Remote work has made overseas clients normal — a designer in Leeds invoicing a startup in Berlin, a consultant in Bristol working for a firm in New York. The income tax side barely changes. The VAT side changes a great deal, and almost always in your favour, which is why it is worth understanding rather than guessing at. And there is one American form that decides whether you receive 100% of a US invoice or 70% of it.

You are taxed where you live, not where the client is

If you are UK-resident, you pay UK tax on your worldwide income. A fee from a client in Berlin is taxed here through Self Assessment exactly like a fee from a client in Bolton, converted to sterling. Being paid in dollars or euros does not move where you are taxed.

Nothing else moves either. For 2026/27 the personal allowance is £12,570, the basic rate is 20% up to £50,270 and the higher rate is 40% above it. Class 4 National Insurance runs at 6% on profits between £12,570 and £50,270 and 2% above that. Overseas turnover sits in the same profit figure as everything else and is taxed at the same marginal rate.

The VAT rule that quietly keeps freelancers unregistered

This is the part worth reading twice, because it is the difference between registering for VAT and not.

The general rule in HMRC's place-of-supply guidance (VAT Notice 741A) is that services sold to a business customer are supplied where the customer belongs. Sell consultancy to a company in Germany and the place of supply is Germany, not the UK. That supply is therefore outside the scope of UK VAT — you charge no UK VAT, and your customer accounts for it in their own country under the reverse charge.

Now the consequence. The compulsory VAT registration test is your taxable turnover in the UK over a rolling 12 months, against a threshold of £90,000 (unchanged since 1 April 2024). Turnover that is outside the scope of UK VAT is not taxable turnover, so it does not count towards the £90,000 at all.

Putting real numbers on it

Illustratively, take Priya, a freelance designer in Leeds with a good year. Her invoices for the last 12 months come to £74,000:

  • UK business clients: £22,000
  • A software company in Berlin (VAT-registered business): £31,000
  • An agency in New York (a business): £21,000

If all £74,000 had come from UK clients she would be nowhere near registration either — but scale her up and the point bites. What matters is that only the £22,000 of UK supplies counts towards the threshold. Priya could add another £60,000 of EU and US business work, take her invoices past £130,000, and still have no obligation to register for VAT, because her UK taxable turnover would still be £22,000.

She may well want to register anyway. Where a UK business makes supplies to overseas customers that would be taxable if made in the UK, HMRC allows voluntary registration so that input tax can be recovered. Say Priya spends £9,600 a year on VAT-bearing costs — software, equipment, a co-working desk. That is £8,000 plus £1,600 of VAT she currently cannot reclaim. Registering lets her recover the £1,600. Her UK clients are VAT-registered businesses, so the £4,400 of output VAT she would start charging them costs them nothing — they reclaim it. The net effect is £1,600 a year, in exchange for filing returns. That is a real decision worth making deliberately rather than by accident, and our guide to VAT registration for the self-employed works through the rest of it.

Prove the customer is a business, and keep the proof The whole treatment rests on the customer being in business. HMRC expects commercial evidence of that. For EU customers their VAT registration number is the best evidence, so get it, put it on the invoice, and keep it. Where there is no VAT number, HMRC will accept alternative commercial evidence — a certificate from the customer's tax authority, or documents showing the nature of their trade. Without evidence, a supply you treated as outside the scope can be reclassified as a UK supply with UK VAT due on it, out of your own pocket.

Selling to consumers abroad is a different rule entirely

Flip the customer from a business to a private individual and the general rule flips too: B2C services are supplied where the supplier belongs. Sell coaching to a private individual in France and the place of supply is the UK, so it is a UK supply, it carries UK VAT if you are registered, and it does count towards the £90,000 threshold.

Digital services to consumers are the sharpest edge. If you sell an automated download, an online course with no live teaching, a template pack, a plugin or a subscription app to a private consumer in the EU, EU VAT is due in the consumer's country from the very first sale. There is no threshold — the EU-wide small-seller threshold stopped applying to UK sellers when the UK left the EU VAT regime. In practice you register once for the non-Union One Stop Shop (OSS) in a single EU member state and file one return covering all of them, rather than registering in each country separately.

