For years, the only way to benefit from Overseas Workday Relief was to lock your earnings away in an offshore account and hope you never tripped the rules. On 6 April 2025 that changed. The relief is now more generous, the offshore account has gone, and the window runs longer. It also comes with a cap and a catch that most guides skip.This is a practical walk through how to claim Overseas Workday Relief under the current rules.
What it is worth at different income levels, and the mistakes that pull HMRC’s attention. If you only want the definition first, our sector page explains what Overseas Workday Relief is in plain terms. Everyone else, start here.
Key facts OWR 2025/26
- Relief period: your first four UK tax years of residence
- Eligibility test: non-UK resident in all of the previous ten tax years
- Cap: the lower of 30% of qualifying employment income or £300,000 a year
- Offshore account: no longer needed for income earned from 6 April 2025
- How you claim: a foreign employment election on your Self Assessment return by 31 January
- The catch: you give up your Personal Allowance and your Capital Gains Tax annual exempt amount for that year
The New 2025/26 RulesWhat Actually Changed
The version of OWR most people remember belonged to the old non-dom regime. When the remittance basis was withdrawn, OWR was rebuilt around the new Foreign Income and Gains rules. Four things are different now, and they matter.
Four Tax Years, Not Three
The relief now covers your first four UK tax years of residence. The old rules gave you three. That extra year can be worth a lot if your overseas workdays are heavy early in your time here.
No More Offshore Bank Account
For income earned from 6 April 2025, you no longer route the relieved pay through a qualifying offshore account. Your salary can land in a normal UK bank account and you can still claim. This single change removes most of the admin that used to put people off.
The 30% / £300,000 Cap
Your relief is now limited to the lower of 30% of your qualifying employment income or £300,000 in a tax year. For most people the 30% figure bites first. For very high earners, the £300,000 ceiling takes over. The worked examples below show exactly where each one kicks in.
The Catch: You Lose Your Personal Allowance
Claiming OWR is not free. When you make the foreign employment election, you forfeit your UK Personal Allowance, £12,570 for 2025/26 and 2026/27, and your Capital Gains Tax annual exempt amount for that year.
Here is where people get caught out. If you earn £80,000 and work overseas only ten percent of the time, your OWR claim is around £8,000, and the £12,570 allowance you give up can wipe out the benefit entirely. The headline relief sounds generous. The arithmetic does not always agree. Run the numbers before you elect, or ask us to.
Who Can Claim OWR
You can claim Overseas Workday Relief for a tax year if you meet three conditions:
- UK tax resident for that year.
- You were non-UK resident in every one of the previous ten consecutive tax years.
- You perform some of your employment duties outside the UK.
These are the same residence conditions that govern the new Foreign Income and Gains regime. Citizenship has nothing to do with it. If you are a British citizen returning after ten years abroad and you meet the test, you qualify as a new arrival like anyone else.
Transitional Rules for 2023/24 and 2024/25 Arrivals
If you moved to the UK in 2023/24 or 2024/25, you now sit in one of two groups, and they are not equal.
- You qualify under both regimes. If you meet both the old OWR conditions and the new FIG conditions, you get the best of both. You can claim OWR for four tax years, and the 30% / £300,000 cap does not apply to you. This is the strongest position available.
- You qualify under the old regime only. If you claimed OWR before 6 April 2025 but do not meet the new FIG conditions, you keep claiming under the old rules until the end of your third tax year of UK residence.
One warning on older money. Any OWR income relating to 2024/25 or earlier stays under the old remittance rules and must remain in a qualifying offshore account to keep its tax-free status. Do not mix pre-April 2025 offshore funds with income earned after that date. Once they mix, the protection on the older funds is gone.
How to Claim Overseas Workday Relief Step by Step
The claim has two moving parts: the election you make on your tax return, and the PAYE notification your employer makes during the year.
Make the Foreign Employment Election on Self Assessment
You claim OWR through a foreign employment election on your Self Assessment return. The deadline is 31 January following the end of the tax year. Miss it and you lose the relief for that year. This is the step that actually secures the relief, so it is the one to get right even if everything else falls into place.
