It sounds like a dream come true doesn’t it? But, unfortunately the tax world just isn’t that simple, especially for UK players going to play overseas and who are often trying to make sense of complex tax residency rules.
So, in this article we dive into the exciting financial matchup and unravel the ever-changing landscape of football, residency and the tantalising world of tax-free dreams!
In Saudi Arabia, footballers’ salaries are not subject to income tax. When you contrast that with the UK’s increasingly high combined tax rate, which can reach 47% for those earning over £125,140 per year, then it is easy to see why the allure of tax-free Saudi Arabia has UK-based players scoring big time deals in the Saudi Pro League this year.
In the UK, besides the standard corporation tax for football clubs and income tax for players, football clubs also often have to foot the bill for agents’ fees on players’ behalf.
But here’s the twist. These payments, although not directly to the player, are considered employee benefits, and therefore subject to tax rates of up to 45%.
Is it any wonder then that agents are playing the role of MVPs in the rising number of transfers to the Saudi Pro League where players can often command higher fees without the tax burden.
From a tax perspective therefore, it might seem like a slam dunk to swap the UK for the Middle East.
But wait as there’s a twist! To ensure they don’t pay UK tax on overseas income, players must adhere to strict residency rules.
When working full-time abroad, as these players do, they can visit the UK for up to 90 days in a tax year, provided they spend no more than 30 days working on home soil.
The game gets even trickier when players leave the UK while their families stay behind and this can, in certain circumstances, affect the number of days they can spend in the UK before becoming tax residents again.
Cue the suspenseful music for players returning to the UK to represent their national teams or play in friendlies. The stakes are high, and the clock is ticking!
For those making their exit during the summer transfer window, they will be making a tactical move part-way through the 2023/24 UK tax year.
In this case in order to maintain their non-UK tax residence status from their departure date, they might need to continue their overseas stint into the following tax year, so all the way through to 5th April 2025.
And here comes the jaw-dropping twist: players who retire or return to the UK before 5th April 2025 risk a portion of their overseas salary falling within the scope of UK income tax.
With the stark contrast in income tax rates, this could be a financial show down of epic proportions.
So, the grand plan of a year in Saudi Arabia to save some tax might just spring an unexpected tax thriller on our stars.
In the exhilarating world of football and taxation, the pitch is not the only arena where players must showcase their skill.
For those playing overseas successfully managing tax implications of that move can become an essential part of the game plan for those seeking to score financial victories on a global stage.
At ETC Tax we play a crucial role in helping individuals navigate the complex tax implications of moving overseas for work.
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Our expertise can provide you with peace of mind around your tax affairs and offer you personalised advice tailored to your exact circumstances. Please get in touch today.
