Overseas Workday Relief

Tax changes for non-UK domiciled individuals announced in the Budget in October are accompanied by changes to tax on earnings for duties performed overseas.

Historically, it was possible for non-UK domiciled individuals to shelter earnings for non-UK duties from UK tax provided they are claiming the remittance basis of taxation and those earnings were not remitted to the UK. This relief was dubbed Overseas Workday Relief (OWR) and was available to individuals in their first year of UK residency and the following two tax years.

Key changes from April 2025

From 6 April 2025, relief will be available for foreign earnings for any individual who benefits under the Foreign Income and Gains (FIG) regime, i.e., someone who is in one of their first four years of UK tax residency after a period of at least ten years of non-UK residency.

This change will allow British nationals who have been living abroad for extended periods to pay no UK tax on any foreign earnings, or earn-outs, received in the first four years they return to the UK. The Budget confirmed that OWR will be extended so that it is available for the first four years of residency, in line with the FIG regime.

However, the revamped OWR will be subject to a financial limit for each qualifying year: the lower of 30% of the qualifying employment income or £300,000 per tax year.

Implications for international employees

Once resident for four years, worldwide income and gains will be subject to UK tax regardless of where duties are performed. This rule change also sees the abolition of the foreign earnings exemption, wherein duties performed outside of the UK may be outside the scope of UK tax.

For internationally mobile employees who are performing duties in multiple jurisdictions, this change could see a much greater portion of their income subject to tax in the UK.

For further guidance on Overseas Workday Relief, please do not hesitate to contact our team on 01903 234094.