Reporting Overseas Income In Self-Assessment Under The New FIG Regime
- MAZ
- Aug 2
- 17 min read
Updated: Sep 11
The Audio Summary of the Key Points of the Article:
Understanding the New FIG Regime and Its Impact on UK Taxpayers
What Is the FIG Regime and Why Should You Care?
Now, if you’re a UK taxpayer with income from abroad, you’ve probably heard whispers about the new Foreign Income and Gains (FIG) regime kicking in from 6 April 2025. This isn’t just a minor tweak to the tax system—it’s a complete overhaul of how foreign income is taxed for UK residents. The FIG regime replaces the old remittance basis, which allowed non-domiciled individuals to avoid UK tax on foreign income unless it was brought into the country. From April 2025, domicile status is out the window, and tax liability hinges on your residency status instead. This shift affects everyone from expats returning to the UK to business owners with overseas investments, so let’s break it down.
The FIG regime offers a four-year tax exemption on foreign income and gains for qualifying new residents—those who’ve been non-UK tax residents for at least 10 consecutive years before moving to the UK. If you qualify, you won’t pay UK tax on your foreign income or gains during your first four years of UK residency, even if you bring those funds into the UK. But here’s the catch: you need to actively claim this relief via your self-assessment tax return, and you must report all foreign income and gains, whether you’re claiming relief or not. This is a big change from the remittance basis, where unremitted income often didn’t need reporting.
Who Qualifies for the FIG Regime?
So, who exactly gets to enjoy this four-year tax holiday? The eligibility criteria are straightforward but strict. You qualify if you’re a UK tax resident under the Statutory Residence Test (SRT) and have not been a UK tax resident for at least 10 consecutive years before your arrival. This applies to both UK nationals returning after a long stint abroad and foreign nationals moving to the UK. For example, if you moved to the UK in the 2025/26 tax year after living in Dubai for 10 years, you’re eligible for FIG relief until 2028/29, provided you remain a UK resident.
Be careful! If you’ve been popping in and out of the UK for short periods in the last 10 years, you might not meet the “10 consecutive years” rule. Check your residency status carefully using HMRC’s SRT guidelines (available at www.gov.uk/guidance/statutory-residence-test). If you were already a UK resident before 6 April 2025 but still within your first four years of residency after a 10-year non-residency period, you can claim FIG relief for the remaining years.
What Types of Income Are Covered by FIG Relief?
Now, let’s talk about what counts as “foreign income and gains.” The FIG regime covers a wide range of income sources, but not everything qualifies. Here’s a quick rundown:
● Eligible Income: Profits from a trade conducted wholly outside the UK, rental income from overseas properties, interest from foreign savings accounts, and dividends from foreign companies.
● Eligible Gains: Capital gains from selling overseas assets, like property or shares.
● Non-Eligible Income: Foreign earnings from employment (unless covered by Overseas Workday Relief) and certain pension income.
For instance, if you own a rental property in Spain or earn dividends from a US-based company, these could be exempt under FIG if you qualify. But income from a UK employer for duties performed abroad doesn’t count—unless you meet specific OWR criteria, which we’ll cover later.
How Does FIG Affect Your Self-Assessment?
Here’s where things get practical. From 6 April 2025, if you’re a UK resident with foreign income or gains over £2,000, you must report these on your self-assessment tax return, even if you’re claiming FIG relief. This is a shift from the remittance basis, where unremitted income often stayed off the radar. You’ll use the SA106 (Foreign) supplementary pages of the SA100 tax return to report these details (check the latest form at www.gov.uk/government/publications/self-assessment-foreign-sa106).
The deadline for filing your self-assessment is 31 January following the tax year (e.g., 31 January 2027 for the 2025/26 tax year). If you’re claiming FIG relief, you must quantify the exact amount of foreign income or gains you’re seeking relief for and deduct these from your taxable income on the return. Miss this step, and you’ll be taxed on the full amount under the arising basis, which means UK tax on your worldwide income as it’s earned.
