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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.Ìý

Employees who elected to be taxed on the remittance basis and were newly UK resident could benefit from ‘Overseas Workday Reliefâ€� (‘OWRâ€�), which broadly meant that employment income in respect of duties performed outside the UK (usually determined on the basis of overseas workdays) would not be taxable until it was remitted to the UK.Ìý

From 6 April 2025, the remittance basis has been replaced with a new regime based only on residence. Overseas Workday Relief has been retained in the new regime, in addition to separate reliefs available on other Foreign Income and Gains (‘FIGâ€�). This means relief will continue to be available for qualifying employees on qualifying employment income which relates to duties performed outside the UK. However, there are some key differences between the old and new regimes.Ìý

Where an employee is eligible for the new FIG regime for a tax year commencing after 5 April 2025 (“the qualifying yearâ€�), OWR will be available on their relevant qualifying foreign employment income.Ìý

The legislation dealing with OWR for new residents on foreign employment income is contained in Chapter 5C of Part 2 of the Income Tax (Earnings and Pensions) Act 2003 (‘ITEPA 2003�) as foreign employment relief.

Guidance relating to the operation of OWR for the period up to 5 April 2025 can be found by going toÌýwww.gov.ukÌýand searching ‘R¶Ù¸é4â€�. There are also transitional provisions to consider for employees who became UK resident in 2022-23, 2023-24 or 2024-25. Guidance in this respect can be found at EIM43605.

What income does OWR apply to?

OWR will continue to apply to the following types of employment income:ÌýÌýÌý

• earnings, and amounts treated as earningsÌýÌý
• amounts which count as employment income under Part 7 of Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) (‘Employment Related Securitiesâ€�)ÌýÌý
• amounts which count as employment income under Part 7A of ITEPA 2003 (‘Employment Income Provided Through Third Partiesâ€�)ÌýÌý

These amounts are qualifying employment income to the extent they relate to a qualifying year, and are from an employment the duties of which are performed wholly or partly outside the UK during the qualifying year.

These amounts are then qualifying foreign employment income if they relate to duties performed outside the UK during a qualifying year in which an employee has made an OWR election.ÌýÌýÌý

If an employee wants to make an OWR claim for relief, they will first now need to make an OWR election for a qualifying year. This will enable the employee to make a claim for relief in their ITSA return for a tax year, for the amount of qualifying foreign employment income assessed in that return, subject to a financial limit.

This means that if all of their qualifying foreign employment income taxable in that tax year is charged to tax, then subject to the financial limit, they can claim relief on all their qualifying foreign employment income. However, if there were any deductions, allowances or other forms of relief which reduced the amount of taxable qualifying foreign employment income charged to tax under section 6 ITEPA 2003, then OWR relief can only be claimed on the part of the qualifying foreign employment income charged. See EIM43590 for further guidance.

Qualifying foreign employment income includes:

• qualifying foreign general earnings as defined within s.41T ITEPA 2003 (see EIM43565)
• qualifying foreign third party income as defined within s.41U ITEPA 2003 (see EIM43570)
• qualifying foreign securities income as defined within s.41V ITEPA 2003 (see EIM43575)

From 6 April 2025, an employee claiming OWR can choose whether they want to receive their qualifying foreign employment income in a UK or overseas bank account without this affecting the relief available.

If an employee receives earnings after 6 April 2025 but the income was in respect of duties performed in a year for which the remittance basis applied, then the remittance basis will still apply to this income, and it will need to be paid offshore or it will be taxable on receipt. See EIM43610 for more information.