India’s Mumbai is the most lucrative destination for British contractors who work abroad, an analysis of 16 international cities shows.
Britons contracting in the Indian financial behemoth have the highest take-home pay once taxes, social security and living costs are factored in, says Access Financial (AF), which ran the analysis.
Assuming that they are performing a highly-skilled role, a Mumbai-based British contractor also has an enviable disposable income, AF found, an average of €115,585 (£100,000).
That compares favourably to just €69,554 in New York and €51,735 in Paris — both popular destinations but “not particularly lucrative when the high cost of living is accounted for.”
AF added: “Cities like Mumbai and Shanghai have to compensate for being less relatively desirable places to live by paying a premium for contractors with internationally sought-after skills.”
But the company, which advises contractors on overseas compliance, said contractors in some destinations would need to ensure non-UK tax residency status to benefit from lower tax rates.
UK tax residency is governed by a complex set of rules, which means that some British contractors working overseas still pay UK taxes.
As a general rule, if a contractor has family in the UK and maintains a home in the country, in order to be non-resident for tax purposes they should spend no more than 90 days in the UK in a single year.
Yet contractors should resist regarding tax as the key factor when weighing up which overseas city would be most lucrative, according to AF managing director Kevin Austin.
“Despite income in Dubai being tax-free, it is not a high-paying destination,” he said. “British expats can earn considerably more in East and South East Asia, even when taxes and social security are factored in.”
Similarly, European countries are highly popular with contractors (Switzerland is the only entry in the top 10 most lucrative), despite their generally higher tax rates and cost of living.
“European countries fare badly in this analysis,” Austin said. “The growth of East and South East Asian economies has seen European countries pushed into second place on pay.
“Together with high taxes and cost of living they make poor choices for contractors primarily looking to save money. Their enduring popularity is a combination of lifestyle and proximity to the UK.”
According to the analysis, the East and South East Asian destinations of Singapore, Malaysia, Hong Kong and China offer British contractors both low taxes and low cost of living.
The stark contrast appears to be New York, where income for contractors is usually very high but where the cost of living, particularly housing, pushes the city down the firm’s rankings.