EIM43580 - Globally mobile employees: Overseas Workday Relief: making a claim for relief

From 6 April 2025, in order to claim Overseas Workday Relief (바카라 사이트極WR바카라 사이트�) in relation to a qualifying year, a qualifying employee will first need to make an OWR election in their Self-Assessment (바카라 사이트楽A바카라 사이트�) tax return for the qualifying year. Such an election is made under section 41M ITEPA 2003 and will allow the employee to make an OWR claim for relief on their qualifying employment income for that qualifying year, in any tax year in which it is charged to tax. An OWR claim for relief is made under section 41P ITEPA 2003.聽

However, making either one of these claims, or an OWR election, will impact the various allowances and reliefs that an individual may be entitled to. Sections 845C to 845E in Part 8 ITTOIA 2005 set out the income tax consequences of making a foreign employment election.


Allowances, reductions and reliefs

An individual who makes an OWR election, a foreign income claim or a foreign gain claim for a tax year will lose any entitlement they may have otherwise had for that tax year to the following:

  • personal allowance
  • blind person바카라 사이트檚 allowance
  • tax reductions for married couples and civil partners
  • transferable tax allowance for married couples and civil partners
  • relief in relation to payments for life insurance etc 바카라 사이트� (see sections 457 and 458 ITA 2007)

These allowances will be lost regardless of whether an election is made for only OWR, only foreign income or only foreign gains.

Any relief under OWR will be disregarded for the purpose of determining an employee바카라 사이트檚 Adjusted Net Income (ANI) for the qualifying year, which is used to calculate entitlements to reliefs including tax free childcare. This means any of the employee바카라 사이트檚 foreign employment income relieved under OWR will be taken into account for these purposes.聽ANI is to be determined as if the relief allowed by the claim had not been deducted in calculating the individual바카라 사이트檚 net income for the tax year. This means that all of an individual바카라 사이트檚 foreign income will be taken into account for the purpose of calculating entitlements to reliefs and the High Income Child Benefit Charge (HICBC).


Capital gains annual exempt amount and capital losses

An individual who makes an OWR election, a foreign income claim or a foreign gain claim for a tax year will lose entitlement to the following:

  • the CGT annual exempt amount (AEA) for the tax year in relation to which the claim is made (see section 1K(6)(b) TCGA 1992)
  • foreign qualifying losses that accrue to the individual in the tax year in relation to which the claim is made, which cease to be allowable losses (see section 16(4) TCGA 1992)

The loss of AEA will be lost regardless of whether an election is made for only OWR, only foreign income or only foreign gains.

The relief on foreign capital gains is applied before deducting any allowable losses. As a result, losses arising in respect of the in-year disposal of UK assets as well as unused losses from years outside of a relevant claim are unaffected. These losses are utilised against UK gains in the year or carried forward to future years in the normal way.


Trading and property income losses

Section 845C ITTOIA 2005

An individual who carries on a trade, profession, vocation or property business wholly outside the UK and makes a foreign income claim, a foreign gain claim or an OWR election for a tax year is not entitled to loss relief in respect of those trading or property income losses from the year of claim.

Relief for those losses is not available either in the year in which the claim is made or in any other tax year. This only applies if the profits (if there were any) of that trade, profession, vocation or property business would be qualifying foreign income. This means that the losses cannot be carried forwards to be deducted from future profits.


Relief for loan costs 바카라 사이트� overseas property business

Section 845D ITTOIA 2005

An individual who makes an OWR election, a foreign income claim or a foreign gain claim for a tax year will lose their entitlement to relief under section 274A ITTOIA 2005 for that tax year. This section applies where an individual has relevant interest and finance costs in relation to a dwelling-related loan for which a deduction may be available 바카라 사이트� see聽PIM2054.

For the purposes of section 274A, the individual바카라 사이트檚 brought-forward amount for the following tax year in respect of the overseas property business is nil.

This entitlement to relief will be lost regardless of whether a claim or election is made for only OWR, only foreign income, only foreign gains.


Contributions to registered pension schemes

An individual who makes a foreign income claim for a tax year may be limited in the amount of tax relief that they are entitled to on contributions to a registered pension scheme under section 188 FA 2004 (see聽PTM044100).聽


Example 1聽

Colette arrives in the UK for the first time on 6 April 2025 becoming UK resident for 2025-26, so that she is a qualifying new resident for that tax year. Colette works both within and outside the UK throughout 2025-26 and makes both an OWR election and an OWR claim for relief in her ITSA return for 2025-26. Colette loses her entitlement to the Personal Allowance for 2025-26.聽聽

In 2026-27, Colette performs all of her employment duties in the UK, but receives a bonus in respect of her duties performed in 2025-26, including those performed outside the UK. Colette does not make an OWR election for 2026-27 but may make an OWR claim for relief in her ITSA return for 2026-27 in respect of the element of the bonus which relates to duties performed outside the UK in 2025-26. The OWR claim for relief made for 2026-27 does not affect Colette바카라 사이트檚 entitlement to the personal allowance in 2026-27.聽聽

An OWR claim for relief must be made in the SA tax return for the tax year in which the relief is available. This means there must be qualifying foreign employment income charged to tax in that year.聽聽

If there is no qualifying foreign employment income charged to tax in the qualifying year, the employee can make an OWR election in their SA tax return for the qualifying year, but would be unable to make an OWR claim for relief in that return.聽聽

When qualifying foreign employment income is charged to tax in a later tax year, the election would then allow the employee to make an OWR claim for relief in the SA tax return for that later tax year.

