06 October 2023
With no income tax being levied on footballers’ salaries in Saudi Arabia, compared with a combined rate of at least 47% of UK income tax and National Insurance contributions for those earning in excess of £125,140 per year in the UK, you can understand why some UK-based players have made the move to the high-spending Saudi Pro League ahead of the recent European transfer deadline.
In addition to the taxes on salaries and bonuses charged under the UK system, football clubs commonly pay agents’ fees on their players’ behalf. Although these payments are not made directly to the player, the cash equivalent of this is treated as a benefit in kind in the UK, subject to tax of up to 45% on the player. In Saudi Arabia, as there is no income tax on earnings from employment there, players do not suffer these charges. It could therefore be argued that agents play a role in the rising level of transfers to the Saudi Pro League as there is scope for them to charge higher fees free of tax on the player.
At face value, from a tax perspective the move from the UK to the Middle East appears ideal. However, for overseas income not to be taxed in the UK, set requirements must be met for an individual to be considered non-UK resident for the tax year in question.
If they work full-time abroad, as these players would, they can usually visit the UK for up to 90 days in a tax year, so long as no more than 30 days are spent working, and retain non-UK tax resident status. Where a player leaves the UK but their family remains, this can, in some circumstances, also reduce the amount of days they can spend in the UK before being considered UK resident. This provides an interesting dilemma for players returning to the UK to play for their national teams or in friendlies, for example.
For those who left the UK during the summer transfer window, they are doing so part way through the 2023/24 tax year. Therefore, to be considered non-UK resident from the date that they left, they may be required to continue to work abroad for the whole of the following tax year, the year to 5 April 2025.
Some players who either retire or return to the UK prior to 5 April 2025 therefore risk a portion of their overseas salary being taxable in the UK, which, given the difference between income tax rates, would have a significant financial impact. In practice, therefore, a plan to have a year playing in Saudi to take advantage of the low tax regime could nevertheless lead to unexpected UK tax liabilities arising.