The UK’s new Foreign Income and Gains (FIG) regime, introduced from 6 April 2025, has fundamentally changed the operation of Overseas Workday Relief (OWR). While the relief has been simplified in several respects, a significant new restriction has been introduced that may reduce the amount of relief available to higher earners.
A New Cap on Overseas Workday Relief
Under the previous OWR rules, qualifying overseas employment income could generally be relieved in full (subject to meeting the relevant conditions).
From 6 April 2025, the amount of Overseas Workday Relief that can be claimed in a tax year is restricted to the lower of:
- £300,000, or
- 30% of the individual’s qualifying employment income.
This restriction applies even where a substantial proportion of an employee’s duties are performed overseas.
How Does the Restriction Work?
Consider the following examples:
Example 1 – Full Relief Available
- Qualifying employment income: £200,000
- 30% of qualifying income: £60,000
- Overseas earnings eligible for relief: £50,000
As the overseas earnings (£50,000) are below the cap (£60,000), the full £50,000 qualifies for Overseas Workday Relief.
Example 2 – Relief Restricted
- Qualifying employment income: £800,000
- 30% of qualifying income: £240,000
- Overseas earnings eligible for relief: £320,000
Although £320,000 relates to overseas duties, the maximum relief available is £240,000, being 30% of the qualifying employment income.
Example 3 – £300,000 Cap Applies
- Qualifying employment income: £1.5 million
- 30% of qualifying income: £450,000
- Overseas earnings eligible for relief: £500,000
Although 30% of qualifying income is £450,000, the statutory cap limits the claim to £300,000.
Why This Matters
The new restriction is particularly relevant for:
- Senior executives with significant international responsibilities.
- Employees on global assignment programmes.
- Individuals earning substantial employment income while performing extensive overseas duties.
For many high earners, the amount of Overseas Workday Relief available may now be considerably lower than under the previous rules.
Practical Considerations
Despite the introduction of the cap, maintaining accurate records remains essential. Individuals should retain evidence of:
- UK and overseas workdays.
- Business travel itineraries.
- Employment contracts and assignment letters.
- Payroll records.
- Supporting documentation demonstrating where employment duties were performed.
These records will remain critical in determining the amount of overseas earnings eligible for relief before applying the statutory cap.
