

In the UK this relief is called Foreign Tax Credit Relief (FTCR). On your Self Assessment you include the income on the SA106 “Foreign” pages and claim a credit. The credit you get is the lower of (a) the Australian tax actually paid on that item, and (b) the UK tax due on that same item. If the Australian tax is higher, the excess isn’t refundable in the UK.

Timing headaches: mismatched tax years

The UK tax year runs 6 April to 5 April, while Australia runs 1 July to 30 June. HMRC guidance accepts that where foreign income is assessed on a different basis overseas (for example, rents assessed to the Australian year), you may need to time-apportion both the income and the foreign tax so the right amounts land in the right UK year. HMRC’s International Manual even gives a worked example and says apportionment by days, weeks or months is fine if used consistently.

Currency conversion

Amounts must be shown in pounds on your UK return. HMRC is relaxed about using reasonable methods, and it publishes official average exchange rates you can use to keep things consistent year to year.

Example: Australian rental income taxed twice but relieved by credit

Amelia is UK-resident in 2025/26. She owns a rental unit in Brisbane.

1. Australia (source country): She files an Australian non-resident return. Australia taxes her net rental profit at non-resident rates. She pays A$5,000 in Australian income tax for the year.
2. UK (residence country): She must also include the same rental profit on her UK Self Assessment (SA106). Because UK rules treat mortgage interest differently, her UK taxable profit may not match the Australian figure. Whatever the UK tax works out to be on that item, she now claims FTCR for the Australian tax paid, limited to the UK tax due on that rental profit. Any excess Australian tax doesn’t create a refund in the UK.
3. If the periods don’t line up: Her Australian return covers 1 July to 30 June, which straddles two UK tax years. She time-apportions the income and the A$5,000 Australian tax so that the right proportions are credited in each UK year.
4. Time Apportionment. The UK tax year runs from 6 April 2025 to 5 April 2026. For Australian income and the related Australian tax, it’s reasonable to apportion approximately one quarter from the 2024/25 Australian return (6 April–30 June 2025) and approximately three quarters from the 2025/26 Australian return (1 July 2025–5 April 2026).

Bottom line: You still report the income in both countries. The DTA doesn’t remove filing duties; it prevents you paying tax twice by making the UK give a tax credit for the Australian tax, up to the UK tax due on the same income.

Planning Opportunities

Time your move to align with tax years

If you have any flexibility, aim to arrive in the UK soon after 6 April (the start of the UK tax year). It starts the clock cleanly for UK residency and, if you qualify, maximises access to the new four-year Foreign Income and Gains (FIG) regime from 6 April 2025. Conversely, consider leaving Australia just after 30 June to “close out” your Australian year neatly. This simple sequencing reduces messy overlap and admin. For assets, remember Australia’s departure rules on capital gains when you cease residency, as choices made at that point can affect both countries later.

Use the UK’s split year treatment on arrival

If you move part way through a UK tax year and meet the conditions, split year treatment divides the year into an “overseas part” and a “UK part”. Foreign income that arose before UK arrival generally falls outside UK tax, which prevents you being assessed in the UK on pre-arrival Australian income. Eligibility depends on defined “Cases” in the Statutory Residence Test, such as starting to have a UK home or starting UK work (which is most common for the people we speak with).

Leverage the new FIG regime (from 6 April 2025)

If you become UK resident after at least 10 consecutive tax years of non-UK residence, you can claim the FIG regime for up to four tax years. During claimed years, foreign income and gains are exempt from UK tax and can be brought to the UK without extra charges. Claims are made year by year via Self Assessment; you can skip a year and still claim later years within your four-year window. Note: you lose your UK personal allowance and the capital gains annual exempt amount for each year you claim FIG. In many cases those allowances are worth more than the FIG exemption, so run the numbers before claiming.

Restructure before you leave Australia

Before departure, review your portfolio and property:

1. Shares and managed funds: When you cease Australian residency, non-property assets are treated as sold at market value unless you elect to defer. Decide whether to crystallise gains on departure or defer and keep them within Australia’s CGT net for a later, real sale.
2. Property ownership and debt: Consider whether shifting ownership proportions (for example between spouses) or refinancing makes sense given the UK’s restriction of mortgage interest relief to a 20% tax credit on residential property, which can turn an Australian tax loss into a UK profit.

Mind the timing and the admin

The UK and Australian tax years do not match. Keep monthly records so you can time-apportion Australian income and the related Australian tax into the correct UK tax years when claiming Foreign Tax Credit Relief. Consistency matters, and HMRC accepts reasonable apportionment and official average exchange rates.

Quick example: making the credit work for you

You arrive in the UK on 1 September 2025, have Australian rental property income, meet split year treatment, qualify for the FIG regime.

1. Your Australian rental income from 6 April to 31 August 2025 sits in the “overseas part” and is outside UK tax under split year rules.
2. From 1 September 2025 to 5 April 2026 you claim the FIG regime, so that period’s foreign income and gains are also outside UK tax (though note the loss of your UK personal allowance may not be desirable).
3. You still meet your Australian filing duties, but in the UK first-year compliance is dramatically simpler.

Case Studies / Real Examples

Below are three anonymised composites that mirror the most common situations we see. Figures are rounded and the exchange rate assumed is A$2.00 = £1.00 for simplicity.

Case study 1: The Sydney landlord

Chloe moved to the UK in 2025 and is a higher-rate taxpayer. Her Sydney flat earns A$3,000 per month (A$36,000 a year). Annual expenses total A$18,000, including A$12,000 mortgage interest.

1. Australia: Net profit A$18,000. Non-resident tax at 32.5% ≈ A$5,850.
2. UK: Income £18,000. Deductions other than interest £3,000. UK “profit” before interest relief £15,000. Tax at 40% = £6,000. Mortgage interest relief is a 20% credit on £6,000 = £1,200. Initial UK bill £4,800.
3. Foreign tax credit: Australian tax paid (£2,925 equivalent) offsets the UK bill, leaving £1,875 to pay in the UK.

Takeaway: A property that is neutral in Australia can still create a UK liability because mortgage interest receives limited relief in the UK. Good record-keeping and consistent FX rates matter.

Case study 2: The remote consultant

Liam lives in Manchester and completes a project for a Melbourne client for A$10,000, all delivered from the UK.

1. Australia: Work performed in the UK and no permanent establishment in Australia, so no Australian tax.
2. UK: £5,000 self-employment income. Taxed under UK rules and subject to National Insurance.
3. Travel twist: A short business trip to Australia (for example, two weeks of meetings or site visits) does not, by itself, create a permanent establishment. In that case, profits remain taxable only in the UK. If Liam were to establish a fixed base or use a dependent agent in Australia, profits attributable to that Australian presence could be taxed there, with the UK giving credit.

Takeaway: For sole traders, the treaty means Australia does not tax your consulting profits unless you have a permanent establishment there. Keep dated timesheets, travel records, and any engagement letters to evidence where the work was carried out and whether any fixed base existed.

Wrapping It Up

Earning Australian income while living in the UK is both common and manageable. With the right plan, you can stay compliant in both countries, avoid paying tax twice, and keep your admin under control.

The essentials are straightforward: know your tax residency, understand what you need to report in each country, and use the Australia–UK Double Taxation Agreement correctly. Add in sensible timing (for moves and disposals), consistent currency conversion, and good records, and most of the heavy lifting is done.

If you’d value an expert eye on your situation, we’re here to help.

If you’re an Aussie in the UK still tied to home financially, get in touch with us at No Worries Accounting. We’ll make sure your tax is sorted on both sides of the world.