Working for an overseas employer with no UK payroll

Q: What does this look like in practice?

Illustration only. Priya moves to Bristol in June and keeps her job with a software company in Singapore, which has no UK office, branch or staff. She is UK resident, paid monthly into her Singapore account, and the UK has no social security agreement covering her. HMRC agree a direct payment scheme for tax and primary NICs. Each month, on or before the date her salary arrives, Priya (or her accountant) sends an FPS showing her gross pay, the tax due under her code and her employee NICs. Her first quarter ends on 5 July. By 19 July she pays HMRC the tax and NICs calculated for June. For the quarter to 5 October she pays by 19 October, and so on. No employer NICs are paid, because her employer has no UK presence and no agreement imposes employer obligations. If the Singapore company later opens a UK office, the presence test at PAYE81610 is likely to be met and the company itself would need to register as an employer and take over PAYE.

Q: What mistakes do people make?

Assuming Self Assessment is enough. PAYE81605 records that overseas employers often assume Self Assessment deals with the employee's UK liability, but that is not so where PAYE should run. Where direct collection applies, HMRC expect in year reporting. Missing a UK presence. A UK registered office, a rented desk or a branch can create a presence, and HMRC will then look to that presence to operate PAYE even if pay is sent from abroad (PAYE81610). Ignoring a UK end user. If you work under the direction of a UK company, section 689 may put PAYE on that company rather than on you. Treating every foreign employer the same for NICs. Whether employer contributions are due turns on the employer's presence and on any social security agreement, not just on where the payroll is run. If HMRC opens a check into your return, tax investigation insurance pays your accountant's fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

If you live and work in the UK for a foreign employer that has no branch, office or other tax presence here, the employer is usually outside the reach of PAYE, so HMRC can require you to run PAYE on your own pay under the direct collection rules in regulations 141 to 147 of the PAYE Regulations. You report each payment in real time, as an employer would, and pay the tax and your own Class 1 National Insurance to HMRC every quarter.

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Why does PAYE not simply apply to my foreign employer?

PAYE has a territorial limit. HMRC’s PAYE Manual at PAYE81610 explains that, following the Oceanic case, PAYE only reaches an employer with a tax presence in the UK, meaning something similar to a branch, agency, office or establishment with a UK address where HMRC can contact the employer and enforce compliance. HMRC does not treat an overseas employer as having a tax presence simply because it has staff living here, and it gives the example of sales staff who travel from their own homes to seek orders. Using UK banks or lawyers does not create a presence either.

So a software developer working from home in Leeds for a company based in Canada, with no UK entity and no UK office, will usually have no UK employer obliged to deduct tax. The earnings are still taxable in the UK if the employee is UK resident. Direct collection is HMRC’s mechanism for collecting that tax during the year rather than waiting for a Self Assessment return.

Two situations take the case out of direct collection altogether. First, PAYE81511 notes that the overseas employer can choose to operate PAYE voluntarily. Second, if you actually work for a UK business, such as a UK group company or client, section 689 ITEPA 2003 can make that UK business operate PAYE instead. That is covered on our page on host employer PAYE under section 689.

What does the law say about direct collection?

Regulation 141 of the Income Tax (Pay As You Earn) Regulations 2003 says that where HMRC are of the opinion that deducting tax by reference to the tax tables is impracticable, the direct collection procedure in regulation 142 applies, unless HMRC make special arrangements instead. Regulation 142 then requires the employee, on receiving each payment, to deliver the real time information an employer would normally send, as if the employee were the employer. The employee can object in writing within 30 days of receiving HMRC’s written notification that direct collection applies.

PAYE75040 sets out when HMRC will use a direct payment arrangement: there is assessable employment income, a likely tax liability because of the level of income, no employer able to operate PAYE (overseas employers with no UK presence are given as an example), and a taxpayer who is willing and able to operate PAYE correctly. If the employee is not willing or capable, HMRC will deal with the income through Self Assessment instead.

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Which type of scheme will HMRC set up?

HMRC’s guidance on when an employee operates PAYE on their own income describes three scheme types, all set up by the employee rather than the employer:

Scheme	When it is used
Direct Payment (Income Tax and NICs)	The employee owes PAYE Income Tax and primary (employee) Class 1 National Insurance
Direct Collection (Income Tax only)	Only Income Tax deduction is due
Direct Collection (employee only NICs)	Only primary Class 1 National Insurance is due

PAYE20100 confirms that the combined tax and NIC scheme is the one used for an individual employed by a foreign employer with no address in the UK from which earnings are paid. Registration is by phone or post through HMRC, who arrange a call back to help you register. Once the scheme exists you will have a PAYE reference and an Accounts Office reference in the same way as an employer does; our guide to employer PAYE reference numbers explains how they are used.

