Overseas Workday Relief Under the New Regime: The 30% Cap Explained

Overseas Workday Relief is an income tax relief for people who move to the UK and carry on working partly abroad. If you qualify, the slice of your salary, bonus, benefits and employment-related securities income that relates to duties performed outside the UK can be relieved from UK income tax during your first four tax years of UK residence.

The version of OWR that applies from 6 April 2025 is a different animal from the old one. The old relief was welded to the remittance basis and non-dom status: it lasted three years and only worked if your earnings were paid into a qualifying offshore bank account and kept outside the UK. The rewritten relief drops all of that.

• It runs for up to four tax years rather than three.
• There is no offshore account requirement: HMRC confirms relief is available whether the income is paid into a UK or an overseas account, and income received offshore can be brought to the UK without a charge.
• Domicile is irrelevant. Eligibility follows the residence-based test used for the 4-year FIG regime, so returning British expats can qualify too.
• In exchange, the relief is capped each year at the lower of 30% of qualifying employment income or £300,000.

There are transitional rules for people who were already claiming OWR before 6 April 2025. Broadly, if you first claimed in 2023/24 or 2024/25 and you count as a qualifying new resident in 2025/26, you can continue claiming for your first four tax years of UK residence, and HMRC's guidance confirms the financial limit does not apply to those transitional years. One trap survives: earnings that relate to a pre-6 April 2025 period and are taxable on remittance still need to have been paid into a qualifying offshore account and kept offshore to benefit.

OWR is now tied to the same test as the 4-year FIG regime. You must be a qualifying new resident for the tax year, which means all of the following.

• You are UK tax resident for the year under the Statutory Residence Test.
• You were non-UK resident for a continuous period of at least 10 tax years immediately before you became UK resident.
• You are within your first 4 tax years of UK residence and not otherwise disqualified for the year.

On the employment side, the relief applies to income from an employment whose duties are performed wholly or partly outside the UK. That includes general earnings, benefits in kind and securities income such as share awards and option gains, to the extent they relate to non-UK workdays in a qualifying year.

Who genuinely benefits? In practice this is a relief for internationally mobile executives, inbound assignees and senior hires with regional or global roles: someone running EMEA from London who spends two weeks a month abroad, or a US executive seconded to a UK group company who keeps significant US responsibilities. The higher your pay and the greater your overseas workday percentage, the more the relief is worth.

It is not automatically worth claiming for everyone who qualifies. Because the claim removes your Personal Allowance for the year (more on this below), an employee on a modest salary with only a handful of overseas trips can find the allowance they give up is worth more than the relief they gain. Run the numbers, or ask us to, before you elect.

For each qualifying year from 2025/26 onwards, OWR is limited to the lower of two figures: 30% of your qualifying employment income for the year, and £300,000. Whichever of those two numbers is smaller is the most relief you can have for that year, even if your actual overseas workdays would justify more.

A simple illustration. Suppose you earn £200,000 of qualifying employment income in 2026/27 and 55 of your 220 workdays are spent outside the UK. One quarter of your workdays are overseas, so £50,000 of your income relates to non-UK duties. Your cap is the lower of 30% of £200,000 (which is £60,000) and £300,000, so £60,000. Because your £50,000 of overseas earnings sits below the cap, all of it is relieved: for an additional rate taxpayer that is a saving in the region of £22,500.

Now a case where the cap bites. An executive earns £1,200,000 and spends 40% of her workdays abroad, so £480,000 of her income relates to overseas duties. Thirty percent of her income is £360,000, but the £300,000 ceiling is lower, so her relief stops at £300,000. The remaining £180,000 of overseas-workday earnings stays fully taxable in the UK, although double tax treaty relief may help if those earnings are also taxed abroad.

Two refinements are worth knowing. First, the limit attaches to each qualifying year, and income received later that relates back to that year, such as a deferred bonus or shares vesting after you have left, counts towards that same year's limit together with relief already claimed. Second, transitional claimants who were using OWR before 6 April 2025 are not subject to the financial limit at all for their remaining eligible years.

The relief follows where your duties are actually performed, and HMRC's guidance says that in most cases it expects an apportionment of income on a workday basis to be just and reasonable. In plain terms: count your total workdays for the year, count the ones where you worked outside the UK, and apply that fraction to your qualifying income.

The counting sounds simple until real life intervenes: travel days that start in London and end in New York, a morning of UK emails before an afternoon flight, conferences, or working from a holiday. Days that mix UK and overseas work need a sensible, consistent approach, and borderline patterns are exactly where HMRC enquiries focus, so take advice on your methodology rather than improvising at filing time.

Contemporaneous records are what win these arguments. Build the evidence file as you go rather than reconstructing it in January.

• A day-by-day location calendar covering every workday, kept in real time.
• Flight bookings, boarding passes, train tickets and hotel invoices.
• Meeting diaries, itineraries and employer travel-system records that show what work was done where.
• Passport stamps and entry records where available.

One warning on day counting: the Statutory Residence Test counts days by where you are at midnight, while OWR apportionment looks at where duties are performed during the day. The two counts can differ for the same trip, so keep records that let you answer both questions.

OWR is claimed through your Self Assessment tax return: you make an election for the year as part of the same claims framework as the FIG regime, and we cover the mechanics in our guide to claiming the FIG regime on your return. You can claim OWR on employment income, relief on foreign investment income and gains under the 4-year FIG regime, or both, and you decide year by year within your four-year window.

The trade-off is the same as for FIG claims: making an election for a year costs you the income tax Personal Allowance, worth £12,570 in 2026/27, and the capital gains tax annual exempt amount of £3,000 for that year. For most people claiming OWR this is less painful than it sounds, because the Personal Allowance is tapered away entirely once income exceeds £125,140, so many claimants have already lost it. For lower earners it changes the arithmetic and should be modelled before electing.

Overseas workdays often carry foreign tax as well, particularly for US-connected executives whose worldwide income remains within the US system. The UK relief, treaty positions and foreign filings need to be planned together; our US partners handle the US side of that for our clients. You can check your position on the residence test with our FIG eligibility checker.

By default your employer must operate PAYE on everything, and you recover OWR through your tax return after the year end. To avoid a year of overwithholding, an employer can instead tell HMRC it will operate PAYE on only the proportion of pay relating to UK duties. From 6 April 2025 this stopped being an application for a direction under section 690 and became a digital notification: HMRC confirms receipt, and the employer can operate PAYE on the reduced proportion immediately from that confirmation.

The change from 6 April 2026 is a cap on that in-year estimate. Where the employee is a qualifying new resident eligible for OWR, the proportion of income excluded from PAYE through a notification is now limited to 30%. HMRC's stated aim is that, in most cases, the provisional relief received during the year should not exceed the OWR the employee can actually claim when they file, which avoids painful January balancing payments for people whose overseas workdays run above 30%.

Note the cap on the notification is a percentage only. The £300,000 ceiling is applied through the tax return, so a very high earner whose 30% exceeds £300,000 can still receive more provisional relief in-year than the final claim supports, and should budget for a Self Assessment balancing payment. Employees whose employers do not use the notification process lose nothing overall: full PAYE is withheld and the relief arrives as a repayment through the return.

If you are moving to the UK in 2026/27 or hiring someone who is, the arrival year sets everything: the residence start date, the four-year clock, the payroll setup and the record-keeping habits. Our guide to moving to the UK covers the wider picture, and arrival-year planning with a CTA before you land, or as early as possible after it, is the single best investment an OWR claimant can make. Get in touch and we will map your four years.