As the 2025/26 tax year approaches its end, it is important to remind internationally mobile employees of the changes to Overseas Workday Relief (OWR) that became effective on 6 April 2025.
The overall effect of OWR remains broadly unchanged. The relief offers certain qualifying employees the opportunity to apportion their employment income (salary, bonuses, share options, etc) between their UK duties and duties performed overseas. Earnings relating to the employee’s UK duties remain taxable in the UK whereas earnings relating to overseas duties may be excluded from UK income tax.
Broadly, under the old regime, a non-UK domiciled person, who had been a non-UK tax resident for at least 3 consecutive tax years, could be eligible to claim OWR upon triggering UK tax residency. The relief would be available for the first 3 consecutive tax years of UK tax residency.
To claim OWR from 6 April 2025 an employee needs to be a ‘qualifying new resident’ under the new Foreign Income & Gains Regime, known as FIG.
An employee will be a ‘qualifying new resident’ if they have not been UK tax resident in any of the 10 tax years prior to triggering UK tax residency. There is no longer a requirement that the employee is non-UK domiciled, potentially meaning a far greater number of employees could benefit.
Employees who qualify as new residents under the FIG regime can now potentially benefit from 4 years of OWR as opposed to 3 years under the old regime.
A noteworthy exception to the new rules is an employee who triggered UK tax residency during 2022/23, who whilst may qualify as a ‘new resident’ under the FIG regime for 2025/26, will not be able to a fourth year of OWR in 2025/26.
A claim for OWR must be made on the employees Self-Assessment tax return by the 31 January following the tax year end.
Bank Account
Under the old regime, OWR was only available to the extent that enough monies relating to overseas duties had been initially paid directly into a non UK bank account. Funds sheltered under OWR were also needed to be retained outside the UK indefinitely to not be UK taxable.
From 6 April 2025 employees qualifying for OWR are no longer required to have their salaries paid into non UK bank accounts. All earnings can now be paid into a UK bank account without adverse consequences.
Monies paid to an overseas bank account under the old OWR regime should still be kept outside the UK to remain non-UK taxable. Employees who benefited from the old regime may want to consider using the Temporary Repatriation Facility (TRF) to bring those monies into the UK at a reduced tax rate.
A significant disadvantage to the new regime is the relief available under OWR is now limited. The ‘cap’ is the lower of:
a) The relevant percentage of the employees’ overseas workdays days compared with total workdays during the tax year.
b) 30% of their taxable employment income.
c) or £300,000.
Example
A qualifying OWR employee earns a salary of £2,000,000 for 2025/26. They worked a total of 200 days during the tax year with 40% of their workdays undertaken overseas.
Under the new regime the maximum amount of earnings the employee can exclude from UK taxation under OWR is £300,000 (as this is the lower of £800,000 being 40% overseas workdays, £600,000 being 30% of taxable employment income and £300,000).
Those who qualified for OWR under the old regime and who continue to qualify under the new regime can take advantage of OWR without being limited by the ‘cap’.
Record Keeping
HMRC often raise checks into claims for Overseas Workday Relief so good record-keeping is essential. At a minimum employees should keep accurate work journal detailing location of work along with a detailed record of travel, retaining evidence such as boarding passes and other receipts and evidence in support of their work calendars.
A claim for OWR could impact the tax relief on pension contributions and will result in the employee losing their income tax personal allowance and capital gains annual exemption. This will need to be considered against the benefit of claiming OWR, although for high earners those who travel frequently for work a claim for OWR is likely to be beneficial.
It is recommended that specialist advice is sought before making a claim for Overseas Workday Relief. We would be happy to assist with any such claims, so do please get in touch.
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