Overseas Workday Relief
- MAZ
- Jul 13, 2024
- 10 min read
Updated: Dec 20, 2025
Understanding Overseas Workday Relief (OWR)
Overseas Workday Relief (OWR) is a tax relief mechanism in the UK designed for non-resident employees who perform part of their employment duties outside the UK. This relief is significant as it allows individuals to exempt a portion of their earnings from UK tax, which is proportional to the days they work abroad. This exemption is available for the first three tax years of the individual's UK residency, providing they meet certain conditions.
The Reformed Overseas Workday Relief: Your Essential Guide to the 2025 Rules and Planning for 2026
Picture this: you've just relocated to the UK for an exciting new role, spending half your time jetting off to client meetings abroad. Suddenly, you're staring at a hefty tax bill on income earned outside the UK. Sound familiar? Many of my clients in London and beyond faced this shock before discovering Overseas Workday Relief (OWR).
As a tax accountant with over 18 years advising UK taxpayers and business owners, I've helped countless internationally mobile professionals navigate these rules. The landscape changed dramatically from 6 April 2025, when the old non-domicile remittance basis was abolished. The good news? A reformed OWR now offers targeted relief for qualifying new residents.
Why the Changes to Overseas Workday Relief Matter Now
The old OWR, tied to non-dom status and remittance rules, no longer exists in its previous form. From the 2025/26 tax year onwards, it's integrated into the new residence-based system alongside the 4-year Foreign Income and Gains (FIG) regime.
According to HMRC guidance, this reformed relief exempts employment income attributable to overseas duties from UK tax – without needing separate overseas bank accounts. You can bring the money home freely.
This delivers real savings for new UK residents with significant overseas workdays. In my experience, clients arriving from Asia or the US often overlook this, paying thousands unnecessarily in the early years.
Who Can Claim the New Overseas Workday Relief?
Eligibility centres on being a "qualifying new resident".
You must be UK tax resident in the year, but not UK resident for at least the 10 full tax years immediately before your arrival. If you qualify in your first year of residence, you can generally claim for up to four consecutive years of UK residence.
This aligns with the FIG regime, but OWR specifically covers foreign employment income – which FIG excludes. Think of it as the employment-focused companion relief.
Be careful here: if you've been UK resident in the last 10 years, you likely won't qualify for the standard four-year window. Transitional rules may help some pre-2025 arrivals, which I'll cover later.
Checking Your Residence History – A Quick Self-Assessment
None of us loves digging through old diaries, but verifying your non-residence period is crucial.
Start with the Statutory Residence Test on GOV.UK. Count back: were you non-UK resident for 10 continuous tax years before this one?
If yes, and you're in your first four years back, you're potentially in line for OWR.
I've seen clients trip up when short UK visits triggered residence in a prior year. Double-check with the statutory residence test tool.
What Income Qualifies for Relief?
OWR applies to earnings from duties performed outside the UK.
This includes salary, bonuses, benefits in kind, and even employment-related securities – as long as the duties were overseas.
Apportionment is key: use a just and reasonable basis, often the number of overseas workdays divided by total workdays.
HMRC expects a workday count, excluding weekends, holidays, or non-working travel days unless substantive work occurs.
For bonuses paid later, look at when the duties were performed, not when received.
Understanding the Financial Caps Introduced in 2025
Here's a big shift from the old rules: relief is capped.
The maximum OWR per tax year is the lower of £300,000 or 30% of your qualifying employment income (after deductions).
This prevents ultra-high earners from unlimited relief.
In practice, for someone earning £500,000 with 50% overseas days, uncapped relief would be £250,000 – but the 30% cap limits it to £150,000.
Transitional claimants (pre-2025 OWR users) escape this cap in their remaining years.
Employment Income | Overseas Workdays Proportion | Uncapped Potential Relief | 30% Cap | £300k Cap | Actual Max Relief |
£400,000 | 60% | £240,000 | £120,000 | £240,000 | £120,000 |
£2,000,000 | 40% | £800,000 | £600,000 | £300,000 | £300,000 |
£800,000 | 70% | £560,000 | £240,000 | £300,000 | £240,000 |
This table shows how the lower cap bites at different levels – vital for high-earning executives I advise.
Making the Election and Claiming Relief
To access OWR, you must make an election in your Self Assessment tax return for the qualifying year.
This election is irrevocable for that year and forfeits your Personal Allowance and Capital Gains Annual Exempt Amount – though many qualifying new residents claim FIG anyway, which already requires this.
Then, claim the relief itself, quantifying the foreign portion.
If you're in PAYE, employers can sometimes apply provisional relief, but from April 2026, this will align with the 30% cap.
