Guidance

Overseas Workday Relief

Published 6 April 2025

This guidance gives you information about the changes to the Overseas Workday Relief (OWR) regime and explains how it works from 6 April 2025. The legislation providing for relief is contained in Chapter 5C of Part 2 of the Income Tax (Earnings and Pensions) Act 2003 (‘ITEPA 2003’) as foreign employment relief. 

You should read this guidance together with both the:

• Statutory Residence Test
• OWR manual (EIM43555)

From 6 April 2025, newly UK resident employees may be eligible for OWR on employment income which relates to employment duties performed outside the UK during a tax year for which they are a ‘qualifying new resident’.

Qualifying new resident for a tax year

An employee is eligible for the Overseas Workday Relief regime in a tax year if they are a qualifying new resident in that tax year. You can read more about the regime for qualifying new residents in manual RFIG44000. Subject to certain transitional provisions, an employee is a qualifying new resident in a tax year, if all of the following apply:

• they’re UK resident in the tax year
• they’ve been non-UK resident for a continuous period of at least 10 tax years immediately prior to that tax year
• they’re not disqualified for the tax year

An employee who is a qualifying new resident for a tax year will remain so in any in tax year in the following 3-year period for which they’re UK resident. This is so they can be a qualifying new resident in up to 4 tax years.

A tax year in which an employee is a qualifying new resident is known as a ‘qualifying year’ for the purposes of Overseas Workday Relief.

How Overseas Workday Relief applies to employment income

Overseas Workday Relief applies to the following types of employment income:

• earnings, and amounts treated as earnings (such as benefits in kind)
• amounts which count as employment income (read more in manual ERSM20000 —  Employment related securities and options)
• amounts which count as employment income (read more in manual EIM45000 — Employment income provided through third parties: overview, general approach)

Employment income amounts can benefit from OWR if they both:

• relate to employment duties carried out outside the UK during a qualifying year for which an employee has made an OWR election
• arise out of an employment which is wholly or partly performed outside the UK

The extent to which income relates to employment duties carried out outside the UK during a qualifying year is determined on a just and reasonable basis. In most cases we would expect apportionment on a workday basis to be just and reasonable. This means that an employee’s annual earnings would be apportioned based on the number of workdays they’ve done in the UK and the number of workdays done overseas.

How to make an Overseas Workday Relief election

An OWR election must be made in the employee’s Self-Assessment tax return for the qualifying year.

If an employee makes an Overseas Workday Relief election, then can make a claim for relief on their qualifying foreign employment income. A claim must be made in the employee’s Self-Assessment tax return. As part of making a claim the employee will need to quantify the amount of relief being claimed in the tax return.

Qualifying foreign employment income is the income from foreign employment that qualifies for relief available to qualifying new residents, this income includes all of the following:

• qualifying foreign general earnings
• qualifying foreign third party income
• qualifying foreign securities income

You can read more on qualifying employment income in manual EIM43565.

How employment income qualifies for relief depends on the tax year the employment income was earned (you can read more in manual EIM40008 — ‘Employment Income Manual’). More than one claim for relief can be made because of an election in a qualifying year.

Overseas Workday Relief will be available to employees whether their income is received in a UK or an overseas bank account. Individuals will also be able to remit it into the UK if it was received offshore without a charge.

A claim for relief can only be made if an employee makes an election for a qualifying year. If an employee chooses not to make an election for a qualifying year, they will then be unable to make a claim for relief in any future tax years in which employment income for that year is charged to tax. This does not affect an employee’s ability to make an election for a future qualifying year, so that they can choose to make an OWR election in only some qualifying years, and not all.

When an employee makes an OWR election for that tax year, they will lose:

• Personal Allowances (PA) for that tax year
• Annual Exempt Amount (AEA) for that tax year
• the ability to claim foreign income or foreign capital losses in that tax year

If they make a claim for relief in a later tax year, this will not affect the employee’s PA or AEA in the later tax year.