The dividing line is automation. A live, human-taught workshop delivered over video is not a digital service. The same material sold as a self-serve recording is.

The American client and the 30% that never arrives

A US company paying a foreign person is required to withhold at 30% unless it holds valid documentation. Services you perform entirely outside the United States are generally foreign-source income and outside the scope of US withholding altogether — but the client's accounts payable system does not know that, and its default without paperwork is to deduct.

The paperwork is IRS Form W-8BEN if you invoice as a sole trader in your own name, or W-8BEN-E if you invoice through a limited company. It goes to the client, not to the IRS. It certifies that you are not a US person and lets you claim the UK–US double taxation treaty, under which business profits are taxable only in the UK where you have no permanent establishment in the States.

Illustratively, on a $6,000 invoice with no W-8BEN on file, $1,800 is withheld and $4,200 reaches you. Getting the $1,800 back means filing a US non-resident return and waiting months. Returning a one-page form before the first invoice avoids the entire episode. Sign it, date it, and expect to refresh it — a W-8BEN generally stays valid until the end of the third calendar year after signing.

Withholding elsewhere, and double tax relief

Some other countries do apply withholding tax to service fees paid abroad, and India, Brazil and parts of Africa and the Middle East come up most often. Where foreign tax has genuinely and properly been deducted, you claim Foreign Tax Credit Relief on the foreign pages (SA106) of your Self Assessment return, and it reduces your UK bill on that same income. The credit is capped at the UK tax due on the income, so it removes double taxation rather than generating a refund. Two rules make it work: you must have a withholding certificate from the payer, and you cannot claim credit for more than the treaty rate — if a client over-deducts, the excess is reclaimed from their tax authority, not from HMRC.

Which exchange rate to use

For income tax, keep it simple and consistent: HMRC publishes monthly and annual average exchange rates, and using one of those, or the actual rate you received, is fine so long as you apply the same method all year.

For VAT the rules are tighter and specific. HMRC's VAT guide requires you to use either the UK market selling rate at the time of supply — rates published in national newspapers are acceptable evidence — or the period rate of exchange HMRC publishes for customs purposes. If you adopt the customs period rate you record that choice in your books at the time, you do not need to notify HMRC in advance, and you cannot then switch methods without HMRC's written agreement. Any other method needs written approval, and forward rates are never acceptable.

Getting paid without losing 4% to the bank

  • The spread is the cost, not the fee. A high-street bank quoting "no transfer fee" is usually taking 3–4% on the conversion. A multi-currency account converting at or near the interbank rate turns that back into income. On £50,000 of overseas invoices, 3.5% is £1,750 a year.
  • Hold the currency if you spend in it. If you buy software in dollars, receiving dollars and paying in dollars beats two conversions.
  • Book the sterling value at the right date and let the software do it — FreeAgent, included in our packages, records the invoice and the receipt separately and posts the exchange difference for you.
  • Put your terms on the invoice in the currency you are billing, with your IBAN or local receiving details. Overseas finance teams pay clean invoices faster, and our post on getting paid as a freelancer covers the rest of the chase.

Your checklist for this week

  1. Split your last 12 months of invoices into UK supplies and overseas B2B supplies. Add up only the UK column and compare it with £90,000. That, not your total turnover, is your registration test.
  2. Collect a VAT number for every EU business client and put it on the invoice. Where there is no VAT number, save whatever commercial evidence of trading you can get.
  3. Check whether anything you sell is an automated digital product bought by private consumers in the EU. If it is, you have an OSS registration to make and no threshold to hide behind.
  4. Send a W-8BEN to every US client now, before the next invoice, rather than after the first deduction.
  5. Write your exchange-rate method into your bookkeeping notes — for VAT it has to be one of the two HMRC permits, and it has to stay the same.
  6. Price the currency spread you are paying on last year's overseas receipts. If it is over 1%, a multi-currency account pays for itself immediately.

How we help

We split your turnover properly so you are not registering for VAT you never owed, apply the right place-of-supply treatment to every overseas sale, handle the currency conversions and exchange differences in your accounts, and claim Foreign Tax Credit Relief where tax has genuinely been withheld abroad. International work should be pure upside, and with the paperwork right it is. Fixed fees from £19 + VAT a month. Get started.