Make your move to the UK less stressful by knowing what you can expect when you arrive. For one, don’t expect to earn as much as you do in Australia. In most cases, you’ll earn between 50% and 80% less than you’re used to. But, apparently the cost of living is reasonable (especially in Scotland) and people manage to survive.
- Most full-time jobs pay about £15,000 – £20,000 a year – usually paid monthly. In Aussie dollars, that’s about $30,000 to $40,000 a year (based on a $1 AUD equaling £2 GBP).
How desperate are you to get a job ASAP after arriving? Can you afford to live without income for two months or longer? Can you hold out until you get a ‘good’ job or do you need to get a ‘good enough’ job ASAP? Even 15 hours a week can make your savings last longer and mean the difference between good health and scurvy.
Working and Tax
Disclaimer: Blogs are useful but not as reliable as up to date information from the source. Please check the most recent information. I have provided links for most things.
UK Versus Australian Tax: The UK tax year runs from 6 April to 5 April the next year. The Australian tax year runs from 1 July to 30 June the next year. The UK and Australia have a Double Tax Agreement to prevent you paying tax twice (but it doesn’t always work as you’d like it to).
National Insurance Number (NINO): apply for a NINO after you arrive.
- You can work without one, while you wait to receive your number; but you might be up for extra tax (’emergency tax’) and then you may not get it all back.
- If you earn more than £155 week, you pay 12% NI contributions on income between £155 and £827 week (£672 to £3,583 month / £8,064 to £42,996 year); and an extra 2% on all income above £827 week.
- Employers also pay about 13.8% on all income above £156 week.
Deduction – Income tax: Most people in the UK get a Personal Allowance of tax-free income. This is the amount of income you can earn before you pay tax.
- As at June 2016, the first £11,000 is tax free and the basic tax rate of 20% applies to all income between £11,000 and £43,000 year. Income tax rates of 40%+ apply to amounts above £43,000 year.
Based on £15,800 gross annual income (£1,315 month gross > £304 week > £8 hour x 38 hours a week) and the NIC and Income Tax percentages above; total monthly net income is approximately £1,157.
The following rough calculations are not to be relied upon as accurate. They’re calculated by a blogger with a calculator while drinking Martell VSOP Cognac:
- National Insurance Contributions on earnings over £8,064: £15,800 – £8,064 = £7,736 x 12% NIC = £929 / 12 = £78 month
- Income tax on earnings over £11,000: £15,800 – £11,000 = £4,800 x 20% = £960 / 12 = £80 month
- Total deductions – NIC + Income Tax deductions: £78 month + £80 month = £158 month
- Total net income: Gross income £1,315 month LESS total deductions £158 = £1,157 month.
UK’s New State Pension Versus Australian Pension
- Usually, you can qualify for a part pension after you have worked in the UK for 10+ years. You can get the full New State Pension if you work in the UK for 35 years. You will get a pro-rata amount for each year worked in the UK (e.g. 10/35th for 10 years qualifying years in the UK).
- You can also increase the amount of UK pension you receive by deferring your pension. You can also get an additional 5.8% for each continuous 12 month period you work.
- It’s also possible that some of your working years in Australia (up until March 2001 when the Social Security Agreement between Australia and the UK ended) can be used to build up your qualifying years.
- You could qualify for both a UK and an Australian pension.
- The UK New State pension isn’t means tested but Australian pensions are.
- While in the UK, you don’t pay tax on the UK State Pension but you will need to pay tax on income earned from Australian sources, like your Australian pension.
- When in Australia, your UK pension will be taxed and it will also affect your Australian pension entitlements. The UK government will not index the UK State Pension if you return to Australia (because there is no Social Security Agreement that makes them) but they will continue to pay it. When you return to the UK, your UK pension will be indexed to the current rate as if you hadn’t left the country.
- You’ll need to be a permanent resident in Australia to claim your Australian pension and you might need to live in Australia for two years before or after (or a mix) so you can claim your Australian pension and make it portable if you return to the UK to live (i.e. get it paid to you in the UK).
- Remember to consider currency exchange rates that effectively halve your Australian pension when converted into pounds. And, if pounds are effectively doubled when converted into Aussie dollars, so too will the tax.
- As the legislation and rules are constantly changing, everyone should consult a financial planner, tax advisor and other specialists when planning which country to retire in/claiming a pension if you aren’t a self-funded retiree.
- If you intend to live in the UK for an extended period of time and are over 40 years old already, start thinking about your retirement options. If it’s possible to receive a part Australian pension and a part UK pension – why not? Think about it. Do some research. Keep an open mind and remain flexible.
* Update – 1 May 2017 *
- We moved to Scotland in September 2016.
- We’re interested in living in the UK long-term because property prices are more affordable compared to Australia – not to mention cheaper, faster and more reliable internet broadband.
- We get in excess of 200mbps with Virgin superfast fibre. Fellow internet lovers will understand how important that is – and anybody who has ever had issues with Telstra in Australia (like everybody!).
- We’re now also be able to travel to more places from the UK than from Australia, and for longer without the ridiculous cost of super-long flights with the usually weak Australian dollar. It costs about £400 return to most USA destinations and less than £50 return for many European destinations.
- Weather isn’t a big deal. We lived in Canberra for 14 years. The English who visited said it was too cold for their liking and the Scot’s said it was like home but without the snow. Now that we’ve survived our first winter – we know we can do it again. It actually wasn’t as bad as we thought it could be.
Pros and cons aside. We love living in Scotland.