Table 1: Key FIG Regime Eligibility and Reporting Requirements
Criteria | Details |
Eligibility | UK tax resident with 10+ consecutive years of non-UK residency prior to arrival |
Duration | 4 tax years from first year of UK residency (e.g., 2025/26 to 2028/29) |
Income Covered | Foreign trade profits, rental income, dividends, capital gains (not employment income) |
Reporting Requirement | Must report all foreign income/gains over £2,000 on SA106 form |
Claim Deadline | 31 January in the second year after the tax year (e.g., 31 January 2028 for 2025/26) |
Tax Implication if Not Claimed | Taxed on arising basis (full UK tax on worldwide income) |
Case Study: Priya’s Move from Singapore
Let’s make this real with an example. Priya, a tech entrepreneur, moves to London in July 2025 after 12 years in Singapore. She earns £50,000 in dividends from her Singapore-based startup and £20,000 in rental income from a flat in Hong Kong. As a qualifying new resident, Priya can claim FIG relief for the 2025/26 tax year. She files her self-assessment by 31 January 2027, reporting both income sources on the SA106 form and claiming relief, meaning no UK tax on the £70,000. However, she loses her £12,570 personal allowance and £3,000 capital gains tax (CGT) annual exempt amount for that year, so she needs to weigh if the relief is worth it.
If Priya forgets to claim FIG relief, her £70,000 will be taxed at UK rates (e.g., 20% basic rate, 40% higher rate, or 45% additional rate, depending on her total income). This could lead to a hefty tax bill, so she consults a tax advisor to ensure compliance.
Why the FIG Regime Might Not Always Save You Money
Now, consider this: claiming FIG relief isn’t always a no-brainer. By opting in, you forfeit your personal allowance (£12,570 for 2025/26) and CGT annual exempt amount (£3,000 for 2025/26). If your foreign income is small—say, £5,000 in overseas dividends—it might be cheaper to pay UK tax on it and keep your allowances. For business owners with complex income streams (e.g., UK and foreign dividends), crunching the numbers is crucial. A tax calculator or professional advice can help you compare scenarios.
Practical Steps and Challenges in Reporting Overseas Income Under the FIG Regime
How Do You Actually Report Foreign Income on Your Self-Assessment?
Now, let’s get into the nitty-gritty of filling out your self-assessment under the new Foreign Income and Gains (FIG) regime. If you’ve got foreign income or gains over £2,000, you’re required to report them on the SA106 (Foreign) pages of your SA100 tax return, whether you’re claiming FIG relief or not. This isn’t as daunting as it sounds, but it does require some careful planning. You’ll need to gather details like the source of your income (e.g., foreign dividends, rental income), the amount in sterling, and any foreign taxes paid. HMRC’s guidance at www.gov.uk/government/publications/self-assessment-foreign-sa106 is your go-to resource for the latest form and instructions.
Start by registering for self-assessment if you haven’t already—new UK residents must notify HMRC within six months of the tax year-end (e.g., by 5 October 2026 for the 2025/26 tax year). Once registered, you’ll receive a Unique Taxpayer Reference (UTR) to file online. The SA106 form asks for specifics like the country of origin, the type of income, and whether you’re claiming FIG relief or other reliefs like Foreign Tax Credit Relief (FTCR). If you’re claiming FIG relief, you’ll need to tick the relevant box and deduct the exempt income from your taxable total.
Step-by-Step Guide to Reporting Foreign Income
So, how do you make sure you’re doing this right? Here’s a practical, step-by-step guide to reporting foreign income under the FIG regime:
Determine Your Residency Status: Use HMRC’s Statutory Residence Test (SRT) to confirm you’re a UK resident and check if you’ve been non-UK resident for 10 consecutive years to qualify for FIG relief (see www.gov.uk/guidance/statutory-residence-test).
Gather Income Details: Collect records of all foreign income and gains—bank statements, dividend vouchers, or property rental agreements. Convert amounts to sterling using HMRC’s exchange rates (available at www.gov.uk/government/publications/hmrc-exchange-rates-for-2025-monthly).