Example

Oliver arrives in the UK for the first time on 6 April 2025 and becomes a UK resident in 2025-26. He is a qualifying new resident and works both inside and outside the UK. Oliver makes an OWR election and an OWR claim in his tax return for 2025-26. In 2025-26 he will lose both his Personal Allowances and his Annual Exempt Amount.

In 2026-27 Oliver remains a qualifying new resident. He does not make an OWR election, but he does make an OWR claim as he receives income from his employment in respect of the employment duties carried out in 2025-26. Oliver has made a claim but because no election was made, he does have is PA and AEA.

Annual financial limits on the relief

From 6 April 2025, subject to certain transitional provisions, OWR will be subject to an annual financial limit for each qualifying year: the lower of 30% of the qualifying employment income for the qualifying year or £300,000.

You can read more on the financial limits in manual EIM43600.

Qualifying deductions and the amount of relief

Overseas Workday relief is available on the amount of qualifying foreign employment income charged to tax. It is determined after any deductions are given as part of calculating the net taxable earnings and net taxable specific income.

From 6 April 2025, there are specific rules which determine how any deductions are treated as being set against qualifying foreign employment income. This is when determining the amount charged to tax for the purposes of calculating Overseas Workday Relief which can be claimed in a tax year. The amount of Overseas Workday Relief available is determined after any deductions are given as part of calculating the net taxable earnings and net taxable specific income. These are applied before determining the application of the financial limit.

You can read more on qualifying deductions in manual EIM43595.

Tax treaty non-resident

The Statutory Residence Test determines an individual’s UK residence status. Where an individual is regarded as UK resident for a year under the statutory residence test but, under a tax treaty, regarded as treaty resident in another country, that does not override or change their UK residence status.

You can read more on the impact of dual residence and tax treaties in manual  INTM154040.

OWR and split year

Where the tax year for which an OWR election is made is a split year, OWR will only apply to employment income which relates to the UK part of the year. Under the split year treatment, the UK part of a tax year is when you are charged to UK tax as a UK resident.

For these purposes, it does not matter whether the year is split into a UK part and then an overseas part of the year or the other way round.
A split year is a tax year in which an individual is resident is to be split into a UK part and an overseas part in certain circumstances. Where a tax year is a split year as regards a taxpayer, new rules apply for the taxation of certain income. You can read more about split years in manual RFIG21000 onwards.

Under the split year treatment, the overseas part of a tax year is the part of the tax year when you are charged to UK tax as if you were not UK resident.

Earnings that OWR does not apply to

OWR does not apply to:

• employment income which relates to employment duties you carried out overseas in the overseas part of a split year
• employment income which relates to employment duties you carry out overseas in a tax year for which you’re not resident in the UK
• general earnings from overseas Crown employment subject to UK tax

When are earnings received

Most employment income is usually received shortly after it is earned. However, an employee may receive some employment income in one tax year, such as a bonus, which is for an earlier tax year because it relates to employment duties you carried out in that earlier year.

This means an employee may carry out employment duties in:

• one tax year but receive some of their earnings for those employment duties in a later tax year
• an overseas or UK part of a split year, but receive payment in the other part of the split year (UK or overseas), or in another tax year altogether

It’s your circumstances in the period that the employment income is ‘for’ that determines whether they qualify for OWR, not your circumstances in the year you receive them. You can read more about the year that earnings are “for” in manual EIM40008 — ‘Employment Income Manual’.

Transitional provisions

Before 6 April 2025, OWR was available as part of the remittance basis for an employee in their first three years of UK residence where they were not domiciled in the UK. However, from 6 April 2025 the relief has been reformed as part of the new residence-based regime, which replaces the old domicile-based system.

You can read more on the old OWR regime in RDR4. Where an employee arrived in the UK and claimed OWR in a tax year prior to 6 April 2025 under the remittance basis, they will still be eligible for OWR for their first three years of UK residence, even if they are not a qualifying new resident in 2025 to 2026. Overseas Workday Relief for these employees for any tax year commencing on or after 6 April 2025 will be available under the new Overseas Workday Relief regime, rather than the remittance basis. This means these employees will have to make an OWR election for tax years commencing on or after 6 April 2025, as well as a claim for relief. The relief available in these years will not be subject to the financial limit.

