Understanding overseas workday relief for new arrivers to the UK

This article follows on from our earlier piece on the Foreign Income and Gains (FIG) regime and looks specifically at the revised Overseas Workday Relief (OWR) rules for individuals becoming UK tax resident from 6 April 2025. Transitional provisions may also apply to individuals who became UK resident in the two tax years prior to this date; however, these rules are more complex and will depend on specific facts and individual circumstances.

Although introduced alongside the FIG regime, OWR is a separate relief with a distinct purpose. It applies specifically to foreign employment income, whereas the FIG regime deals more broadly with foreign income and gains. The two can operate in parallel, but OWR must be considered and claimed in its own right.

For those who qualify as new UK residents, OWR is available for the first four tax years of residence. In simple terms, it allows individuals to claim relief on the portion of their employment income that relates to duties performed outside the UK. UK workdays remain taxable, while overseas workdays can be relieved. Importantly, the new regime removes the need to keep earnings offshore in order to access the relief, which is a welcome simplification.

That said, the regime is more structured than before. A key limitation is the introduction of an annual cap, with relief restricted to the lower of 30% of qualifying employment income or £300,000. In practice, this means that individuals who spend more than 30% of their working time overseas will not obtain full relief for those duties, reducing the overall benefit.

Another area that requires careful attention is deferred or “trailing” remuneration, such as bonuses or equity-based awards. Relief can still apply where such income relates to an earlier period of employment, but only if a valid OWR claim was made for that earlier tax year. If no claim was made at the time, it will not be possible to revisit the position when the income is eventually paid.

In addition, the cap applies by reference to the year in which the duties were performed, not the year of receipt. This means that when deferred income is paid, it must be considered alongside any relief already claimed for that earlier year, which can further restrict the amount of OWR available.

As with the FIG regime, OWR is not automatic. A formal election is required, and the claim must be made through the individual’s UK self-assessment tax return. This can also have wider implications, including a potential loss of UK allowances, so it is important to assess the overall position before claiming.

In summary, the revised OWR regime continues to offer valuable relief for internationally mobile employees, but it is more prescriptive and, in some cases, less generous than the previous rules. Ensuring that claims are made on time, and that the interaction with deferred remuneration is properly managed, will be key to making effective use of the relief within the four-year window.

‍How can Sanctuary help?

While the new OWR rules offer welcome simplification, the introduction of caps and strict election deadlines means there is no room for error. At Sanctuary, we ensure that your transition to the UK is optimised by aligning your employment income strategy with the broader FIG regime.

Read the previous article here to learn more on this topic, visit our Tax & Advisory service page to find more about our tax & residency advisory services, or contact us for a bespoke consultation via the contact form or email us at: hello@sanctuary.ae.