Identify Eligible Income: Confirm which income qualifies for FIG relief (e.g., foreign dividends, capital gains) and which doesn’t (e.g., employment income). Cross-check with HMRC’s FIG guidance.
Complete the SA106 Form: Report all foreign income/gains over £2,000 on the SA106 pages. Specify amounts, sources, and any foreign taxes paid. If claiming FIG relief, indicate the exempt portion.
Calculate Tax Implications: If not claiming FIG relief, calculate UK tax liability based on your income tax band (e.g., 20% basic rate, 40% higher rate for 2025/26). Use FTCR if you’ve paid foreign tax to avoid double taxation.
File by the Deadline: Submit your self-assessment by 31 January following the tax year (e.g., 31 January 2027 for 2025/26). Pay any tax due by the same date to avoid penalties.
Keep Records: Retain all documentation for at least 22 months after the tax year-end (e.g., until 31 January 2028 for 2025/26) in case HMRC queries your return.
Table 2: Tax Rates and Reliefs for Foreign Income (2025/26 Tax Year)
Income Type | UK Tax Rate (2025/26) | FIG Relief Available? | Other Reliefs |
Foreign Dividends | 8.75% (basic), 33.75% (higher), 39.35% (additional) | Yes | FTCR if foreign tax paid |
Foreign Rental Income | 20% (basic), 40% (higher), 45% (additional) | Yes | FTCR, allowable expenses |
Capital Gains (Non-Property) | 10% (basic), 20% (higher) | Yes | Annual exempt amount (£3,000) if not claiming FIG |
Employment Income | 20% (basic), 40% (higher), 45% (additional) | No (except OWR) | Overseas Workday Relief (if eligible) |
What About the Temporary Repatriation Facility (TRF)?
Now, here’s a gem that doesn’t get enough attention: the Temporary Repatriation Facility (TRF). If you were previously on the remittance basis and have unremitted foreign income or gains from before 6 April 2025, the TRF lets you bring these funds into the UK at a reduced tax rate of 12% for two years (2025/26 and 2026/27). This is a one-time opportunity to “clean up” mixed funds or old offshore accounts without facing the full UK tax rates.
For example, imagine Sanjay, a business owner who moved to the UK in 2023 after 15 years in India. He has £100,000 in unremitted foreign dividends from 2022. Under the TRF, he can bring this money to the UK in 2025/26 and pay just 12% tax (£12,000) instead of the 33.75% higher rate (£33,750). However, he must report this on his SA106 form and ensure the funds are clearly identified as pre-2025 income. Miss the TRF window, and he’ll face the full tax rate if he brings the money later.
Common Pitfalls and How to Avoid Them
Be careful! Reporting foreign income isn’t always smooth sailing. One major pitfall is failing to convert foreign income to sterling correctly. HMRC requires you to use their official exchange rates, and getting this wrong can trigger penalties or an incorrect tax bill. Another issue is overlooking foreign taxes paid, which could entitle you to FTCR. For instance, if you paid 15% tax on French dividends, you can offset this against your UK tax liability, reducing your overall bill.
Another trap is assuming all foreign income qualifies for FIG relief. Employment income, for example, is only exempt under specific conditions like Overseas Workday Relief (OWR), which applies if you work partly abroad for a non-UK employer. If you’re a business owner with a foreign subsidiary, ensure you distinguish between trade profits (eligible for FIG) and employment income (often not). When in doubt, consult a tax advisor to avoid costly mistakes.
Case Study: Eamon’s Complex Income Mix
Let’s consider Eamon, a UK resident since 2024 after 11 years in Australia. He runs a consultancy with £30,000 in UK profits and £40,000 in Australian rental income. In 2025/26, he qualifies for FIG relief and claims it for his rental income, avoiding UK tax on the £40,000. However, he loses his £12,570 personal allowance, so his UK profits are taxed at 20% (£6,000). Without FIG relief, he’d keep his personal allowance, paying tax only on £17,430 (£3,486 at 20%). Eamon uses a tax calculator to compare scenarios and decides FIG relief saves him more, but he carefully documents his Australian income on the SA106 form to avoid HMRC scrutiny.
