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Autumn Budget 2024: Overseas Workday Relief (OWR)

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Current position

Currently, subject to certain conditions, non-UK domiciled individuals can make a claim for ‘overseas workday relief’ (OWR) for their first three years of UK tax residency.

Where an individual performs their employment in both the UK and another jurisdiction, overseas workday relief allows individuals to shelter the proportion of their earnings that relates to overseas employment duties, provided these earnings are paid overseas and are not brought to the UK.

What is changing?

From 6 April 2025, eligibility for OWR will be determined by an individual’s residency and not their domicile. Where an individual qualifies for the Foreign Income and Gains (FIG) regime (see Alice Pearson’s article), they will also be eligible to claim OWR. The relief can be claimed for up to four years, compared to the current three-year limit.

Individuals will still be able to shelter a proportion of their overseas employment income from UK taxation, however, the relief will be subject to an ‘annual financial limit’ for each year, being the lower of:

  • 30% of their qualifying employment income
  • £300,000

Whilst the financial limit does restrict the relief that can be claimed, the good news is that individuals will no longer have to keep their overseas earnings overseas. Qualifying individuals can benefit from the relief regardless of whether the employment income is paid into a UK bank account or an overseas bank account. If the employment income is paid to an overseas account, this income can be remitted to the UK without a UK tax charge.

It is worth noting that if an individual receives employment income post-6 April 2025, which relates to employment duties performed pre-6 April 2025 (for example, a performance bonus), this will be treated under the pre-6 April 2025 OWR rules, and taxable on the remittance basis. This means that any employment income relating to pre-6 April 2025 duties will still need to be paid into a qualifying overseas bank account and kept offshore to benefit from OWR.

Transitional arrangements

  • Individuals who claimed OWR relief in a tax year prior to 6 April 2025 but do not qualify for FIG will still be eligible for OWR for their first three years of UK residence. Individuals that are part way through their three-year claim on 6 April 2025 and do qualify for the four-year FIG regime, will be able to benefit from OWR for a total of four years. Additionally, individuals who are partway through their OWR period on 6 April 2025 will not be subject to the financial limits.
  • It will be possible to designate unremitted income qualifying for OWR under the Temporary Repatriation Facility (TRF) and remit this income to the UK at the TRF rates (12% in tax years 2025/26 and 2026/27, rising to 15% in tax year 2027/28). Further details regarding the TRF can be found in Alison Palmer’s article. 

Contact Us
Please contact Helen Davis or your usual Mercer & Hole contact if you have any questions about any of the above. We are here to help.

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