Originally posted on: 7 September 2025
Updated on: 11 November 2025
When Emma, a Kiwi software developer, moved to London on a Youth Mobility visa, she thought she’d cracked the perfect setup. Keep the dream job back in Auckland, get paid in NZ dollars, and swap her home office view of Rangitoto Island for a cosy flat in Shoreditch. No hunting for work in a new country, no awkward probation periods, no fuss.
But then the first pay cheque hit her UK bank account and a niggling question popped up: “Hang on… do I need to pay UK tax on this?”
In simple terms it’s a hard “Yes”. Living and working in the UK makes you a UK tax resident, regardless of where your employer is based. And because her New Zealand company had no UK presence, there was no one to deduct PAYE tax or National Insurance for her.
So how does this work, and what does Emma need to do? That’s where DPNI – the Direct Payment scheme – steps in. It’s HMRC’s way of saying: “If your overseas employer can’t run payroll in the UK, then you’ll have to do it yourself.”
For most Australians and New Zealanders moving to the UK, they realise that if they are working in the UK, then they need to pay tax in the UK. Some think they are fine if they keep paying tax on that income back home, and a handful think they have stumbled across an awesome little tax loophole that allows them to pay no tax at all. They assume that being paid from abroad means they can sidestep the UK taxman.
In reality, HMRC’s radar is global, and the DPNI scheme is how you stay compliant without giving up your overseas job.
Introduction
For many Australians and New Zealanders heading to the UK, the ideal scenario is simple: keep your existing job back home, jump on a plane, and start your London adventure without missing a beat. Whether you’re on a Youth Mobility visa, an Ancestry visa, or tagging along with a partner, staying on your overseas employer’s payroll feels like the best of both worlds – income security with a change of scenery.
But here’s the catch: if your employer doesn’t have a UK office, there’s no local payroll system to automatically deduct PAYE tax or National Insurance from your salary. HMRC still expects its cut, and it’s up to you to make that happen.
That’s where DPNI (Direct Payment scheme) comes in. It’s the official mechanism that lets you stay employed by your Australian or Kiwi company while making sure your UK tax and NI obligations are met. In other words, DPNI bridges the gap between your overseas job and the UK tax system, so you can focus on enjoying life in Britain without worrying about falling foul of HMRC. And for paying tax on your income back home? The moment you leave Australia / NZ you ideally want to make sure your tax residency ceases then also. Being tax resident of one country at a time makes things SO MUCH easier for you. Our previous blogs cover tax residency in much more detail – the Australian tax residency rules are fair and straightforward, and NZ’s rules (while stuck in the 1800’s) are easy enough to follow while also being characteristically out-dated.
What is DPNI (in Plain English)?
Put simply, DPNI stands for Direct Payment of National Insurance – though in practice it covers both Income Tax and NI. Think of it as HMRC’s DIY payroll system for people whose employer can’t run a UK payroll.
Here’s how it works: under a normal UK job, your employer runs PAYE, deducts tax and NI from your salary, and pays it straight to HMRC. Easy. But if your employer is based in Sydney or Wellington with no UK presence, there’s no PAYE in place. HMRC still wants its deductions, so they hand you the responsibility.
Under a DPNI scheme, you effectively become your own payroll manager. Each time your overseas employer pays you, you work out the UK tax and NI that should be deducted, then send it on to HMRC. The net effect is the same as if you had a UK employer – just with a bit more admin on your side.
And let’s be clear: this doesn’t change your employment status. You’re not suddenly self-employed or a freelancer. You remain an employee of your overseas company with the same contract, benefits, and reporting lines. DPNI is simply the mechanism that makes sure HMRC gets its share while you’re working in the UK.
And of course we don’t just feed you to the wolves, the team at No Worries Accounting can help with all of this – all you need to do is keep getting paid by your employer, and we’ll look after all the HMRC reporting.
How the DPNI Scheme Works (Step-by-Step)
So what does running your own payroll actually look like? Here’s the process in plain English:
1. Registration with HMRC
You start by registering for a Direct Payment PAYE scheme. HMRC will set you up with a PAYE reference number and send instructions. This is essentially the “green light” to begin operating payroll for yourself. Don’t leave it too late – it can take 6–8 weeks to get everything processed, so the earlier you apply after landing in the UK, the smoother things will be.
2. Monthly payroll process
Once you’re registered, each month you’ll:
- Calculate how much UK Income Tax and National Insurance should be taken from your gross salary (the amount your overseas employer pays you).
- Deduct that tax from yourself.
- Remit it directly to HMRC by their deadlines.
3. Software & tools
HMRC provides free software called Basic PAYE Tools, which allows you to run payroll, create payslips, and file your monthly submissions. That said, it’s not exactly user-friendly. Many people prefer to use an accountant or payroll provider (like us at No Worries Accounting) to handle the setup and ongoing calculations.
4. Ongoing obligations
Just like any UK employer, you’ll need to:
- Keep payroll records.
- Issue yourself payslips.