Where an employee arrived in the UK and claimed OWR in either 2023 to 2024 or 2024 to 2025 under the remittance basis, if they are a qualifying new resident in 2025 to 2026, they will be eligible for OWR for their first 4 years of UK residence.

Where an employee arrived in the UK and claimed OWR in 2022 to 2023 under the remittance basis, they will not be eligible for OWR in 2025 to 2026, even if they are a qualifying new resident in this tax year.

You can read more on transitional provisions in manual EIM43605.

Income earned prior to 6 April 2025 and received after 6 April 2025

As set out above, an employee can be taxable on employment income in a different tax year to the one in which it was earned. Where employment income relating to employment duties performed prior to 6 April 2025 is received after 6 April 2025, if it relates to employment duties performed in a year for which the employee elected to be taxed on the remittance basis, the remittance basis rules will continue to apply to this income.

This means that if the employee qualified for OWR in that year, then to the extent the income relates to employment duties performed outside the UK, it will continue to be taxable upon remittance. This means any employment income relating to a pre-6 April 2025 period which is taxable on remittance will still need to be paid into a qualifying overseas bank account and to be kept offshore to benefit from OWR.

You can read more on trailing income related to pre-6 April 2025 in manual EIM43610.

Where income to which the remittance basis applied is received after 5 April 2025, but before 6 April 2028, you may be able to include in a designation under the Temporary Repatriation Facility (TRF).

You can read more on Temporary Repatriation Facility in manual RDRM70000.

Case examples

The following examples demonstrate how the rules apply in practice.

In each example, unless otherwise stated, the individual:

• is a qualifying new resident
• carries out employment duties partly in the UK and partly overseas

Example 1 — Abdul — Eligibility for OWR

Abdul arrives in the UK on 1 February 2026 to begin a work secondment. He has not previously been to the UK and so has not been resident here before. He leaves the UK on 5 April 2029.

Under the statutory residence test, Abdul is resident in the UK for the tax year 2025 to 2026 and is eligible for split year treatment, as well as being a qualifying new resident in that year. The UK part of his split year begins on 1 February 2026.

Abdul is also resident in the UK for the tax years 2026 to 2027, 2027 to 2028 and 2028 to 2029, and is a qualifying new resident in each of those years. He makes an OWR election for each of the tax years 2025 to 2026, 2026 to 2027, 2027 to 2028 and 2028 to 2029. He is not resident in the UK for the tax year 2029 to 2030.

Abdul’s qualifying foreign employment income for 2025 to 2026 (from 1 February 2026), 2026 to 2027, 2027 to 2028 and 2028 to 2029 are eligible for Overseas Workday Relief. He will need to claim relief in each tax return in which this qualifying foreign employment income is charged to tax, taking into account the effect of the financial limit.

Provided Abdul remains not resident in the UK for 10 consecutive tax years following 2028 to 2029, he may be eligible for Overseas Workday Relief again from the 2039 to 2040 tax year.

Example 2 — Burril — Eligibility for OWR

Burril arrives in the UK on 1 March 2026 to begin a work secondment. He has not been to the UK before and has therefore never been resident here. He leaves the UK on 5 April 2030.

He is not resident in the UK under the statutory residence test for the tax year 2025 to 2026. He becomes resident in the UK for the tax years 2026 to 2027, 2027 to 2028, 2028 to 2029 and 2029 to 2030 and is a qualifying new resident in each of these years. He makes an OWR election for each of the tax years 2026 to 2027, 2027 to 2028, 2028 to 2029 and 2029 to 2030. He is not resident in the UK for the tax year 2030 to 2031.

Burril’s qualifying foreign employment income for 2026 to 2027, 2027 to 2028, 2028 to 2029 and 2029 to 2030 are eligible for Overseas Workday Relief. He will need to claim relief in each tax return in which this qualifying foreign employment income is charged to tax, taking into account the effect of the financial limit.

