🇬🇧Overseas Workday Relief

Concept

Overseas Workday Relief is the employment-income counterpart to the FIG regime: where a qualifying new resident performs employment duties both inside and outside the UK, the pay tied to the overseas duties can be kept out of UK tax. It relieves duties performed abroad — not foreign salary as such — and reaches bonuses and equity only so far as they trace to those duties. From 6 April 2025 the relief runs on the same residence test as the FIG regime rather than on domicile and the remittance basis.

From a non-dom relief to a residence test

Until 6 April 2025 OWR lived inside the non-dom system. It reached only employees who were not UK domiciled, who claimed the remittance basis, and who kept the overseas earnings in a qualifying offshore account; it ran for the first three tax years of residence and had no ceiling. The 2025 non-dom reform cut those moorings. OWR now rides on the residence-based FIG regime, reaches anyone who clears the ten-year non-residence test whatever their domicile, lasts four years rather than three, and carries a cap — but the earnings may be paid into a UK account instead of being trapped offshore.

The rule

A qualifying new resident — defined in section 845B ITTOIA 2005 as someone who was not UK resident in any of the ten tax years before the year of arrival — can claim OWR on employment income that relates to duties performed outside the UK, for up to four consecutive qualifying years. Each qualifying year carries its own annual limit: the lower of 30% of qualifying employment income or £300,000. EIM43560 ties eligibility to the residence-based FIG framework — being eligible for FIG is enough, with no separate FIG claim required — and EIM43600 sets the cap.

Scope

OWR is relevant to executives, carried-interest professionals, founders on employment contracts, secondees, employees with RSUs or options, and internationally mobile family office principals. It does nothing for investment income, dividends, trust distributions or trading profits outside an employment contract.

The test

The analysis runs through five questions: is the person a qualifying new resident under the Statutory Residence Test; is the employment performed partly outside the UK; which earnings relate to qualifying foreign duties; do any bonuses or securities awards relate to qualifying years; and how does the cap bite. Earnings are split between UK and overseas duties on a just-and-reasonable basis, normally by workday count.

Consequences

Relief cuts UK tax on qualifying foreign employment income, and — unlike the old regime — that income can now land in a UK account. The foreign employment election costs the personal allowance and the annual exempt amount for the year, the same trade-off as a FIG claim. Payroll, PAYE, employer reporting and shadow-payroll treatment often turn material even when the individual's position is clear. Income from an earlier qualifying year can still attract relief when it is paid later, but only if an election was made for that year. Once the four years end, the employee moves to worldwide taxation on the same earnings.

Transitional rules

Anyone already claiming OWR before 6 April 2025 keeps a route through the change. An employee on the old relief who is not eligible for the new FIG regime can run OWR to the end of their third tax year of residence; an employee eligible under both old and new rules reaches the full four years, and the 30% / £300,000 cap does not bite on a claim that rests on the transitional provisions. Employment income for a pre-2025 period still taxed on the remittance basis must stay in a qualifying offshore account, with the special mixed fund rules (EIM43667) governing how money leaves it. EIM43605 sets out the transitional map.

Examples

An executive moving to London in 2025/26 with duties performed in New York, Dubai and London needs a workday allocation for salary and bonus, then the cap. A founder receiving RSUs after moving to the UK must test the vesting and duties period rather than assuming the grant date or broker location controls the UK answer. A bonus paid after departure can still attract OWR for the part earned in a qualifying year for which an election was made.

Risk

The risk is weak workday evidence. HMRC will not usually accept broad business-travel narratives where the computation depends on foreign duties. Other risks are treating OWR as available without qualifying new resident status, misapplying the cap, or assuming a foreign employer automatically means foreign-source income. HMRC's EIM43615 addresses artificial workday arrangements.

Evidence

Evidence includes employment contracts, assignment letters, payroll records, travel calendars, workday diaries, board packs, time-zone records, equity award documents, vesting schedules and employer calculations. The file must let each apportioned figure and the cap be reconstructed from source.

The employer's side

PAYE does not switch off because relief is due. The employer still operates payroll, but can ask HMRC to apply PAYE to only the UK-duty share of the salary, so the employee is not over-withheld and left to reclaim. Agreeing that proportion early and feeding it into payroll — alongside any shadow-payroll obligations where the employer is foreign — is what keeps the relief from becoming a year-long cash-flow loan to HMRC.

Planning

OWR planning belongs with the employment contract, the payroll set-up and the return, and should be settled alongside the FIG position before UK residence begins. The aim is a clean, evidenced workday pattern rather than an engineered one, with the loss of allowances and the cap modelled against expected foreign earnings.