- File Real Time Information (RTI) reports with HMRC.
- Complete end-of-year submissions.
It might sound like overkill when it’s just you, but HMRC still expects all the same steps as if you were running payroll for a whole team.
5. Think of it as “being your own HR department”
With DPNI you’re both employee and employer for UK tax purposes. You’ll still get your gross salary from your overseas company, but you’re the one making sure the right amounts end up in HMRC’s bank account.
That’s where we can help. At No Worries Accounting, we take the headache out of the process – helping you set up the DPNI scheme for you, running monthly payroll, filing submissions, and making sure everything is spot-on with HMRC. That way, you can get on with your UK adventure knowing the admin is sorted.
Why People Use DPNI Instead of Going Solo
You might be wondering, why go through the hassle of DPNI at all? Why not just switch to self-employment in the UK and invoice your overseas company like a contractor? For some people that can work, but for many Aussies and Kiwis it’s not the right fit. Here’s why DPNI can be the smarter choice:
1. Professional & legal restrictions
Certain professions simply don’t allow you to operate as a freelancer. Take lawyers, for example – in New Zealand or Australia, you generally need to be attached to a firm for practising rights. Accountants, financial advisers, and other regulated roles are similar. Staying as an employee via DPNI keeps everything above board without jeopardising your professional standing.
2. Keep your home-country benefits
By remaining on your employer’s books, you continue to accrue the benefits that matter: Aussie superannuation contributions, KiwiSaver top-ups, long-service leave, share options, or simply the comfort of continuous employment. If you “go solo” as a UK contractor, those benefits vanish overnight.
3. Simplicity for short stints
If you’re only in the UK for a year or three, why blow up your whole employment setup for what is essentially a temporary adventure? DPNI lets you keep things stable and reversible – when you return home, you slot straight back into your job without needing to renegotiate contracts or reapply for roles.
4. No UK setup headaches for your employer
If you didn’t use DPNI, the alternative might be for your overseas employer to register a UK payroll or even a UK entity just for you. That opens up the risk of creating a “permanent establishment” in the UK and adds a ton of admin and cost. Most Aussie and Kiwi firms won’t go there for a single employee abroad. DPNI lets them keep paying you as usual, while you handle your UK tax.
In short, DPNI is the “have your cake and eat it too” option. You get to stay an employee of your home-country company, keep your benefits, and still meet all your UK obligations – without dragging your employer into UK employer law.
Who Actually Uses DPNI? (Scenarios)
The DPNI scheme might sound a bit niche, but in practice it fits a wide range of real-life situations. Here are some of the most common ones we see among Aussies and Kiwis in the UK:
1. Working holiday makers keeping their old job
Thanks to the Youth Mobility Scheme, Australians and New Zealanders up to age 35 can live and work in the UK for up to three years. Many take the opportunity to keep their job back home and just log in from London. DPNI makes this possible without their employer needing to set up a UK office.
2. Digital nomads with overseas employers
Picture the coder in a Shoreditch café working for a San Francisco startup, or the marketing consultant dialling into meetings with a Tokyo firm. If you’re physically in the UK, you’re a UK tax resident – so even if your pay comes from abroad, DPNI is the tool that keeps things compliant.
3. Secondments without a UK branch
Sometimes Aussie or Kiwi companies send an employee to the UK informally, without establishing a local entity. You stay on the payroll back home, but from HMRC’s perspective you’re working in the UK. DPNI is the bridge that makes that arrangement work smoothly.
4. Lawyers and other regulated professionals
Professions like law and accounting often require you to remain an employee of a firm for practising rights. For example, a Kiwi lawyer in London might still need to be tied to their NZ firm. DPNI allows them to keep that employment intact while paying UK tax as required.
5. Spouses and partners tagging along
If your partner gets a job in the UK and you move with them, you don’t necessarily need to quit your old role. Plenty of Aussies and Kiwis negotiate with their employer to keep working remotely. With DPNI in place, you can live in the UK, stay on your home-country payroll, and keep things legal with HMRC.
Bottom line: if you’re in the UK, physically working here, and your employer doesn’t have a UK presence, DPNI is almost certainly the scheme you need. It’s become especially popular with Australians and New Zealanders because it allows them to keep their home-country career on track while enjoying their UK adventure.
Common Challenges with DPNI
As useful as DPNI is, it’s not all smooth sailing. There are a few quirks and headaches you’ll want to be aware of before diving in:
1. Cashflow management
Unlike PAYE, where tax is whisked away before you see your money, under DPNI your overseas employer pays you the full gross amount. It’s then up to you to set aside the tax and NI before HMRC’s deadlines. If you don’t stay disciplined, it’s very easy to dip into those funds and find yourself short when the payment is due.
2. Lack of traditional payslips and P60s
Banks, landlords, and mortgage lenders in the UK are used to seeing official payslips and year-end P60s. With DPNI, you can generate your own, but they don’t always carry the same weight. You might find yourself explaining the scheme to a confused mortgage broker or handing over HMRC submission receipts as proof of income.