Example 2

Enrico is a qualifying new resident in 2025-26, so is eligible to make an OWR election for 2025-26, and works both in and outside the UK in that year. However, all of his qualifying employment income for 2025-26 is deferred until 2026-27, so that 2026-27 is the first year in which qualifying employment income for 2025-26 is charged to tax. As a result, Enrico cannot make a claim for relief under the new OWR regime in his return for 2025-26. Instead, he wants to make an OWR claim for relief in his return for 2026-27.聽聽

In order to be able to a make an OWR claim for relief for 2026-27 or any later tax year that employment income earned in 2025-26 is charged to tax in, Enrico would need to have made an OWR election in his 2025-26 return, even though he could not claim any relief for that year, as that is the qualifying year to which the employment income relates.聽聽

This means that if Enrico chose not to make an OWR election in 2025-26, he would be unable to make an OWR claim for relief on the employment income which relates to that year in his return for 2026-27.聽

As part of making an OWR claim for relief, the employee must quantify the amount of relief being claimed.聽

From 6 April 2025 when an employee is UK resident in a tax year, all of their foreign employment income which is chargeable to UK income tax will be taxable in the same manner, and at the same time, as their UK employment income. Relief is now given at step 2 of the calculation of the employee바카라 사이트檚 income tax liability for a tax year under section 23 ITA 2007.聽

This means the relief claimed will be deducted from the total income charged to income tax for the qualifying year.聽

Example 3

Dominique is a qualifying new resident in 2025-26 and performs the duties of her employment both in and outside the UK. Dominique chooses to make an OWR election in her return for 2025-26 as well as an OWR claim for relief.聽聽

Dominque received employment income of 拢200,000 in 2025-26, all of which related to duties performed in 2025-26, including qualifying foreign employment of 拢25,000. Dominque also received UK bank interest of 拢100 and dividends from UK resident companies totalling 拢5,000. As such Dominque claimed relief under OWR of 拢25,000.聽聽

Step 1聽of the calculation of tax liability at s.23 ITA 2007 is to identify the amounts of income charged to income tax for the year. Each amount is a 바카라 사이트渃omponent바카라 사이트� of total income, while the sum of these amounts is 바카라 사이트渢otal income바카라 사이트�.

聽 聽 聽 聽Employment income:聽 聽 聽聽拢200,000

聽 聽 聽 聽UK bank interest:聽 聽 聽 聽聽 聽 聽拢100聽

聽 聽 聽 聽Dividends:聽 聽 聽 聽 聽 聽 聽 聽 聽 聽 聽 聽拢5,000聽

聽 聽 聽 聽Total income:聽 聽 聽 聽 聽 聽 聽 聽 聽聽拢205,100聽

Step 2 of the calculation of tax liability at s.23 ITA 2007 is to deduct from the components any reliefs that are due (and as described within s.24 ITA 2007).聽

聽 聽 聽 聽Employment income:聽 聽 聽拢200,000聽

聽 聽 聽 聽Less OWR claimed:聽 聽 聽 聽聽(拢25,000)聽

聽 聽 聽 聽Net Employment聽

聽 聽 聽 聽income:聽 聽 聽 聽 聽 聽 聽 聽 聽 聽 聽 聽 聽聽拢175,000聽

聽 聽 聽 聽UK bank interest:聽 聽 聽 聽 聽 聽拢100聽

聽 聽 聽 聽Dividends:聽 聽 聽 聽 聽 聽 聽 聽 聽 聽 聽聽拢5,000聽

聽 聽 聽 聽Net income:聽 聽 聽 聽 聽 聽 聽 聽 聽 聽拢180,100聽

At step 3 of the calculation deductions are made for allowances to which the taxpayer is entitled. Dominque has no entitlement to the personal allowance as she has made an OWR election for 2025-26 (notwithstanding that her income level would have reduced the personal allowance to zero in any case). The calculation of tax liability will then continue unchanged from the previous method from this point onwards.聽

Any relief under OWR will be disregarded for the purpose of determining an employee바카라 사이트檚 Adjusted Net Income (ANI) for the qualifying year, which is used to calculate entitlements to reliefs including tax free childcare. This means any of the employee바카라 사이트檚 foreign employment income relieved under OWR will be taken into account for these purposes.聽