How to Handle Mixed Funds and Trusts
Now, things get trickier with mixed funds or trusts. Mixed funds—bank accounts with both UK and foreign income—are a headache under the FIG regime. If you’re claiming relief, you must clearly identify the foreign portion. For example, if your offshore account has £50,000 from UK dividends and £50,000 from foreign gains, only the latter qualifies for FIG relief. HMRC’s rules on mixed funds are strict (check www.gov.uk/government/publications/residence-domicile-and-remittance-basis), so you might need professional help to untangle them.
Trusts are another complex area. If you’re a beneficiary of a foreign trust, FIG relief may apply to distributions, but only if the trust’s income or gains are foreign-sourced. If the trust has mixed income, you’ll need to trace the source meticulously. HMRC’s Trust and Estate Foreign pages (SA107) may also be required alongside SA106.
Why Professional Advice Might Be Your Best Friend
None of us is a tax expert, but the FIG regime’s complexity often calls for professional help, especially for business owners with diverse income streams. A tax advisor can help you navigate FTCR, OWR, or the TRF, ensuring you don’t overpay or face penalties. For instance, penalties for late filing can be £100 initially, escalating to £1,600 after 12 months, plus 5% of any unpaid tax. Advisors can also help you decide whether to claim FIG relief or retain your personal allowance based on your income profile.
Key Takeaways and Strategic Considerations for the FIG Regime
Is the FIG Regime Right for Your Financial Situation?
Now, let’s talk about strategy. Deciding whether to claim Foreign Income and Gains (FIG) relief isn’t just about ticking a box on your self-assessment—it’s about weighing the pros and cons for your unique financial picture. For some UK taxpayers, especially those with significant foreign income, the four-year tax exemption can be a game-changer. But for others, particularly those with modest overseas earnings, giving up your personal allowance (£12,570 for 2025/26) and capital gains tax (CGT) annual exempt amount (£3,000 for 2025/26) might not be worth it. The key is to run the numbers. For instance, if your foreign income is £10,000, paying 20% UK tax (£2,000) while keeping your personal allowance could save you more than claiming FIG relief and losing the allowance.
Business owners with complex income streams—like foreign dividends from a subsidiary or rental income from overseas properties—need to be extra cautious. The FIG regime can shield substantial sums from UK tax, but you’ll need meticulous records to prove the income’s foreign origin. HMRC’s guidance at www.gov.uk/government/publications/self-assessment-foreign-sa106 emphasises accurate reporting, and errors can lead to audits or penalties. A quick tip: use accounting software to track foreign income separately from UK sources to simplify your SA106 filing.
How Can You Optimise Double Taxation Relief?
So, the question is: how do you avoid paying tax twice on the same income? Foreign Tax Credit Relief (FTCR) is your lifeline here. If you’ve paid tax abroad on income or gains eligible for FIG relief, you can still claim FTCR if you choose not to claim FIG relief. For example, if you paid 25% tax on £20,000 of German rental income, you can offset that against your UK tax liability, reducing your bill. The catch? You must provide evidence, like foreign tax assessments or receipts, when filing your SA106 form. Without FIG relief, your UK tax liability on that £20,000 would be based on your income tax band—say, 40% (£8,000) for higher-rate taxpayers, minus the foreign tax paid (£5,000), leaving a net UK tax of £3,000.
If you’re claiming FIG relief, FTCR doesn’t apply because the income is exempt from UK tax. But here’s a strategic angle: if the foreign tax rate is low (e.g., 10% in Cyprus), you might opt out of FIG relief, claim FTCR, and keep your personal allowance. This is especially relevant for business owners with income from low-tax jurisdictions. Always compare the tax outcomes using a calculator or a tax advisor to make an informed choice.