3. The admin burden
Running payroll – even a one-person payroll – means you’re suddenly your own HR department. You’ll need to:
- File Real Time Information (RTI) reports every month.
- Keep payroll records.
- Stay on top of submission deadlines.
It’s not impossible, but it can be a time sink. Many people choose to have an accountant handle the ongoing payroll so they can focus on their UK adventure rather than spreadsheets.
At No Worries Accounting, we’ve helped plenty of Aussies and Kiwis navigate cross border tax challenges. From setting up the DPNI scheme to producing payslips that lenders are happy with, we can smooth out the rough edges so you can enjoy the benefits of keeping your overseas job without the stress of managing the admin yourself.
Alternatives to DPNI (and Why Most Don’t Fit)
DPNI isn’t the only way to deal with UK tax when working for an overseas employer – but for most Aussies and Kiwis, it’s the most practical. Here’s why the other options usually fall short:
1. Registering as self-employed
One option is to resign from your role and re-engage as a contractor, invoicing your old employer from the UK. Many people do this by registering as a sole trader. From a compliance perspective, that works fine – HMRC is perfectly happy with it.
The trade-off is what you leave behind: employee benefits such as superannuation/KiwiSaver contributions, share schemes, or long-service leave stop the moment you switch status. You’re also running your own small business, with all the admin that comes with it.
For some, that flexibility is exactly what they want. But if your goal is to keep your overseas job intact, preserve your employee perks, and simply pay the right UK tax, DPNI usually makes more sense.
2. Employer registering for UK PAYE
There’s nothing stopping a foreign company from voluntarily running a UK payroll. But for a single employee, most businesses won’t bother. It’s costly, complex, and risks creating a “permanent establishment” in the UK, which brings corporate tax consequences they don’t want.
3. Employer of Record (Umbrella company)
Another route is to use what’s called an Employer of Record (EOR) or umbrella company. In this setup, the umbrella company technically employs you in the UK, runs PAYE on your behalf, and then invoices your overseas employer for the cost.
It’s fully compliant and can make things easier if your employer wants nothing to do with UK payroll. But it comes at a price – umbrella arrangements are generally more expensive and less tax-efficient than running DPNI yourself.
That said, for some people (or for employers who want everything handled at arm’s length) it can be the right fit. We even run our own version, No Worries Red Umbrella, for those scenarios where it’s the simplest way forward. But for most Aussies and Kiwis working temporarily in the UK, DPNI usually strikes the better balance between cost, control, and compliance.
4. Do nothing
We sometimes hear, “If I’m paid overseas, why would HMRC know?” This is the most dangerous option. Working in the UK without paying UK tax is illegal. HMRC does have cross-border reporting systems and, sooner or later, non-compliance catches up with you – with penalties attached.
For most Aussies and Kiwis, DPNI is the sweet spot: it’s affordable, it keeps you in proper employee status, and it avoids dragging your employer into UK compliance they don’t want.
Immigration & Legal Side
One more vital point: tax compliance is only half the story. You also need the legal right to work in the UK. Being paid from abroad doesn’t exempt you from UK immigration rules.
1. Visa and work rights
Australians and New Zealanders have a few great options:
- Youth Mobility Scheme (YMS) – up to three years’ work rights, perfect for keeping your old job while living in the UK.
- UK Ancestry visa – five years of work rights if you’ve got a UK-born grandparent.
- Skilled Worker or Secondment visas – more formal routes where your employer sponsors you (less common in the DPNI context).
And of course, if you hold a British or Irish passport, you’ve got an automatic right to work.
2. Tax residency back home
Once you move to the UK, you usually stop being tax resident in Australia or New Zealand. That means your salary is taxed in the UK, not at home. Keeping things simple, one country of residence at a time, avoids double-tax headaches.
3. UK employment rights
Here’s a nuance: while you’re an employee of your overseas company, many UK employment protections (like unfair dismissal rights) won’t apply in the same way. But UK tax and National Insurance rules absolutely do apply – HMRC doesn’t care where your contract is based.
“…the service has been fabulous.”
Ah Mike, we think you’re pretty fabulous too!
Summary / Key Takeaways
If you’re living and working in the UK for a non-UK employer, you have three main options:
- Register as self-employed → simple and compliant, but you lose employee benefits and effectively turn your old job into a freelance gig.
- Use an umbrella company (Employer of Record) → compliant and hands-off, but usually more expensive and less tax-efficient.
- DPNI (Direct Payment scheme) → stay on your overseas employer’s books, keep your benefits, and run your own UK payroll with HMRC.
For most Australians and New Zealanders, DPNI is the sweet spot. It preserves your employment status, avoids dragging your employer into UK compliance, and keeps you fully above board with HMRC.
Yes, it’s a bit of admin – but far better than risking fines, back taxes, or awkward conversations with your boss. And if you don’t want the hassle, that’s exactly where No Worries Accounting can step in to manage the setup and monthly filings for you.