Running a Business in Two Countries: UK & Aus

Introduction

I’ve had quite a few conversations in the past year with Australians living in the UK who are running businesses across both countries. The questions tend to follow a familiar pattern: “Will my business be taxed in both countries?”, “How do I move money between my Australian company and my UK one?”, and “What’s the best way to pay myself when the income’s earned overseas?”

For many freelancers and small business owners, it starts simply enough, an Australian company that’s still trading while they’ve set up life in the UK. But things quickly get complicated once income, clients, or contracts start crossing borders. The key challenges we see are around permanent establishment risks (not accidentally creating a taxable presence in the wrong country), working out where profits should be taxed, and moving money between your Australian and UK businesses in a tax-efficient way.

In this article, we’ll unpack those issues, focusing on how the UK-Australia Double Tax Agreement applies, what triggers a permanent establishment, and how to structure things so you can move funds between companies cleanly. Whether it’s a UK company invoicing your Australian one, or simply paying yourself from profits earned abroad, setting it up right from the start can save a lot of tax, and a lot of headaches, later on.

Who Is This For?

This guide is for Australians living in the UK who maintain business interests in both countries. Maybe you’re running a UK limited company while still owning a small business back in Australia. Or perhaps you’re contracting through a UK company but still have clients back home. You might even have income flowing between your Australian and UK entities. If you’re essentially living under one tax system while earning money under another, we’re talking to you. The goal here is to help you understand how UK and Australian tax rules interact for cross-border business activities – so you can structure things smartly and avoid nasty surprises when tax time rolls around.

A Quick Note for Sole Traders

This article focuses mainly on Australians in the UK who run their own limited companies in both countries. If you’re a sole trader, the position is usually more straightforward. When you’re living and working in the UK, even if your clients are Australian, your income is simply UK sole trader income taxed under UK rules. Likewise, if you’re back in Australia as a sole trader working for UK clients, it’s just Australian sole trader income. The double tax agreement still ensures you don’t get taxed twice, but in most cases, there’s no cross-border company structure to worry about.

Permanent Establishment – Don’t Trigger an Unwanted Tax Presence

One of the first concepts to get your head around is the idea of a permanent establishment (PE). In plain English, a permanent establishment is a taxable presence that your business can inadvertently create in the other country. If your business is viewed as having a PE in the UK or Australia (whichever is “the other” for you), that country will want a slice of your business profits.

Under the UK–Australia Double Tax Agreement, business profits are generally taxed only in the country where the business is resident – unless the business has a permanent establishment in the other country. In other words, if you’re an Australian business owner now living in London, Australia keeps taxing your business profits as usual unless you do something that makes HMRC say, “Hang on, you’re doing business in the UK now too.” The same logic works in reverse for a UK company creating a presence back in Australia.

So, what counts as a permanent establishment? Typically, it means having some kind of fixed place of business in the other country – an office being the typical example. It can also be triggered if you have a dependent agent in the other country who can negotiate or sign contracts on your behalf. For example, if your UK company hires a representative in Australia who regularly seals deals for you, that could give the ATO grounds to argue that your UK company now has a taxable presence there.

The bar for creating a PE isn’t extremely low – a few client meetings or a PO box abroad won’t do it – but it’s something to stay mindful of as your business activities expand across borders.

Why does PE status matter so much? Because if you do trigger one, you’ll need to start paying corporation tax on the profits attributable to that presence in the second country. For instance, an Australian company that inadvertently establishes a PE in the UK could find HMRC taxing part of its profits in the UK. You’d then face the complexity of preventing both countries from taxing the same profits – a situation best avoided from the outset.

Tip: If you’re running an Australian business remotely from the UK, try not to base key operations in the UK. Simply moving yourself (the owner) doesn’t automatically make your company UK-resident, as long as the real decision-making and management stay in Australia. But here’s the catch: in most small businesses, you are the decision-maker. If you’re making all the strategic calls from your home office in London, HMRC could argue the company’s “mind and control” have shifted to the UK. Consider formally delegating decision-making to someone you trust in Australia, and hold important board meetings on Australian soil. These steps help demonstrate that management remains in Australia, so only one country taxes your profits.