Unlike Abdul, Burril is not resident in the UK in 2025 to 2026 (the tax year in which his UK secondment commenced). Burril is therefore eligible for Overseas Workday Relief for 2029 to 2030 because this is the fourth year for which he is UK resident, and is a qualifying new resident.

Provided Burril remains not resident in the UK for 10 consecutive tax years following 2029 to 2030, he may be eligible for Overseas Workday Relief again from the 2040 to 2041 tax year.

Example 3 — Colar — Eligibility for OWR

Colar arrives in the UK on 1 February 2026 to begin a work secondment. He’s previously been resident in the UK. He ceased to be resident in the UK on 5 April 2020.

He was not resident in the UK for the tax years 2019 to 2020up to 2025 to 2026. He leaves the UK on 5 April 2029.

Colar is resident in the UK for the tax year 2025 to 2026 under the statutory residence test and is eligible for split year treatment. The UK part of his split year begins on 1 February 2026.

Colar is resident in the UK for the tax years 2025 to 2026 up to 2028 to 2029. He is not resident in the UK for the tax year 2029 to 2030.

Colar has not been non-resident in the UK for ten consecutive tax years immediately prior to his secondment to the UK. He’s not a qualifying new resident in 2025 to 2026 and so is not eligible for Overseas Workday Relief in any of the years he remains UK resident up to 5 April 2029.

Provided Colar remains not resident in the UK for 10 consecutive tax years following 2028 to 2029, he may be eligible for Overseas Workday Relief again from the 2039 to 2040 tax year.

Example 4 — Drey – Eligibility for OWR when UK resident years are not continuous

A US company employs Drey. Drey has visited the company’s group office in the UK on short business projects on a number of occasions in each of several tax years prior to 2025 to 2026. He has not been UK resident prior to 2025 to 2026.

In 2025 to 2026 Drey works on a short business project in the UK and is resident for the year under the statutory residence test. He has further business visits to the UK during 2026 to 2027 but is not resident in the UK for that year. He’s seconded to work at the company’s group office in the UK for 3 years from 1 May 2027. Drey leaves the UK on 5 April 2030.

Drey is resident in the UK for the tax year 2027 to 2028 and is eligible for split year treatment. The UK part of his split year begins on 1 May 2027.

He is resident in the UK for the tax years 2025 to 2026, 2027 to 2028 and 2028 to 2029 and is a qualifying new resident in each of these years. Drey is also resident in the UK for 2029 to 2030 but is not a qualifying new resident in that year.

Drey does not make an OWR election in 2025 to 2026. He makes an OWR election for each of the tax years 2027 to 2028 and 2028 to 2029.

Drey will not be able to claim relief on his foreign employment income for the tax year 2025 to 2026 as he did not make an OWR election for that year. Drey can make a claim for Overseas Workday Relief for his qualifying foreign employment income for tax years 2027 to 2028 and 2028 to 2029. He will need to claim relief in each tax return in which this qualifying foreign employment income is charged to tax, taking into account the effect of the financial limit. Even though Drey remains resident in the UK for 2029 to 2030, he is not a qualifying new resident so therefore he will not be entitled to any further relief.

Provided Drey remains not resident in the UK for 10 consecutive tax years following 2029 to 2030, he may be eligible for Overseas Workday Relief again from the 2040 to 2041 tax year.

Example 5 — Drey — Eligibility for OWR when UK resident years are not continuous (Part 2)

In January 2030 Drey receives his 2029 performance bonus which is in respect of his employment duties throughout the calendar year 2029.

He is not eligible for Overseas Workday Relief for 2029-2030 when he receives his bonus but as he earned part of it in respect of employment duties performed in2028-2029, that part is eligible for Overseas Workday Relief. Drey will still need to take into account the effect of the financial limit when making the claim for relief.

Example 6 — Estelle — Eligibility for OWR when not a UK resident before

Estelle arrives in the UK on 6 April 2026 to begin a work secondment which will last for four years. She has not previously been to the UK and so has not been resident here before.

