Overseas Workday Relief: A Practical Guide for New UK Arrivals

For internationally mobile executives, portfolio managers, and professionals who become UK resident while continuing to work globally, Overseas Workday Relief (OWR) can be one of the most valuable tax reliefs available. It allows the portion of employment income earned by performing duties outside the UK to escape UK income tax entirely — even though the individual is UK resident and therefore otherwise subject to UK tax on worldwide income.

This guide explains who qualifies, how OWR works under the post-2025 FIG regime, the record-keeping requirements, the employer's PAYE obligations, and some practical worked examples.

What Is Overseas Workday Relief?

Overseas Workday Relief is a statutory exemption under the Income Tax (Earnings and Pensions) Act 2003, as modified from April 2025 by the Foreign Income and Gains (FIG) regime legislation. In essence:

• You are UK resident (and therefore subject to UK income tax on worldwide income);
• You have employment income from an employment where you also perform duties outside the UK;
• The portion of your employment income that is attributable to overseas workdays is exempt from UK income tax.

The result: only the portion of your salary, bonus, and benefits that relates to UK duties is taxable in the UK. The remainder is treated as foreign employment income, exempt under the FIG rules during the qualifying period.

Who Qualifies?

OWR is available to individuals who:

1. Are eligible for the FIG regime — meaning they have been non-UK resident for at least 10 consecutive tax years before the current period of UK residence; and
2. Are in their first, second, third, or fourth UK tax year of the current period of UK residence; and
3. Have employment income that includes earnings attributable to overseas workdays — duties performed outside the UK.

The FIG regime window is four years. OWR is available throughout those four years, not just the first year.

After year 4, OWR is no longer available. All employment income (regardless of where the duties are performed) becomes taxable in the UK as the individual is a standard UK resident taxpayer.

How Is "Overseas Workday Income" Calculated?

The relief works by apportioning total employment income between UK workdays and overseas workdays. The mechanics:

Step 1: Identify total employment income (salary, bonus, commission, benefits-in-kind, etc.) for the tax year.

Step 2: Identify the total number of working days in the year — typically 220-260 depending on the individual's pattern.

Step 3: Identify the number of days on which duties were performed outside the UK (overseas workdays). Days on which the individual is in transit, or works for only part of the day overseas, require careful analysis.

Step 4: Calculate the overseas fraction: overseas workdays / total workdays.

Step 5: The overseas fraction of total employment income is exempt from UK income tax under OWR.

Example: An investment banker earns £500,000 in salary and bonus. She works 220 days in the year, of which 66 days are spent working in non-UK jurisdictions (client visits, regional offices, conferences). Her overseas fraction is 66/220 = 30%. OWR exempts 30% × £500,000 = £150,000. Only £350,000 is taxable in the UK. At the additional rate (45%), this saves approximately £67,500 in income tax.

Employer PAYE and the OWR Claim

An important practical point: the employer operates PAYE on the full employment income, including the OWR-eligible portion. This is because the employer typically does not know the precise overseas workday count until after the tax year ends.

The employee then claims the OWR relief via their UK self-assessment return. HMRC issues a refund (or credit) of the PAYE overpaid on the overseas portion. Alternatively, an employee who can predict their workday split with reasonable accuracy can apply to HMRC for a modified PAYE code to reduce withholding in-year.

For executives receiving large annual bonuses paid in the early part of the calendar year (common in financial services), the PAYE on overseas-workday bonus income may not be reclaimed until the following January, creating a cash flow disadvantage. Planning around bonus payment timing and PAYE code applications can mitigate this.

Record-Keeping Requirements

HMRC expects OWR claimants to maintain contemporaneous records of overseas workdays. This means:

• A work diary or calendar clearly noting days spent outside the UK;
• Travel records (boarding passes, hotel receipts, expense claims) corroborating the overseas presence;
• Notes of the business purpose of overseas trips — meetings, clients, duties performed;
• Payslips and employment contract confirming the nature and structure of remuneration.