What National Insurance is due if my employer is abroad?

Class 1 National Insurance has two parts: the employee’s primary share and the employer’s secondary share. HMRC’s 2026 to 2027 employer further guide (CWG2) says that where the employer is not resident, not present and has no place of business in the UK, the employer does not have to pay employer contributions, but the employee’s contributions must still be paid. PAYE75030 explains that where there is no legal responsibility on the employer, it is the employee’s responsibility to register a scheme and pay.

There are three important exceptions:

Social security agreement countries. If you hold a certificate of coverage from a country the UK has an agreement with, showing you pay into that country’s scheme only, no UK Class 1 contributions are due for that period. Our page on A1 certificates and social security abroad explains how these work.
Agreements with employer obligations. CWG2 says an employer with no UK presence must still pay employer Class 1 contributions where the employee is covered by one of the agreements that include employer obligations. In that case the employer must register, although the employee can agree to register and pay both shares on the employer’s behalf.
The first 52 weeks. CWG2 says contributions are not payable for the first 52 weeks, starting from the first Sunday after arrival, for an employee who does not normally live or work in the UK and is sent here temporarily by an overseas employer with a place of business outside the UK, where the employee comes from a country with no social security agreement.

How do I report and pay each quarter?

Under regulation 142 you send a Full Payment Submission for each payment you receive, using payroll software or HMRC’s free tools, just as an employer would. The payroll mechanics are the same as those in our guide to FPS and EPS returns. If only National Insurance is due, HMRC’s guidance says you report gross earnings for NICs, enter zeros in the taxable pay and tax fields, and enter code NT in the tax code field because it is mandatory.

Regulation 143 requires you to keep a deductions working sheet recording each payment, the date received and the total to date, together with free pay and total tax to date at the last payment in each quarter. Regulation 144 then requires you to pay the increase in total tax for each tax quarter within 14 days after the quarter ends. The tax quarters, defined in regulation 2, run 6 April to 5 July, 6 July to 5 October, 6 October to 5 January and 6 January to 5 April, so the payment dates fall on 19 July, 19 October, 19 January and 19 April. If total tax falls in a quarter, for example after a code change, you can deduct the excess from a later quarter’s payment or reclaim it.

What happens if I do not pay or report properly?

Regulation 147 lets HMRC give you a notice requiring a return of the tax due for a quarter within 14 days where you have paid nothing, or HMRC are not satisfied you paid the full amount. HMRC can then certify and recover the tax using the same powers it uses against employers. PAYE75010 also explains that HMRC can end a direct payment arrangement where the taxpayer has failed to operate PAYE properly, and the taxpayer will then receive a Self Assessment return after 5 April. Where National Insurance is still due, the taxpayer must continue to calculate and pay contributions quarterly even after the tax side moves to Self Assessment.

What does this look like in practice?

Illustration only. Priya moves to Bristol in June and keeps her job with a software company in Singapore, which has no UK office, branch or staff. She is UK resident, paid monthly into her Singapore account, and the UK has no social security agreement covering her. HMRC agree a direct payment scheme for tax and primary NICs.

Each month, on or before the date her salary arrives, Priya (or her accountant) sends an FPS showing her gross pay, the tax due under her code and her employee NICs.
Her first quarter ends on 5 July. By 19 July she pays HMRC the tax and NICs calculated for June.
For the quarter to 5 October she pays by 19 October, and so on.
No employer NICs are paid, because her employer has no UK presence and no agreement imposes employer obligations.

If the Singapore company later opens a UK office, the presence test at PAYE81610 is likely to be met and the company itself would need to register as an employer and take over PAYE.

What mistakes do people make?

Assuming Self Assessment is enough. PAYE81605 records that overseas employers often assume Self Assessment deals with the employee’s UK liability, but that is not so where PAYE should run. Where direct collection applies, HMRC expect in year reporting.
Missing a UK presence. A UK registered office, a rented desk or a branch can create a presence, and HMRC will then look to that presence to operate PAYE even if pay is sent from abroad (PAYE81610).
Ignoring a UK end user. If you work under the direction of a UK company, section 689 may put PAYE on that company rather than on you.
Treating every foreign employer the same for NICs. Whether employer contributions are due turns on the employer’s presence and on any social security agreement, not just on where the payroll is run.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 24 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.