For 2025-2026, she is not resident in the UK under the statutory residence test for the tax year 2025 to 2026. She is resident in the UK for the tax years 2026 to 2027, 2027 to 2028, 2028 to 2029 and 2029 to 2030 and is a qualifying new resident in each of these years. She does not make an OWR election for the tax year 2026 to 2027 but does make an election for OWR for the tax years 2027 to 2028, 2028 to 2029 and 2029 to 2030. She is not resident in the UK for the tax year 2030 to 2031.

Estelle will not be able to claim relief on her foreign employment income for the tax year 2026 to 2027 as she did not make an OWR election for that year. Estelle can make a claim for Overseas Workday Relief for her qualifying foreign employment income for tax years 2027 to 2028,2028 to 2029 and 2029 to 2030. She will need to claim relief in each tax return in which this qualifying foreign employment income is charged to tax, taking into account the effect of the financial limit.

Provided Estelle remains not resident in the UK for 10 consecutive tax years following 2029 to 2030, she may be eligible for Overseas Workday Relief again from the 2040 to 2041 tax year.

Example 7 — Francis — Eligibility for OWR when not a UK resident before

Francis arrives in the UK on 1 December 2025 to begin a work secondment which is expected to last for 35 months. He has not previously been in the UK and so has not been resident here before.

Francis is resident in the UK for the tax year 2025 to 2026 and is eligible for split year treatment. The UK part of his split year begins on 1 December 2025.

For the tax years 2025 to 2026 and 2026 to 2027 he is resident and is a qualifying new resident for each of these years. His foreign employment income for these years is eligible for Overseas Workday Relief. He will need to claim relief in each tax return in which this qualifying foreign employment income is charged to tax, taking into account the effect of the financial limit. He is not UK resident in 2027 to 2028.

Provided Francis remains not resident in the UK for 10 consecutive tax years following 2027 to 2028, he may be eligible for Overseas Workday Relief again from the 2038 to 2039 tax year.

Example 8 — Zoe — OWR and securities income

Zoe arrived in the UK on 6 April 2025, becoming UK resident in 2025 to 2026, having last been resident in 2005 to 2006. Zoe left the UK on 5 April 2026. During 2025 to 2026 Zoe worked for a pharmaceutical company where she spent 75% of her time working in the UK and 25% of her time working at the company’s office in Chicago.

Zoe is a qualifying new resident in 2025 to 2026 and decides to make an OWR election in her tax return for that tax year. She will need to claim relief in each tax return in which this qualifying foreign employment income is charged to tax, taking into account the effect of the financial limit.

Zoe was granted a share option on 6 April 2025 which she exercised on 5 April 2027, realising a gain of £100,000, which is securities income and is taxable in 2026 to 2027. This income is treated as accruing across both tax years 2025 to 2026 and 2026 to 2027, so that part of it accrued during a qualifying year in which the employment duties of the employment were partly performed outside the UK, which means it is qualifying securities income for the purposes of OWR, even though the gain is not realised until tax year 2026 to 2027.

Because Zoe had made an OWR election in tax year 2025 to 2026, Zoe would be entitled to claim relief in her Self Assessment tax return for tax year 2026 to 2027, subject to the financial limit on the amount of the securities income which accrued during 2025 to 2026, which relates to employment duties performed outside the UK. This would likely be £12,500, as £50,000 of the income accrued during tax year 2025 to 2026, and 25% of her employment duties during that year were performed outside the UK.

Example 9 — Julie — OWR and transitional provisions

Julie became UK resident in May 2024, having previously last been resident in the UK in September 2019. Julie is eligible for OWR for the year to 5 April 2025 by meeting the requirements at s.26A and electing to be taxed on the remittance basis. However, Julie is not eligible for the new Foreign Income and Gains regime as she has not spent the last 10 years being non-UK resident, so therefore she is not a qualifying new resident. As Julie isn’t eligible for the new Foreign Income and Gains regime, she would also not normally be entitled to Overseas Workday Relief. However, as Julie first made a claim for Overseas Workday Relief in the 2024 to 2025 tax year, she can still claim under the transitional provisions.

