Living in Gibraltar but Working in the United Kingdom: Understanding Tax Implications

An Overview

For individuals living in Gibraltar but working in the United Kingdom, understanding the tax rules governing their income is essential. These rules determine where your income is taxed, and they can vary depending on specific circumstances such as the nature of your work, the location of your employer, and the time spent in each jurisdiction.

Taxation of Employment Income

Income from Employment – Generally, salaries, wages, and other similar payments earned by someone living in Gibraltar for their job will only be taxed in Gibraltar, unless the work is done in the UK. However, if you perform your employment duties physically in the UK, your income becomes taxable in the UK rather than Gibraltar. This is a significant consideration for cross-border workers, as it directly impacts their tax liabilities.

Exceptions to the Rule

Despite the general guidelines, there are exceptions

If someone lives in Gibraltar but works in UK, their income may still only be taxed in the Gibraltar under the following conditions:

• Duration of Stay in the UK: If you spend no more than 183 days working in the UK during a 12-month period that starts or ends during the tax year.
• Employer’s Location: Your income must be paid by an employer who is not based in the UK. This is crucial in establishing whether your income can be excluded from UK taxation.

Practical Application of the Rules

For individuals who split their time between Gibraltar and the UK, it is often necessary to apportion their income. The time spent physically working in the UK and Gibraltar determines the proportion of income taxed in each jurisdiction. This can involve detailed record-keeping to ensure accurate reporting and compliance with both countries’ tax laws.