Sort the Section 690 Notification With Your Employer
A Section 690 notification lets your employer run PAYE on only the UK-duties portion of your salary. Without it, PAYE comes off your full pay and you wait until the year-end return to recover the rest. With it, you feel the benefit in your monthly pay packet.
Your employer estimates the proportion of time you will work overseas and files the notification with HMRC. For 2025/26, that estimate can reflect your actual expected overseas workdays. From 6 April 2026 the figure will be capped at 30%, which we cover in the Budget section below.
Reapply Every Tax Year
A Section 690 direction is not permanent. Your employer has to submit a fresh notification for every tax year in which you want in-year relief, and any arrangement made before 6 April 2025 no longer counts under the new digital process. If your employer forgets, PAYE runs on 100% of your salary until you reclaim through Self Assessment. Put a reminder in the calendar.
Know What Counts as an Overseas Workday
This is where a lot of claims go wrong, often because of advice that does not apply.
An overseas workday is any day on which you perform substantive employment duties outside the UK. Answering a few emails or taking a short call while in the UK does not disqualify a day as overseas. But HMRC does not treat UK board meetings, essential training, or contractual UK work as incidental. Those are real UK duties.
You may have read about a three-hour rule. That comes from the Statutory Residence Test, which decides whether you are UK resident at all. It is not the OWR test. The same goes for the “present in the UK at midnight” rule. That also belongs to the Statutory Residence Test. For OWR apportionment, a day you spend working in the UK is a UK workday whether or not you were here at midnight.
Autumn Budget 2025 Update Section 690 Changes From April 2026
At the Autumn Budget on 26 November 2025, HMRC confirmed a further change that takes effect from 6 April 2026.
Under the current 2025/26 rules, your employer can notify any reasonable percentage of overseas workdays on the Section 690 form. The 30% / £300,000 cap is then applied later, when you file your return. That gap creates a clawback risk if the in-year relief runs ahead of the year-end cap.
From 6 April 2026, employers will have to limit the proportion of income notified on the Section 690 form to a maximum of 30% for OWR-eligible employees. Anything above 30% gets restricted at source. In practice:
- For 2025/26: the notification can still estimate above 30% where the overseas workdays justify it, but expect to reconcile back to the cap at year-end.
- For 2026/27 onwards: in-year PAYE relief lines up with the year-end cap. Fewer surprises and less clawback, but no chance of higher provisional relief during the year either.
OWR Worked Examples 2025/26
These assume you qualify as a new UK resident under the post-April 2025 regime. They show how the two caps interact at different income levels. Some Examples are.
Mid Earner the Cap Does Not Bite
Salary £80,000, with 60 of 240 workdays spent overseas, so 25% of the time. The pre-cap relief is 25% of £80,000, which is £20,000. The 30% cap would allow £24,000, so it does not bite, and the £300,000 ceiling is nowhere near. OWR claimed: £20,000. But remember the trade-off. Giving up the £12,570 Personal Allowance means the real additional tax-free income is closer to £7,400, not the full £20,000. Worth doing, but not as much as the headline suggests.
High Earner the 30% Cap Starts to Bite
Salary £400,000, with 88 of 220 workdays overseas, so 40% of the time. The pre-cap relief is 40% of £400,000, which is £160,000. The 30% cap limits that to £120,000. The £300,000 ceiling is not in play. OWR claimed: £120,000, capped by the 30% rule.
Ultra High Earner, the £300,000 Ceiling Applies
Salary £2,000,000, with 80 of 200 workdays overseas, so 40% of the time. The pre-cap relief is 40% of £2,000,000, which is £800,000. The 30% cap would give £600,000. But the £300,000 monetary ceiling is lower, so that is the binding limit. OWR claimed: £300,000.
The pattern is simple once you see it. Below roughly £1 million of income the 30% rule sets your ceiling. Above it, the flat £300,000 cap takes over.
OWR and National Insurance
This catches almost everyone out, so read it twice. Overseas Workday Relief is an income tax relief only. It does nothing for your National Insurance.