Table 3: Comparing FIG Relief vs. No FIG Relief (Example Scenario)
Scenario | With FIG Relief | Without FIG Relief |
Foreign Income | £50,000 (dividends) | £50,000 (dividends) |
UK Income | £30,000 (trade profits) | £30,000 (trade profits) |
Personal Allowance | £0 (lost) | £12,570 |
Taxable Income | £30,000 (UK only) | £67,430 (£80,000 - £12,570) |
UK Tax (20% basic rate) | £6,000 | £13,486 |
Foreign Tax Paid (15%) | N/A (FIG exempt) | £7,500 (offset via FTCR) |
Net UK Tax | £6,000 | £5,986 (£13,486 - £7,500) |
Total Tax Paid | £6,000 (UK only) | £13,486 (£5,986 UK + £7,500 foreign) |
What Happens if You Get It Wrong?
Be careful! HMRC doesn’t mess around when it comes to incorrect self-assessments. If you fail to report foreign income over £2,000, you could face penalties starting at £100 for late filing, escalating to 5% of the tax due (or £300, whichever is greater) after three months. For deliberate errors, penalties can reach 100% of the tax owed. For example, if you underreport £50,000 of foreign dividends taxable at 33.75% (£16,875), you could owe an additional £16,875 in penalties, plus interest.
To avoid this, double-check your figures and keep detailed records. If you’re unsure about mixed funds or trust income, consult a tax advisor. HMRC’s helpline (available via www.gov.uk/contact-hmrc) can also clarify basic queries, but they won’t do the math for you. For complex cases, like part-year residency or overseas trusts, professional help is often worth the cost to avoid costly mistakes.
Case Study: Ayesha’s TRF Strategy
Now, consider this: Ayesha, a marketing consultant, moved to the UK in 2024 after 12 years in Canada. She has £80,000 in unremitted foreign gains from selling Canadian shares in 2022, when she was on the remittance basis. In 2025/26, she uses the Temporary Repatriation Facility (TRF) to bring this money to the UK, paying a reduced 12% tax (£9,600) instead of the standard 20% CGT (£16,000). She reports this on her SA106 form, clearly identifying the pre-2025 gains. By acting within the TRF’s two-year window (2025/26–2026/27), she saves £6,400. Ayesha also claims FIG relief on £30,000 of new Canadian dividends, avoiding UK tax entirely, but she loses her personal allowance, so she carefully calculates the trade-off.
Summary of the Most Important Points
The FIG regime, effective from 6 April 2025, offers a four-year tax exemption on foreign income and gains for UK residents who were non-UK tax residents for 10 consecutive years prior to arrival.
You must report all foreign income and gains over £2,000 on the SA106 form of your self-assessment, even if claiming FIG relief.
Claiming FIG relief means forfeiting your £12,570 personal allowance and £3,000 CGT annual exempt amount for 2025/26, which may not suit taxpayers with low foreign income.
The Temporary Repatriation Facility (TRF) allows pre-2025 unremitted income or gains to be brought to the UK at a 12% tax rate until 5 April 2027.
Foreign Tax Credit Relief (FTCR) can offset foreign taxes paid against UK tax liability if you opt out of FIG relief, but evidence is required.
Use HMRC’s official exchange rates to convert foreign income to sterling to avoid errors and potential penalties.
Mixed funds and trusts require careful tracing to identify foreign income eligible for FIG relief, often necessitating professional advice.
Penalties for late or incorrect self-assessment filings start at £100 and can escalate to 100% of the tax owed for deliberate errors.
The self-assessment deadline is 31 January following the tax year, with records retained for at least 22 months after.
Strategic decisions, like choosing between FIG relief and retaining your personal allowance, depend on your income profile and require careful calculation.
FAQs
Q1: What is the Foreign Income and Gains (FIG) regime in the UK?
A1: The FIG regime is a new tax system starting 6 April 2025, replacing the remittance basis, offering a four-year tax exemption on foreign income and gains for UK residents who were non-UK tax residents for 10 consecutive years before arriving in the UK.
Q2: Who is eligible to claim FIG relief?
A2: Individuals qualify for FIG relief if they are UK tax residents and have not been UK tax residents for at least 10 consecutive years prior to their arrival in the UK.