Don't rely solely on payroll – always review in your tax return.
Transitional Arrangements for Pre-2025 Claimants
If you claimed old OWR in 2023/24 or 2024/25, you may access transitional relief for remaining years, even without the 10-year non-residence.
No financial cap applies here.
I've had clients in this boat breathe a sigh of relief – one director from Singapore continued claiming seamlessly into 2025/26.
Trailing bonuses from pre-2025 duties may still use old remittance rules if remitted carefully.
A Practical Worksheet: Calculate Your Potential OWR
Grab a coffee and try this simple worksheet I use with clients:
Total employment income this tax year: £_______
Total working days: _______
Overseas working days: _______
Proportion overseas (3 ÷ 2): _______%
Uncapped relief (1 × 4): £_______
30% of total income: £_______
Apply lower of uncapped, 30%, or £300,000: £_______
Estimated tax saving (at your marginal rate, e.g., 45%): £_______
This quick check often reveals thousands in potential savings – and flags if professional apportionment advice is needed.
Real-World Scenario: Alex's International Role
Take Alex, a tech director who moved to London from Canada in April 2025 after 12 years away.
Earning £650,000, he spent 180 out of 220 working days overseas.
Uncapped relief: around £532,000 (adjusted for non-working days).
But capped at 30% (£195,000).
At 45% tax, that's over £87,000 saved annually for four years.
Without OWR, he'd face full UK tax on everything.
Alex's case mirrors many expats I advise in fintech.
Another Example: Sarah the Consulting Partner
Sarah, a partner in a professional services firm, arrived in 2025 with £1.2 million income, 55% overseas duties.
Potential relief £660,000, but capped at £300,000.
She needed careful records for HMRC scrutiny on high-value claims.
In my experience, partners often undervalue robust day-count evidence.
Common Mistakes I've Seen Clients Make
Honestly, the biggest pitfall? Poor records.
One client lost £40,000 relief because travel itineraries didn't prove substantive work overseas.
Always keep calendars, emails, and meeting notes.
Another trap: assuming all travel days count – they don't.
And don't forget the election – miss it in year one, and you lose access for that year's income forever.
Planning Ahead for the 2026/27 Tax Year
As we approach 2026, rules remain stable, though PAYE provisional relief tightens from April 2026.
If you're arriving soon, structure your contract to maximise overseas duties early.
Business owners: consider employing new arrivals via overseas entities where possible, though anti-avoidance rules apply.
Implications for Business Owners and Directors
If you're a business owner with director duties abroad, OWR can apply to your salary.
But dividends don't qualify – they're separate.
I've helped owners draw lower UK salaries, relying on overseas earnings relief.
For employers, offering OWR support attracts global talent.
Many firms I work with now include tax-equalised packages covering these reliefs.
Checklist: Are You Ready to Claim OWR?
Confirmed 10+ years non-UK residence? ☐
In first four years of current UK residence period? ☐
Maintained detailed workday records? ☐
Prepared to forfeit Personal Allowance (likely via FIG anyway)? ☐
Calculated within caps? ☐
Ready to elect in Self Assessment? ☐
Tick these, and you're set.
Summary of Key Points
The reformed OWR from 6 April 2025 provides relief on overseas duties income for qualifying new UK residents – those non-resident for 10 prior years.
Relief lasts up to four years, with no need for separate banking arrangements.
Income is apportioned by overseas workdays; bonuses follow duty performance period.
A cap applies: lower of £300,000 or 30% of employment income per year (except transitionals).
Claim requires an election in Self Assessment, forfeiting Personal Allowance.
Transitional rules protect some pre-2025 claimants without the cap.
Robust records are essential – poor evidence risks HMRC challenges.
Combine with FIG regime for broader foreign income relief (excluding employment).
Business owners and directors can benefit on salary portions.
For 2026/27 planning, maintain records early and consider professional advice for complex apportionments.
If you're navigating these changes, the savings can be substantial. In my years advising clients, getting OWR right often transforms a daunting tax bill into a manageable one. Always check the latest HMRC guidance on OWR and consider personalised advice.
