Overseas Workday Relief (OWR) – A Guide for New UK Residents
The UK tax system underwent one of its most significant changes in decades from 6 April 2025, with the abolition of the remittance basis and the introduction of a new residence-based regime for foreign income and gains.
One area that continues to offer substantial tax-saving opportunities for internationally mobile employees is Overseas Workday Relief (OWR).
For qualifying employees, OWR can reduce UK income tax by excluding earnings that relate to employment duties performed outside the UK. This can be particularly valuable for senior executives, internationally mobile professionals, and employees who continue to travel extensively for work after becoming UK tax resident.
What is Overseas Workday Relief?
Overseas Workday Relief allows certain employees to apportion their employment income between:
Duties performed in the UK; and
Duties performed overseas.
The proportion of employment income relating to UK duties remains taxable in the UK. However, the proportion relating to overseas duties may qualify for relief and therefore be excluded from UK income tax.
The relief can apply to various forms of employment income, including:
Salary
Bonuses
Share option gains
Share awards
Other qualifying employment income
Importantly, from 6 April 2025, relief is available regardless of whether the income is paid into a UK or overseas bank account, and qualifying income can be remitted to the UK without triggering an additional tax charge.
How Have the Rules Changed from 6 April 2025?
Prior to 6 April 2025, Overseas Workday Relief was linked to an individual's domicile status.
Under the old rules, an individual generally needed to:
Be non-UK domiciled; and
Have been non-UK tax resident for at least three consecutive tax years before becoming UK resident.
Where these conditions were met, OWR was generally available for the first three tax years of UK residence.
From 6 April 2025, the relief has been aligned with the new Foreign Income and Gains (FIG) regime and is now based on residence rather than domicile.
This means that an individual no longer needs to be non-UK domiciled to qualify.
Who Qualifies for Overseas Workday Relief?
To claim OWR under the new rules, an employee must be a Qualifying New Resident under the FIG regime.
An individual will generally qualify if they:
Become UK tax resident; and
Have not been UK tax resident in any of the previous 10 tax years.
This change significantly broadens access to the relief, potentially allowing many more internationally mobile employees to benefit.
How Long is Relief Available For?
Under the previous regime, relief was available for up to three tax years.
Under the new FIG regime, qualifying new residents can potentially benefit from four tax years of Overseas Workday Relief.
However, there is an important transitional exception.
An individual who first became UK resident during the 2022/23 tax year may satisfy the new FIG conditions in 2025/26 but will not gain access to a fourth year of OWR.
New Financial Limits on Overseas Workday Relief
One of the major changes introduced from 6 April 2025 is the introduction of a cap on the amount of relief available.
The relief available is restricted to the lower of:
The proportion of employment income relating to overseas workdays;
30% of taxable employment income; or
£300,000.
For high earners with substantial overseas duties, this cap may significantly reduce the amount of relief available compared to the previous regime.
What Employment Income Can Qualify?
Qualifying foreign employment income can include:
Qualifying foreign general earnings
Qualifying foreign third-party income
Qualifying foreign securities income
This can encompass salary, bonuses, share option gains and certain employment-related securities income.
The exact treatment depends on when the employment duties were performed and the nature of the income received.
Overseas Workday Relief and Self-Assessment
An OWR election must be made through the employee's Self-Assessment tax return.
The deadline for making the election is generally 31 January following the end of the relevant tax year.
Making an election alone is not sufficient.
The employee must also submit a claim specifying the amount of Overseas Workday Relief being claimed.
Failure to make the election for a qualifying year can have significant consequences.
If no election is made for a qualifying year, relief relating to income from that year's employment duties may be permanently lost in future years.
However, an employee is not required to make an election in every qualifying year and can choose to claim relief in some years but not others.
Important Consequences of Making an OWR Election
Employees considering an OWR claim should carefully weigh the tax savings against the wider implications.
When an Overseas Workday Relief election is made for a tax year, the employee loses:
Their Income Tax Personal Allowance for that tax year;
Their Capital Gains Tax Annual Exempt Amount for that tax year; and
The ability to claim foreign income losses and foreign capital losses for that tax year.
For many higher earners, the value of OWR will substantially outweigh the loss of these allowances, but calculations should always be undertaken before making a claim.
There can also be implications for pension tax relief, which should be considered as part of the overall planning process.
Practical Example
Oliver arrives in the UK for the first time on 6 April 2025 and becomes UK tax resident during the 2025/26 tax year.
As he has not been UK resident in any of the previous ten tax years, he qualifies as a new resident under the FIG regime.
Oliver performs employment duties both in the UK and overseas.
He makes an OWR election and claims Overseas Workday Relief in his 2025/26 Self-Assessment tax return.
As a result:
He can claim relief on qualifying overseas workdays;
He loses his Personal Allowance for 2025/26; and
He loses his Annual Exempt Amount for Capital Gains Tax purposes for 2025/26.
In 2026/27, Oliver receives additional employment income relating to overseas duties performed in 2025/26.
He claims OWR on this income but does not make an OWR election for 2026/27.
Because no election is made in 2026/27, he retains his Personal Allowance and Annual Exempt Amount for that tax year.
Record Keeping Requirements
HMRC frequently opens compliance checks into Overseas Workday Relief claims, making robust record keeping essential.
Employees should maintain:
Detailed work diaries showing where duties were performed;
Accurate workday calculations;
Travel schedules and itineraries;
Boarding passes;
Flight confirmations;
Hotel invoices;
Calendar entries; and
Other supporting evidence demonstrating where work was carried out.
Poor documentation can result in HMRC challenging the number of overseas workdays claimed and potentially denying relief.
Overseas Workday Relief and Split Year Treatment
Special rules apply where an individual qualifies for split year treatment.
Where the year is split into a UK part and an overseas part, Overseas Workday Relief only applies to employment income relating to the UK part of the tax year.
The overseas part of the year is already treated as a period during which the individual is taxed as though they were non-UK resident.
As a result, careful analysis is often required when individuals arrive in or leave the UK part-way through a tax year.
Dual Residence and Tax Treaties
An individual may be UK resident under the Statutory Residence Test while simultaneously being treated as resident in another country under a double taxation agreement.
However, treaty residence does not alter an individual's UK residence status for Overseas Workday Relief purposes.
The interaction between OWR and double tax treaties can be complex and professional advice should be sought where dual residence exists.
Is Overseas Workday Relief Worth Claiming?
For many internationally mobile employees, Overseas Workday Relief remains one of the most valuable UK tax reliefs available.
Despite the introduction of the £300,000 and 30% caps, significant tax savings may still be available where substantial employment duties are performed overseas.
However, the decision to make an OWR election should not be taken lightly. The loss of personal allowances, annual exemptions and certain loss reliefs means each claim should be reviewed on a case-by-case basis.
How Surrey Hills Tax Can Help
At Surrey Hills Tax, we advise internationally mobile employees, company directors and expatriates on all aspects of UK residence and cross-border taxation.
We can assist with:
Determining eligibility for Overseas Workday Relief
Workday calculations and apportionment methodologies
OWR elections and claims
HMRC enquiries and compliance checks
Statutory Residence Test reviews
FIG regime planning
International tax and double tax treaty advice
If you have recently moved to the UK or expect to become UK tax resident, contact Surrey Hills Tax to discuss whether Overseas Workday Relief could reduce your UK tax liability.