Q3: What types of income are exempt under the FIG regime?
A3: Foreign income such as dividends, rental income, trade profits conducted wholly outside the UK, and capital gains from overseas assets are exempt, but employment income generally is not unless covered by specific reliefs.
Q4: How does someone apply for FIG relief?
A4: To claim FIG relief, individuals must complete the SA106 (Foreign) pages of their self-assessment tax return, ticking the relevant box to exempt eligible foreign income and gains.
Q5: What happens if someone doesn’t report their foreign income?
A5: Failing to report foreign income over £2,000 can lead to penalties starting at £100 for late filing, escalating to 5% of the tax due or up to 100% for deliberate errors.
Q6: Can someone claim FIG relief and still use their personal allowance?
A6: No, claiming FIG relief means forfeiting the personal allowance (£12,570 for 2025/26) and the capital gains tax annual exempt amount (£3,000 for 2025/26).
Q7: What is the Temporary Repatriation Facility (TRF)?
A7: The TRF allows individuals previously on the remittance basis to bring pre-2025 unremitted foreign income or gains to the UK at a reduced 12% tax rate until 5 April 2027.
Q8: How does Foreign Tax Credit Relief (FTCR) work with the FIG regime?
A8: FTCR allows individuals to offset foreign taxes paid against UK tax liability if they opt out of FIG relief, but it’s not applicable if FIG relief is claimed.
Q9: What are the penalties for incorrect currency conversion in reporting foreign income?
A9: Incorrectly converting foreign income to sterling using non-HMRC exchange rates can result in an incorrect tax calculation, potentially leading to penalties or additional tax assessments.
Q10: Can business owners claim FIG relief on foreign subsidiary profits?
A10: Yes, profits from a trade conducted wholly outside the UK by a foreign subsidiary can qualify for FIG relief, provided the business owner meets the eligibility criteria.
Q11: How does the FIG regime affect non-domiciled individuals?
A11: From 6 April 2025, domicile status is irrelevant; the FIG regime applies based on residency status, affecting non-domiciled individuals who meet the 10-year non-residency rule.
Q12: What records should someone keep for FIG reporting?
A12: Individuals should retain bank statements, dividend vouchers, rental agreements, and foreign tax documents for at least 22 months after the tax year-end to support their self-assessment.
Q13: Can someone claim FIG relief for part of their foreign income only?
A13: Yes, individuals can choose to claim FIG relief for specific eligible income or gains while paying UK tax on others, depending on their financial strategy.
Q14: How does the FIG regime impact overseas trusts?
A14: Distributions from foreign trusts may qualify for FIG relief if the income or gains are foreign-sourced, but tracing the source is complex and may require additional SA107 forms.
Q15: What is Overseas Workday Relief (OWR) under the FIG regime?
A15: OWR allows certain employment income earned abroad to be exempt from UK tax for eligible FIG claimants, typically for duties performed outside the UK for a non-UK employer.
Q16: Can someone appeal an HMRC decision on their FIG relief claim?
A16: Yes, individuals can appeal an HMRC decision within 30 days of receiving the notice, providing evidence to support their FIG eligibility or calculations.
Q17: How does someone know if they’re a UK tax resident for FIG purposes?
A17: The Statutory Residence Test (SRT) determines UK tax residency based on factors like days spent in the UK and ties to the country, which affects FIG eligibility.
Q18: What are mixed funds, and how do they affect FIG reporting?
A18: Mixed funds are accounts containing both UK and foreign income or gains; only the foreign portion qualifies for FIG relief, requiring careful tracing and documentation.
Q19: Can someone use the FIG regime if they’re only a UK resident for part of the year?
A19: Yes, part-year residents can claim FIG relief for the portion of the tax year they’re UK residents, provided they meet the 10-year non-residency rule.
Q20: How does the FIG regime affect capital gains tax on overseas assets?
A20: Capital gains from overseas assets are exempt under FIG relief for four years for eligible individuals, but claiming relief means losing the £3,000 CGT annual exempt amount.
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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