HMRC does not prescribe a specific format, but records should be sufficient to withstand scrutiny in an enquiry. Relying on reconstructed records after the fact is risky. Many professionals use a dedicated travel diary app or maintain a simple spreadsheet from day one.

Relevance of employment contract: The employment contract should be reviewed to confirm it acknowledges that UK and overseas duties are both required. If the contract specifies that all duties are UK-based, an OWR claim is difficult to sustain even if the individual does in practice work overseas.

Comparison with Pre-2025 Overseas Workday Relief

Prior to April 2025, OWR operated under the remittance basis regime. The key difference was that, under the old rules, the overseas workday income was exempt from UK tax only if it was not remitted to the UK. This created planning around the offshore/onshore split of remuneration — some executives arranged for overseas workday income to be paid into offshore accounts, which was never remitted to the UK.

Under the new FIG regime, there is no remittance condition. The overseas workday income is simply exempt — whether paid into a UK account or an overseas account, whether remitted or not. This simplifies the administration significantly.

However, the new regime is arguably less generous in some cases. Previously, a wealthy individual with foreign income could shelter more through the remittance basis than the 4-year FIG window allows. The new OWR is cleaner but has a harder end date at year 4.

OWR and Other Employment Benefits

OWR applies not just to cash salary and bonus but also to other employment income, including:

• Benefits-in-kind (company cars, private medical insurance, accommodation) — the overseas workday apportionment reduces the UK-taxable element;
• Share awards and long-term incentives (LTIPs): Where a share award vests over a period that straddles both non-UK residence and UK residence (or straddles the OWR period), careful apportionment of the vesting gain between UK and non-UK duties is required. HMRC has specific sourcing rules for internationally mobile employees.

Share schemes: The interaction of OWR with the taxation of equity awards — particularly restricted stock units (RSUs), performance share plans (PSPs), and options — is one of the most complex areas of international employment taxation. The taxable date, the vesting period, the service period, and the workday count all affect the UK-taxable amount. Specialist advice is essential for executives with significant equity remuneration.

Social Security and OWR

OWR relates only to income tax. It does not affect National Insurance contributions or social security obligations. Where a UK-resident employee performs duties in another country, there may be separate social security obligations in that country, depending on whether there is a bilateral social security agreement (totalisation agreement) between the UK and the relevant country.

For individuals moving to the UK who previously paid social security in another jurisdiction, the UK's totalisation agreements (with the EU, USA, and many other countries) allow previous contributions to count towards certain UK NIC qualifying years.

Practical Worked Examples

Example 1: Private Equity Partner UK arrival: 1 April 2025 (year 1 of FIG). Total remuneration: £800,000. Working days: 240. Days working overseas (Singapore client meetings, Luxembourg fund management): 96. Overseas fraction: 96/240 = 40%. OWR-exempt income: £320,000. UK-taxable: £480,000. Saving at 45% vs no OWR: approximately £144,000.

Example 2: Regional Director Year 3 of FIG window. Base salary: £200,000; bonus: £100,000. Total: £300,000. Working days: 230. Overseas days: 46 (20%). OWR-exempt: £60,000. UK-taxable: £240,000. PAYE withheld on full £300,000 in year; OWR reclaim via self-assessment: approximately £27,000.

Example 3: Post-FIG Window (Year 5) OWR no longer available. All £300,000 taxable. Tax planning shifts to pension contributions, EIS, and other reliefs.

This article reflects legislation and HMRC guidance as of June 2026. Tax rules, particularly for internationally mobile employees, are subject to change. Professional advice tailored to your employment and residence circumstances is essential.

How Global Investments Can Help

OWR planning requires the co-ordination of tax advice, payroll arrangements, record-keeping, and self-assessment filing. For executives with significant equity remuneration, the complexity increases further. Global Investments works with specialist employment tax advisers and international tax consultants to ensure our clients maximise the reliefs available during their FIG window, manage PAYE efficiently, and plan for life after year 4. Contact us to arrange a review of your employment tax position.