Financial planning for British digital nomads: a short guide (Pt 1)

This communication is for informational purposes only and is not intended to constitute, and should not be construed as investment advice, investment recommendations or investment research. You should seek advice from a professional adviser before embarking on any financial planning activity. Whilst every effort has been made to ensure the information contained in this communication is correct, it is subject to change and we are not responsible for any errors or omissions.

In 2023 there will be an estimated 35 million digital nomads worldwide, with British nationals making up 8% of the total. Common careers for these individuals include consulting, marketing, content creation and digital design.

Digital nomads are not just young people. Indeed, the 40-59 age group comprises 35% of the global community. Many are drawn to the idea of experiencing different cultures and cuisines, especially if their work can be done remotely from anywhere.

Yet being a digital nomad brings its challenges. Not only are you constantly adapting to a new environment, but your financial plan can get tied in knots due to different tax rules in various countries. How do you deal with income tax, pensions, and other areas when you are unsettled?

Below, our team at Scottsdale offers this short guide to financial planning for digital nomads – with a particular focus on Spain (our home turf). We hope this content is helpful. If you want to discuss your financial plan with us, please get in touch to arrange a no-obligation financial consultation, at our expense:

+34 966 460 407

Visas and digital nomads

Broadly speaking, a digital nomad is someone who travels frequently and works remotely using the internet. They typically have no fixed office location – instead working in coffee shops, co-working spaces or public libraries.

The digital nomad life brings many benefits including higher productivity (you want to get your work done so you can explore!), greater adaptivity of your brain to change and more time to do the things you love. However, there are some drawbacks to consider.

One of them is navigating visas. Many countries allow you to visit without a visa (or with a tourist visa) but are strict about not letting you work during your stay. This can create problems for digital nomads, since they may not wish to go through the hassle and expense of getting a business visa for each country they want to visit.

Spain is different in this respect. It offers a 1-year Digital Nomad Visa which British people can apply for, letting them gain up to 20% of their income from Spanish firms. The income threshold is set at 200 per cent of the country’s monthly minimum wage.


Paying tax as a British digital nomad

As a digital nomad, your income situation can be complex. Perhaps you derive most or all of it from clients in the UK, but you work in different countries overseas. Or, maybe you pick up new clients in different locations as you move around – resulting in income from multiple countries and in multiple currencies.

From the UK’s standpoint, your residency status plays a primary role in whether your income is subject to tax in the UK. If you are deemed “non-resident” (e.g. you spent less than 183 days in the UK in a given tax year), then your income is likely not subject to UK tax.

Instead, you may need to pay income tax in your new country of residence (with certain exceptions, such as Saudi Arabia). However, this can create a grey area for digital nomads since it can be difficult to determine residency status due to frequent moving around.

Citizens from the European Economic Area (EEA) can live and work in Spain without a visa. However, this does not encompass UK nationals since Brexit. As such, British nationals will need a Digital Nomad Visa or other relevant visa to work in Spain.


Pension planning for digital nomads

It is easy for digital nomads to forget about retirement when they are having so much fun travelling and working in different countries. Be careful not to fall into this trap.

Take care to consider your State Pension. If you are working abroad for a UK employer, then you may still build this up automatically via National Insurance (NI) contributions made automatically through the PAYE system.

However, if you are self-employed whilst abroad, or you work for a local company in your new country, then you may not need to pay NI contributions in the UK anymore. This can mean that your State Pension stops building up – possibly leading to a lower retirement income later.

Voluntary NI contributions can still be done whilst you are based overseas and can be a good option in certain cases. However, be careful also to consider your own pension, not just your State Pension (which is unlikely to meet your future retirement income needs on its own).

You can keep saving into a UK pension scheme if you live abroad. However, there is a limit to how much tax relief you can claim – and for how long.


Conclusion & invitation

In this guide, we have touched upon visas, income tax and pensions for British digital nomads. However, there is much more that could be said – including in other important areas such as financial protection, estate planning and investing.

If you are interested in discussing your own financial plan with us as a global remote worker, please get in touch to arrange a no-commitment financial consultation at our expense:

+34 966 460 407


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