If that’s your setup, think about formally delegating decision-making to someone you trust in Australia, or holding important board meetings on Australian soil. These steps help show that the company’s management remains in Australia. By planning ahead, you’ll keep your business’s tax residency clear and ensure that only one country gets to tax your profits – not both.

Where Are Your Profits Taxed? (Understanding the UK–Aus Tax Split)

Closely tied to the permanent establishment issue is the question of who gets to tax your business profits. Fortunately, the rules are fairly logical once you know them. As a general principle, each country taxes the profits of businesses that are resident there, and the Double Tax Agreement (DTA) makes sure you don’t pay tax twice on the same income.

So if you have a UK-registered company doing work in the UK, the UK will tax its profits. If you also continue running an Australian company, Australia will tax those profits. You won’t get taxed on Australian company profits in the UK unless you’ve created a UK permanent establishment. Likewise, Australia shouldn’t tax your UK company’s profits unless that UK company has effectively set up camp in Australia.

What does this mean in practice? Keep it simple. If you’re living in the UK and providing your own services (contractor/freelancer work), you typically don’t need to set up a new Australian company just because you’ve landed an Australian client. Invoice through your UK limited company and, if useful, use a banking facility like Wise to open AUD and GBP local details so Australian clients can pay you easily. Those receipts are UK-company income, taxed in the UK.

When does an Australian company still make sense?

1. Where you already have an Australian entity with existing operations – e.g., staff, subcontractors, leases, long-term contracts – that you’re maintaining.
2. Where there’s genuine on-the-ground activity in Australia that could otherwise create PE risk for your UK company.

If you try to run everything through one company that straddles both countries without thinking it through, things can get messy. For example, using your Australian company for a UK project while you’re London-based can look like it’s doing business in the UK (potentially creating a UK PE), inviting HMRC to tax part of those profits. Conversely, a UK company substantially managed from Australia or closing deals through an Australian agent may look like it has an Australian PE, inviting ATO tax on the Australian-attributable profits.

The takeaway: be deliberate about which entity earns which income. If you’re just selling your own time from the UK, bill via the UK company and keep the Australian side out of it. Maintain an Australian company only where there’s a real Australian footprint to support. Keeping the structure clean at the start is usually the easiest way to ensure each country taxes only its share.

Moving Money Between Australia and the UK – Paying Yourself the Smart Way

Once you’ve decided where each business sits and where the profits should be taxed, the next question is obvious: how do you actually get the money across?

This is where a lot of small business owners and contractors can over-complicate things. If your Australian company is generating profits while you’re living in the UK, how do you move that money into your hands, or into your UK company, without triggering unnecessary tax or payroll complications?

The good news is, there are legitimate and efficient ways to do this.

Option 1: Your UK Company Invoices Your Australian Company

One of the cleanest methods is for your UK limited company to invoice your Australian company for management, consultancy, or service fees. This transfers funds from Australia to the UK as a genuine business expense, fully deductible for the Australian company. Your UK company then recognises that income in the UK and pays UK corporation tax on its profits, which you can later take out as salary or dividends.

This structure makes it simple to draw income in the UK (where you live and pay tax), while keeping your Australian company compliant back home. It’s important that the invoices represent real, commercial services, not just an arbitrary transfer of funds, and that the amounts are reasonable for the work performed.

Option 2: Paying Yourself Directly (Salary or Dividends)

Alternatively, you can draw funds personally from your Australian company, either as a salary or as dividends.

1. Salary (when you’re not Australian tax resident): If your Australian company pays you while you’re living and working in the UK, that pay is generally UK-taxable only. Australia typically doesn’t tax non-residents on employment performed outside Australia, so PAYG withholding isn’t normally required. In the UK, you’ll be taxed under PAYE (with National Insurance), and HMRC may require your Australian employer to register and operate PAYE even without a UK presence. You could also look to use the UK DPNI scheme to handle your UK tax and NI obligations, or in short-term cases, simply declare the income on the foreign income pages of your tax return. Look at other options first though – pulling a salary from an Australian company while UK tax resident tends to make life more complicated than it needs to be.
2. Dividends: Dividends from an Australian company to a UK-resident are taxed in the UK, with a credit only for any Australian withholding tax deducted. Franking credits aren’t creditable in the UK (they’re Australia’s mechanism for recognising company tax already paid), so you don’t get UK relief for that underlying Australian company tax. Franked dividends are often exempt from Australian withholding, which means there’s no foreign tax credit to use in the UK – you’ll just pay UK dividend tax in full. Net result: Aussie dividends can be less efficient than routing profits to a UK company and paying yourself under UK rules.