In the 2025 to 2026 tax year, Julie decides to make an OWR election in her tax return so she can make a claim for relief. She will need to claim relief in each tax return in which this qualifying foreign employment income is charged to tax. As she is not eligible for the Foreign Income and Gains regime and is relying on the transitional provisions to make an OWR election, she will only be eligible to make an OWR election each year for her first 3 years of UK residence.

As the transitional provisions do not have a financial limit, Julie is able to claim all of her qualifying employment income. Julie also received a bonus that was earned in the 2024 to 2025 tax year, for which Julie elected to be taxed on the remittance basis, so this will continue to benefit from the remittance basis of taxation, even though the income was paid to Julie on 10 October 2025. Julie would need to keep this money offshore, otherwise it will incur a tax charge. Julie may wish to consider the rules regarding the TRF.

Qualifying employment income is the income from employment that qualifies for relief available to qualifying new residents, this income includes all of the following:

• qualifying general earning
• qualifying third party income
• qualifying securities income

Example 10 — Steven — OWR and transitional provisions

Steven arrived in the UK in April 2023, having never previously being UK resident. Stephen became UK resident in 2023 to 2024 and made an election to be taxed on the remittance basis in this year, qualifying for Overseas Workday Relief in tax year 2023 to 2024.

Stephen remains UK resident in 2024 to 2025 and 2025 to 2026. In 2025 to 2026 Stephen is a qualifying new resident as prior to his first year of UK residence he spent the last 10 years being non-UK resident, and 2025 to 2026 is within the first three years following the first year in which is was a qualifying new resident.

As Stephen is eligible for Foreign Income and Gains regime, and he first elected to be taxed on the remittance basis and met the provisions to benefit from OWR in the 2023 to 2024 tax year, he will benefit from the OWR transitional provisions.

In the 2025 to 2026 tax year, Stephen decides to make an OWR election in his tax return so he can make a claim for relief. He will need to claim relief in each tax return in which qualifying foreign employment income for that tax year is charged to tax. As he is eligible for the Foreign Income and Gains regime, he will be eligible to make an OWR election each year for his first 4 years of UK residence. He can continue to claim OWR up to the 2026 to 2027 tax year.

As the transitional provisions do not have a financial limit, Stephen is able to claim relief on all of his qualifying foreign employment income from 2025 to 2026 and 2026 to 2027. Stephen also received a bonus in July 2025 that was earned in the 2024 to 2025 tax year, for which Stephen elected to be taxed on the remittance basis. He will continue to benefit from the remittance basis of taxation, even though the income was paid to Stephen in July 2025. Stephen would need to keep this money offshore, otherwise it will incur a tax charge. Steven may wish to consider the rules regarding the TRF.

Example 11 — Christophe — Eligibility for OWR

Christophe arrived in the UK in May 2022, becoming UK resident in 2022 to 2023 having never previously been UK resident. In tax year 2025 to 2026 Christophe is a qualifying new resident as he had a period of 10 consecutive tax years in which he was non-UK resident prior to tax year 2022 to 2023, and tax year 2025 to 2026 is within his first four tax years of UK residence. Christophe had elected to be taxed on the remittance basis in tax year 2022 to 2023 and met the requirement of section 26A ITEPA 2003 in that year, so that he qualified for Overseas Workday Relief.

Although Christophe is a qualifying new resident in 2025 to 2026 and eligible for the Foreign Income and Gains regime, because he was eligible for OWR in the three tax years prior to 6 April 2025, and elected to be taxed on the remittance basis in at least one of these years, he is treated as not being a qualifying new resident for OWR purposes in 2025 to 2026.

Example 12 — Pedro — Allowable deductions

Pedro arrived in the UK in March 2025, having previously never been resident in the UK, and became UK resident in tax year 2025 to 2026.

Pedro is a qualifying new resident in 2025 to 2026 and makes an OWR election for this year as he works both in and outside the UK in that year. Pedro’s taxable earnings in 2025 to 2026 for that year are £100,000, £10,000 of which is qualifying foreign employment income. He has allowable deductions of £5,000 which can be set against the £100,000, so that he net taxable earnings for 2025 to 2026 are £95,000. For the purposes of determining the qualifying foreign employment income charged to tax, the same proportion of the allowable deductions is treated as set against the qualifying foreign employment income, as the qualifying foreign employment income is of the taxable earnings. As qualifying foreign employment income is 10% of the taxable earnings, 10% of the allowable deductions are treated as set against the qualifying foreign employment income, so £500 (£5,000 x 10%).