UK Overseas Workday Relief and Non-Domicile Tax Reforms
ear | Eligibility Criteria | Relief Period (Years) | Financial Limit / Cap | Remittance Requirement | Tax Treatment of Mixed Funds | Election/Claim Process | Key Deadlines | Source |
Current system (pre-6 April 2025) | Non-UK domiciled individuals taxed on the remittance basis. | Up to 3 years | No specific monetary cap mentioned (relief proportional to overseas workdays). | Mandatory: Earnings must be paid into an offshore account and not remitted to the UK to be exempt. | Special Mixed Fund Rules apply: requires account in employee's name, overseas, with balance ≤ £10 before first deposit. | Claimed via the remittance basis on the UK Self-Assessment tax return. | Nomination of qualifying bank account by 31 January following the end of the tax year. | [1-3] |
From 6 April 2025 | Qualifying new residents: UK resident for the year but non-UK resident for the 10 consecutive years prior to arrival. | Up to 4 years | Lower of £300,000 or 30% of the employee’s worldwide employment income. | Abolished: Relief is available regardless of whether earnings are remitted to the UK or paid into a UK account. | Remittance rules abolished for new FIG; Temporary Repatriation Facility (TRF) allows 12-15% tax on pre-2025 mixed funds. | Annual election required on the Self-Assessment tax return; separate claim to quantify relief each year. | Election must be made by 31 January in the second tax year after the relevant year (e.g., 31 Jan 2028 for 2025/26). | [1, 3-6] |
Transitional (Post-April 2025 for pre-2025 arrivals) | Individuals who claimed OWR before 6 April 2025 and are part-way through their relief window. | Up to 3 years (if not FIG eligible) or 4 years (if FIG eligible). | Annual £300,000 / 30% cap does not apply to these individuals for the remainder of their qualifying period. | For trailing income earned before 6 April 2025, prior remittance rules still apply (must keep offshore). | Trailing income must follow old rules; TRF can be used to designate pre-2025 unremitted OWR income. | Must make an OWR election for tax years starting on or after 6 April 2025. | Standard Self-Assessment deadlines apply for elections and claims. |
FAQs
What exactly is the reformed Overseas Workday Relief and how does it differ from the old rules? The reformed OWR, effective from 6 April 2025, allows qualifying new UK residents to exempt employment income earned from duties performed overseas from UK tax for up to four years. Unlike the old system tied to non-dom status and remittance basis (now abolished), the new relief has no banking separation requirements and includes financial caps, making it simpler but more limited for high earners.
Who qualifies as a "qualifying new resident" for Overseas Workday Relief? You must be UK tax resident in the year of claim but have been non-UK resident for at least the 10 full tax years immediately before arriving. Relief is available for your first four consecutive years of UK residence, with some transitional access for those who claimed under the old rules in 2023/24 or 2024/25.
Is there a limit on how much relief I can claim under the new OWR rules? Yes – relief is capped at the lower of £300,000 or 30% of your qualifying employment income per tax year. Transitional claimants (pre-2025) are exempt from these caps in their remaining years.
What types of employment income can benefit from Overseas Workday Relief? Salary, bonuses, benefits in kind, and employment-related securities all qualify, as long as they relate to duties performed outside the UK. The relief is apportioned based on overseas workdays versus total workdays.
How do I actually claim Overseas Workday Relief on my tax return? You must make an irrevocable election in your Self Assessment tax return for the qualifying year, which also means forfeiting your Personal Allowance and Capital Gains Annual Exempt Amount (common if you're also using the FIG regime). Quantify and claim the foreign portion separately.
Do I need to keep my overseas earnings in a separate bank account? No – one of the biggest improvements in the reformed rules is that you can remit funds freely to the UK without losing relief, unlike the old remittance basis requirements.
How should I calculate the overseas portion of my income for OWR? Use a just and reasonable basis, typically the number of overseas workdays divided by total workdays (excluding weekends, holidays, and non-working travel). Bonuses are attributed to the period when the related duties were performed.
What records do I need to support an OWR claim if HMRC asks questions? Detailed evidence is essential: calendars, travel itineraries, emails, meeting notes, and boarding passes showing substantive work occurred overseas. Poor records are the most common reason claims are reduced or denied.
Can company directors or business owners benefit from Overseas Workday Relief? Yes, on the salary portion of income attributable to overseas director duties. Dividends do not qualify, but many owners I advise structure lower UK salaries to maximise relief on overseas earnings.
Will the Overseas Workday Relief rules change again for the 2026/27 tax year? As of December 2025, the core rules remain stable, though PAYE provisional relief adjustments take effect from April 2026. Early planning and robust records will continue to be key for maximising claims.
About the Author
Maz Zaheer, AFA, MAAT, MBA, is the CEO and Chief Accountant of MTA and Total Tax Accountants, two premier UK tax advisory firms. With over 15 years of expertise in UK taxation, Maz provides authoritative guidance to individuals, SMEs, and corporations on complex tax issues. As a Tax Accountant and an accomplished tax writer, he is renowned for breaking down intricate tax concepts into clear, accessible content. His insights equip UK taxpayers with the knowledge and confidence to manage their financial obligations effectively.
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