Your NIC position runs on a separate set of rules:
- If you stay on a UK employer’s payroll and no social security agreement applies, UK NICs are due on your full salary.
- If you are seconded from an EU or EEA country, or a country with a UK social security agreement, an A1 certificate or Certificate of Coverage can keep you in your home country’s system.
- If you are seconded to the UK from a country with no agreement, UK NICs may apply from day one or after 52 weeks, depending on your circumstances.
So you can pay zero UK income tax on 30% of your salary under OWR while still paying full UK NICs on 100% of it. Always look at the combined income tax and NIC position, not income tax on its own.
Common Mistakes That Trigger HMRC Enquiries
HMRC opens enquiries into OWR claims regularly. These are the triggers we see most:
- Weak workday records. “I think I was in Paris that week” is not evidence. Keep a dated calendar with named clients, locations and supporting receipts.
- Counting weekends and holidays as overseas workdays. Only days you actually work qualify.
- Treating UK board meetings or training as incidental. HMRC views these as substantive UK duties.
- Forgetting the Personal Allowance trade off. Claiming when the relief is smaller than the allowances you give up.
- Missing the annual Section 690 reapplication. Every tax year is a fresh application.
- Mixing pre April 2025 offshore funds with later income. This destroys the protection on the older money.
- Filing the Self Assessment claim late. The election must be on your return by 31 January.
- Assuming OWR covers National Insurance. It does not, and the NIC bill comes as a shock.
In Summary
- OWR removes UK income tax on earnings tied to overseas workdays for qualifying new UK residents.
- It runs for four UK tax years and is capped at the lower of 30% of qualifying employment income or £300,000 a year.
- From 6 April 2025 you no longer need an offshore account for current-year income.
- You claim through a foreign employment election on your Self Assessment return by 31 January, and you give up your Personal Allowance for that year.
- OWR reduces income tax only, not National Insurance.
- From 6 April 2026, Section 690 notifications will be capped at 30% to match the year end limit.
Frequently Asked Questions
How long can I claim OWR for?
For your first four UK tax years of residence under the new regime, up from three years under the old rules.
Does claiming OWR cost me my Personal Allowance?
Yes. The foreign employment election removes your Personal Allowance, £12,570 for 2025/26 and 2026/27, and your Capital Gains Tax annual exempt amount for that year. It is the single most overlooked part of OWR planning.
What is the £300,000 / 30% cap and who does it apply to?
It applies to anyone claiming under the post-April 2025 regime. Your relief is the lower of 30% of qualifying employment income or £300,000 a year. People who claimed under the old regime and qualify under both are not subject to it.
What counts as an overseas workday?
Any day you perform substantive employment duties abroad. Brief UK admin such as a short call or email check does not disqualify the day, but UK board meetings, essential training and contractual UK work are not incidental.
Does holiday time count as overseas workdays?
No. Only days you actually work qualify. Holidays and weekends spent abroad do not increase your relief.
What is a Section 690 direction and do I need one?
It lets your employer run PAYE on only the UK-duties part of your salary, so you get the benefit during the year rather than waiting for a refund. You must reapply for it each tax year.
What changes from 6 April 2026?
Employers will have to cap the income they notify on the Section 690 form at 30% for OWR eligible employees, lining up in year PAYE relief with the year end cap.
What records do I need to keep?
Dated, contemporaneous evidence: a work calendar showing where you worked each day, the clients or projects involved, flight bookings or boarding passes, hotel receipts and expense reports tied to specific overseas locations.
What happens if I exceed the £300,000 cap?
Any overseas income above the cap is taxed at standard UK income tax rates, up to 45%, in the normal way.
Speak to an Expat Tax Specialist
OWR is more generous than the old regime, and more technical. The cap, the Personal Allowance trade-off, the transitional rules, the 2026 Section 690 change and the National Insurance interaction all need planning before you commit to the election.
IBISS & CO advises international employees, globally mobile executives and high earners arriving in the UK. We model the relief against your salary, your workday pattern and your arrival date before you elect, so you only claim when it pays. Learn more about our Overseas Workday Relief service, or book a consultation Or Call us on 0208 664 8096.
