Overseas workday relief takes UK tax off the part of a new arrival’s employment income that relates to work done outside the UK. Since 6 April 2025 it is available to employees in their first four tax years of UK residence after at least ten years of non residence, regardless of domicile, and it no longer depends on keeping the money offshore. Relief needs an election and a claim on the tax return and is capped at the lower of 30% of the employee’s qualifying employment income and £300,000 a year.

What changed in April 2025?

Before 6 April 2025, overseas workday relief was tied to the remittance basis. A newly arrived non domiciled employee who claimed the remittance basis was taxed on pay for overseas workdays only when it was brought to the UK, which meant keeping it in an offshore account (EIM43555). The remittance basis has now been replaced by a regime based on residence alone. The relief survives as “foreign employment relief” in Chapter 5C of Part 2 of the Income Tax (Earnings and Pensions) Act 2003, and is given by election and claim on the return.

Who qualifies?

An employee can use the relief for a tax year in which they are eligible for the four year foreign income and gains regime, whether or not they actually claim that regime for their other income (EIM43560). They must be a qualifying new resident under section 845B ITTOIA 2005, which means:

  • they are UK resident for the tax year;
  • they were not UK resident for at least ten consecutive tax years immediately before it;
  • they are not a member of the House of Commons or House of Lords at any time in the year; and
  • they are at least ten years old at the start of the year.

The following three tax years also qualify if the person stays UK resident, so the relief can cover up to four years (RFIG44000). Domicile is no longer a factor, so a British expatriate coming home after more than ten years away can qualify, and the relief can be used more than once in a lifetime if a fresh ten year gap builds up. See returning to the UK for the wider checklist.

Which earnings qualify?

The relief covers three kinds of employment income for a qualifying year, from an employment whose duties are performed wholly or partly outside the UK in that year:

  • general earnings, and amounts treated as earnings;
  • employment related securities income under Part 7 ITEPA 2003; and
  • disguised remuneration income under Part 7A ITEPA 2003.

Only the part relating to duties performed outside the UK is “qualifying foreign employment income”, worked out on a just and reasonable basis, usually by counting workdays (sections 41T and 41U, EIM43565). Three points catch people out:

  • If the year is a split year, only earnings attributable to the UK part can qualify.
  • The rule that treats incidental UK duties as performed abroad (section 39 ITEPA 2003) does not apply here, so a short UK business trip counts as UK work.
  • Earnings from overseas Crown employment that is subject to UK tax do not qualify.

How much relief can be claimed?

The relief is the amount of net taxable income that reflects qualifying foreign employment income. Allowable deductions are first spread across UK and foreign earnings in proportion, under section 41Q (EIM43595). The result is then capped by the financial limit in section 41R: for each qualifying year, relief cannot exceed the lower of 30% of the employee’s relevant qualifying employment income for that year and £300,000 (EIM43600).

The cap applies to each qualifying year separately and cumulatively. A bonus paid in a later year for work done in an earlier qualifying year can be relieved in the year it is taxed, but only within the unused part of the earlier year’s limit. Each qualifying year needs its own claim, even when both claims go on the same return (EIM43590). Employees who arrived in 2023 to 2024 or 2024 to 2025, qualified for the old relief and claimed the remittance basis keep relief without the financial limit for tax years ending before 6 April 2028, but those who arrived in 2022 to 2023 under the old rules cannot use the new relief (EIM43605).

A worked example

Illustration only. Marta has never lived in the UK. She moves to London on 6 April 2026 as a regional sales director, on a salary of £200,000 for 2026 to 2027 with no allowable deductions. Her workday records show 40% of her duties are performed outside the UK.

Step Amount
Qualifying employment income £200,000
Qualifying foreign employment income (40%) £80,000
Financial limit: lower of 30% of £200,000 and £300,000 £60,000
Overseas workday relief claimed £60,000
Employment income taxed in the UK £140,000

If 25% of her duties had been abroad, the foreign income of £50,000 would sit below the £60,000 cap and the full £50,000 could be claimed.

How do you claim it?

There are two steps, both on the Self Assessment residence pages (SA109). First, an election for the qualifying year under section 41M; second, a claim for relief under section 41P for each tax year in which qualifying income is taxed (EIM43580). The SA109 boxes ask for the qualifying employment income after deductions, the qualifying foreign employment income after deductions, the maximum relief under the financial limit and the relief claimed.

The election and the claim must both be made in a return by the first anniversary of 31 January after the end of the tax year, so for 2025 to 2026 the deadline is 31 January 2028 (EIM43585). There is no special power to accept late claims, which depend on HMRC’s general late claims policy. Consequential claims are possible after a discovery assessment, but not where the lost tax arose from careless or deliberate behaviour.

What does the election cost?

Making an overseas workday relief election, or any claim under the four year regime, for a tax year removes for that year the personal allowance, blind person’s allowance, the married couple’s and transferable allowance reductions, and the capital gains tax annual exempt amount (EIM43580). Relieved income still counts in adjusted net income, so it is taken into account for the High Income Child Benefit Charge and for personal allowance tapering. For someone on a salary like Marta’s, the allowance would already be lost to the taper, so the cost is small; for a lower earner the lost allowance can outweigh the relief.

How should the employer run PAYE?

Unless the employer gives notice, PAYE is normally run on the full salary and the relief comes through the return. Section 690D ITEPA 2003 lets the employer notify HMRC of the best estimate of the foreign proportion of pay for a qualifying new resident who works or is likely to work abroad. From 2026 to 2027 the proportion in the notice is capped at 30%, and the notice only takes effect when HMRC acknowledges it.

What are the common mistakes?

  • Not keeping a daily record of where duties were performed, which is the evidence for the just and reasonable split.
  • Treating short UK trips as incidental; section 39 does not apply to this relief.
  • Forgetting the separate election, without which no claim is valid.
  • Assuming related employments with the same or an associated employer can be split freely. Section 41Z1 limits the foreign share to what is reasonable given the duties in and outside the UK, and section 41Z counters artificial arrangements (EIM43615, EIM43620).
  • Missing the claim deadline for a year in which a later bonus is taxed.

If HMRC opens a check into your return, tax investigation insurance pays your accountant’s fees. Solar Protect cover pays up to £100,000 with no excess; it never pays tax, interest or penalties. Read how our cover works or get a quote.

Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.