What is the overseas workday relief?
Answered 17 March 2026
Here is a comprehensive explanation of Overseas Workday Relief (OWR):
Overseas Workday Relief (OWR)
What the law says
Legislative basis (from 6 April 2025)
OWR is now legislated as "foreign employment relief" in Chapter 5C of Part 2 of ITEPA 2003, introduced by the Finance Act 2025. The old relief under s.26A ITEPA 2003 (linked to the remittance basis) has ceased to have effect for tax years from 6 April 2025.
Who qualifies?
The relief applies to individuals who are a "qualifying new resident" for a tax year (the "qualifying year"). An individual is a qualifying new resident for the purposes of Chapter 5C if they are a qualifying new resident for the purposes of Chapter 5 of Part 8 of ITTOIA 2005 (see s.845B of that Act). This broadly means individuals who have been non-UK resident for at least 10 consecutive tax years before becoming UK resident.
How the relief works — election and claim
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The individual must first make a foreign employment election for the qualifying year (s.41M ITEPA 2003). The election must be made in a return, before the end of 12 months beginning with 31 January after the end of the qualifying year.
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Once an election is made, the individual may make a foreign employment relief claim for the qualifying year or any subsequent tax year (s.41P). The relief equals so much of the net taxable employment income for that year as reflects qualifying foreign employment income (i.e. income attributable to duties performed outside the UK).
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The relief is given by deducting the amount from the individual's net income for the tax year.
Financial limit (s.41R ITEPA 2003)
The relief is capped at the lesser of:
- 30% of the relevant qualifying employment income, and
- £300,000
Where a claim is made for a subsequent tax year (e.g. for a bonus taxed later), the limit is reduced by amounts already relieved under s.41P in earlier years.
What income qualifies?
"Qualifying foreign employment income" includes:
- Qualifying foreign general earnings (s.41T/41U)
- Qualifying foreign third party income (s.41U)
- Qualifying foreign securities income (s.41V)
Effect on pension relief
Where a foreign employment relief claim is made, the individual's relevant UK earnings for pension contribution relief purposes are reduced by the relieved amount (s.41S ITEPA 2003).
Effect on adjusted net income
The relief is ignored when determining adjusted net income under s.58 ITA 2007 (s.41T ITEPA 2003).
HMRC guidance / practice
Historical position (pre-6 April 2025)
Before 6 April 2025, OWR was available to employees who were resident but non-domiciled in the UK and elected for the remittance basis. Under that regime, employment income for duties performed outside the UK was only taxable when remitted to the UK.
New regime (from 6 April 2025)
From 6 April 2025, the remittance basis has been replaced with a residence-only based FIG regime. OWR has been retained but operates differently — relief is now available regardless of whether the income is remitted to the UK, and there is no requirement to be non-domiciled. Individuals are not required to bring their tax-relieved foreign income and gains to the UK, and if they choose to, there is no tax liability when they do.
Income covered by OWR
OWR applies to: earnings and amounts treated as earnings; amounts counting as employment income under Part 7 ITEPA 2003 (Employment Related Securities); and amounts under Part 7A ITEPA 2003 (Employment Income Provided Through Third Parties) — to the extent they relate to duties performed outside the UK during a qualifying year.
Financial limit — worked examples
HMRC illustrates the cap as follows: if an employee has qualifying employment income of £200,000 and 30% of that is £60,000, the relief is restricted to £60,000 (the lower of £300,000 and £60,000). Where an employee has multiple employments, the financial limit applies to the total qualifying employment income across all employments.
Associated employments
Where an employee holds associated employments (with the same or associated employers), s.41Z1 ITEPA 2003 limits the amount of qualifying foreign employment income that can be claimed — restricted to the proportion that is reasonable having regard to the nature and time devoted to duties inside and outside the UK.
PAYE implications
From 6 April 2025, s.690 ITEPA 2003 no longer applies to employees eligible for OWR. Instead, employers can make a notification under s.690D ITEPA 2003 to treat part of the employee's income as not being PAYE income.
Transitional arrangements
Employees who met the provisions of s.26A in either 2023-24 or 2024-25 and elected for the remittance basis in at least one of those years may retain eligibility for the new OWR in 2025-26. Further detail is at HMRC manual EIM43605.