Option 3: Keeping Each Business Separate

In some cases, the best approach is simply to keep the two businesses fully separate, drawing your income from whichever company aligns with where you’re living and working at the time. That means you let profits accumulate in the Australian company while you’re abroad, and only draw them when you return or can do so efficiently.

The UK–Australia Double Tax Agreement – Your Safety Net

Throughout this discussion, we’ve mentioned the UK–Australia Double Tax Agreement (DTA) several times. Think of it as your safety net – it’s what ensures you don’t pay tax twice on the same income. It’s also the main reason running a business across both countries is even feasible.

Here’s how it helps in practice:

1. Clarity on taxing rights: The DTA sets out who taxes what. Business profits are taxed in the company’s country of residence unless there’s a permanent establishment in the other country. Employment income is generally taxed where the work is physically performed; your country of residence may also tax it, with a foreign tax credit to avoid double taxation. If you’re not Australian tax resident and all your duties are in the UK, Australia would typically not tax that salary (so no PAYG), while the UK taxes it under PAYE. Dividends, interest, and royalties have shared taxing rights – the source country may levy withholding tax (often capped around 0-15%), and then your country of residence taxes the income with credit for any withholding. Note that Australian franking credits aren’t creditable in the UK, so franked dividends (often 0% Aussie withholding) can still leave you paying UK dividend tax in full. The net effect: you usually pay about the higher of the two countries’ rates on a given income stream, not both added together – the DTA stops your income becoming a tax piñata for both HMRC and the ATO to have a crack at.
2. Foreign tax credits: In your tax returns, the DTA’s benefits show up as foreign tax credit relief. For instance, if you’ve paid $5,000 tax in Australia and the UK also taxes that same income, HMRC will usually give you up to $5,000 credit against your UK tax bill. You’ll only pay the difference if the UK tax is higher – or vice versa with Aussie credits. It takes a bit of extra paperwork, but this mechanism is what actually neutralises double taxation.
3. Dual-residency tie-breaker: Sometimes, people end up tax resident in both countries – often in the year they move from one to the other. The treaty includes “tie-breaker” rules to determine a single country of residence for treaty purposes, based on where you have a permanent home, personal and economic ties, and other factors. This can significantly affect (and simplify) how your income is taxed and which treaty provisions apply.

The main thing to remember is that the DTA doesn’t apply automatically – you often need to claim the relief. That might mean informing a payer not to withhold tax or claiming foreign tax credits when you file your return. The rules can be fiddly, so it’s worth getting professional guidance the first time around. But the important bit is this: the agreement exists precisely to protect people like you – Australians living in the UK with income on both sides of the world. As long as you tick the right boxes and file the right forms, you shouldn’t be paying tax twice on the same dollar (or pound) of income.

Conclusion

Running a business across both the UK and Australia isn’t something to leave to chance. Between permanent establishment rules, tax residency, and the practicalities of shifting money between countries, there’s a lot to line up – but it’s all manageable with a clear structure and the right advice.

If you plan it properly, you can usually avoid double taxation, make full use of the UK–Australia Double Tax Agreement, and move money between entities in a way that makes sense for where you live and work. It’s about setting things up once, correctly, so you can focus on your business, not your tax return.

For some people, the best option is to run everything through a UK limited company and have it invoice their Australian company for services. For others, it’s simpler to keep both entities separate and draw income from whichever side of the world they’re based in at the time.

The key takeaway? Don’t guess. The right approach depends on where your business decisions are made, how you draw income, and what your long-term plans look like.

At No Worries Accounting, we work with Australians living and working in the UK every day, helping them navigate this exact balance – from limited company setups to cross-border tax filings and everything in between. It’s all part of making sure your business runs smoothly on both sides of the world.