This means the qualifying foreign employment income treated as charged to tax is £9,500, so that this is the amount of relief Pedro can claim under OWR.

Example 13 — Nicole — Allowable deductions

Nicole arrived in the UK in May 2025, having previously never been resident in the UK. She is resident in the UK for the tax years 2025 to 2026, 2026 to 2027, 2027 to 2028 and 2028 to 2029 and is a qualifying new resident in each of these years. Nicole has a single employment which she carries out both in and outside the UK in each of these years.

In tax year 2026 to 2027, Nicole decides to make an OWR election in her tax return so she can make a claim for OWR relief. She will need to claim relief in each tax return in which qualifying foreign employment income for 2026 to 2027 is charged to tax.

Nicole has £10,000 of taxable earnings in tax year 2026 to 2027, made up of £9,000 for that tax year and £1,000 which is for 2025 to 2026. The £9,000 is qualifying employment income, 30% of which relates to overseas employment duties. While the £1,000 is qualifying employment income because it is for a qualifying year, as Nicole did not make an OWR election for 2025 to 2026, Nicole cannot claim any OWR relief on this income. Nicole has allowable deductions of £5,000 in respect of that employment in 2026 to 2027. The £5,000 is set first against the £9,000 which is for 2026 to 2027, so that the net qualifying employment income is £4,000, and relief would be available on 30% of this at £1,200.

Example 14 — Sasha — Allowable deductions

Sasha arrived in the UK in June 2023, having previously never been UK resident before. She leaves the UK on 5 April 2028 and is UK resident in the tax years 2023 to 2024 to 2027 to 2028.

Sasha is a qualifying new resident in the tax years 2025 to 2026 and 2026 to 2027 and makes an OWR election in both tax years.

Sasha has £10,000 of taxable earnings in 2027 to 2028, made up of £1,000 for that tax year and £9,000 which is for 2026 to 2027. The £1,000 is not qualifying employment income, but the £9,000 is and 30% of this relates to overseas employment duties, so that her qualifying foreign employment income is £2,700. Sasha has allowable deductions of £5,000 in respect of that employment in tax year 2027 to 2028. This means Sasha’s net taxable earnings for 2027 to 2028 is £5,000.

When determining how much OWR relief Sasha can claim in her Self-Assessment return for 2027 to 2028, the £5,000 deductions are set against her taxable earnings for 2027 to 2028, reducing this to nil, and is then set against her taxable earnings for 2026 to 2027. When set against the taxable earnings for 2026 to 2027, the deductions are treated as being set against the amount which is not qualifying foreign general earnings first. As there are £6,300 taxable earnings for 2026 to 2027 which are not qualifying foreign employment income, the deductions are set against this first and so, subject to the financial limit, there is £2,700 qualifying foreign employment income charged to tax in 2027 to 2028, in relation to which Sasha can claim OWR relief.

Example 15 — Sasha — Allowable deductions (part 2)

This example is a the same as example 14 but instead the allowable deductions are £8,000. Sasha has £10,000 of taxable earnings in 2027 to 2028 which is made up of £1,000 which is not qualifying employment income for that tax year, and £9,000 which is qualifying employment income for tax year 2026 to 2027. Of the £9,000 from 2026 to 2027, 30% relates to overseas employment duties so that her qualifying foreign employment income is £2,700. Sasha has allowable deductions of £8,000 in respect of that employment income in tax year 2027 to 2028. The deductions would have been set against:

• £1,000 from 2027 to 2028 tax year which was not qualifying employment income
• £6,300 from tax year 2026 to 2027 that was not qualifying foreign employment income
• £700 from tax year 2026 to 2027 that was qualifying foreign employment income

This would result in £2,000 being qualifying foreign employment income on which OWR could be claimed.