Counting overseas workdays
HMRC accepts a practical rule of thumb for international travel days: for flights of 7 hours or less, a morning arrival = UK workday; afternoon arrival = overseas workday; etc. For flights of more than 7 hours, morning/afternoon arrivals and departures may be split as half UK/half overseas workday.
Citation sources
by treating all income paid to an internationally mobile employee as PAYE income, unless the employer had applied to HMRC for a direction allowing them to operate PAYE only on the percentage of the employee’s income that related to work done in the UK. From 6 April 2025 the legislation at section 690 ITEPA 2003 has changed and will work differently to before. Section 690 now applies only to uncertain payments. An uncertain payment is a payment of, or on account of, the income of an international
Part 2 Employment income: charge to tax Chapter 5C Relief for new residents on foreign employment income Claim for relief Limit on relief 41R 1 This section sets out how to determine the limit on the amount of relief the individual is entitled to when making a foreign employment relief claim for a year for the purposes of section 41P(3). 2 The limit is the lesser of— a 30% of the relevant qualifying employment income, and b £300,000. 3 For the purposes of this section “ relevant qualifying emplo
Section 41Z1 ITEPA 2003 limits the amount of relief which can be claimed under Chapter 5C of Part 2 ITEPA 2003 where an employee receives qualifying foreign employment income from associated employments, which are not performed wholly outside the UK. An associated employment is defined at section 41Z1(4) as employments with the same employer or with associated employers and sections 24(5) and 24(6) ITEPA 2003 apply for the purposes of section 41Z1. There is a limit on how much qualifying emplo
Part 2 Replacement of special rules relating to domicile Chapter 1 New rules for foreign income and gains of individuals becoming UK resident Claim for relief on foreign employment income 38 1 In Part 2 of ITEPA 2003 (employment income: charge to tax), after Chapter 5B insert— Chapter 5C Relief for new residents on foreign employment income Foreign employment election Foreign employment election for qualifying new residents 41M 1 This Chapter applies if an individual is a qualifying new resident
From 6 April 2025, all UK residents are taxed on the arising basis of assessment on their worldwide income and gains. For details of the remittance basis of assessment which was available prior to 6 April 2025 see RDRM31030. Individuals who come to the UK after a period of at least 10 consecutive tax years of non-UK residence are able to claim UK tax relief on foreign income and gains that accrue during their first 4 years of UK residence. The regime that provides for these reliefs for qualifyi
For tax years prior to 6 April 2025, employees who were resident but non-domiciled in the UK could benefit from an alternative basis of assessment called the remittance basis. If the remittance basis applied to a tax year, certain foreign income and gains arising or earned in that tax year were only taxable when remitted to the UK, rather than at the normal time. Employees who elected to be taxed on the remittance basis and were newly UK resident could benefit from ‘Overseas Workday Relief’ (‘O
ial limit. This means the relief available on Sanya’s qualifying foreign employment income for 2025-26 is restricted to the lower of £300,000 and £60,000 (£200,000 x 30%). Sanya can claim £60,000 relief under OWR in his 2025-26 return. The financial limit only takes into account qualifying employment income charged to tax. Example 2 Jennifer is a qualifying new resident for 2025-26 and makes an OWR election for that year. Jennifer works for two employers in 2025-26, Company A and Company B. Jen
The time of departure or arrival and the duration of international business travel can make it extremely difficult to decide whether a particular day should be regarded as a UK or an overseas workday. In these specific circumstances, HMRC is prepared to accept that the following treatment provides a reasonable basis for determining the status of such a day: International flight or journey lasting no more than seven hours Morning arrival – UK workday Morning departure – overseas workday Afternoon
Following the abolition of the remittance basis of taxation, the provisions of section 26A, known as Overseas Workday Relief, have ceased to have effect for tax years from 6 April 2025. A new relief based on duties performed outside the UK has been introduced at Chapter 5C ITEPA 2003 under Foreign Employment Relief (and also referred to as Overseas Workday Relief). More information on this relief, including the treatment of years in transition between the respective reliefs, can be found at EIM4