HMRC taxes on foreign income: What UK residents need to know

Earning money outside the UK? It could be from a foreign employer, an overseas property, or a pension abroad. Either way, you may still owe UK tax on it.

HMRC taxes UK residents on their worldwide income. It doesn’t matter where you earn it or whether you bring it into the UK. Getting the rules wrong can mean penalties, missed relief claims, or paying tax twice. This guide explains how HMRC taxes foreign income, what counts as a foreign source, how to report it, and which reliefs can cut your tax bill.

How HMRC taxes foreign income for UK residents

Foreign income is anything from outside the UK (defined as England, Scotland, Wales, and Northern Ireland). HMRC treats income from the Isle of Man and the Channel Islands as foreign income. The Republic of Ireland is also a separate country for tax purposes.

Individual liabilities for UK residents

UK tax on foreign income starts with your residence status for that tax year. HMRC uses the Statutory Residence Test (SRT) to decide whether you’re a UK resident. It applies the test separately to each tax year. The SRT has three layers, applied in order:

• Automatic UK tests. Spending 183 days or more in the UK during the tax year automatically makes you UK resident. Other automatic UK tests exist, for example, having a UK home you use for a certain period.
• Automatic overseas tests. These can make you automatically non-resident, for example if you spend fewer than 16 UK days and were UK resident in any of the previous three years.
• Sufficient ties test. If neither automatic test settles your status, HMRC weighs your UK ties against the days you spend here. Ties include family, accommodation, work, and time spent in the UK in earlier years.

A common and expensive misconception is that spending fewer than 183 days in the UK means you’re not a UK resident. Under the sufficient ties test, someone with strong UK connections can be a UK resident on as few as 16 days. If your situation isn’t clear-cut, work through the SRT carefully or speak to an accountant.

If you’re a UK resident, you’re taxed on the ‘arising basis’. That means all your worldwide income is taxable in the UK, whether or not you bring the money here. Taxable foreign income includes wages from work abroad, foreign dividends, savings interest, overseas rental income, and overseas pension income. Most foreign income is taxed in the same way as UK income, but HMRC applies special rules to areas such as pensions, overseas property rental, and certain employment situations.

Common misconceptions about UK tax on foreign income

‘Foreign tax was deducted, so I don’t need to tell HMRC.’

You usually still need to report the income on your Self Assessment return and then claim Foreign Tax Credit Relief where available. Since the FIG regime took effect on 6 April 2025, almost all UK resident taxpayers now need to report their foreign income and gains, even if they end up paying no UK tax.

‘Only money brought back to the UK is taxable.’

This was linked to the remittance basis, which applied to eligible non-UK domiciled taxpayers in earlier tax years. It was never the default for UK residents, and it no longer applies from 6 April 2025.

‘Small foreign income can always be ignored.’

HMRC gives narrow exceptions, but there is no general ‘ignore foreign income’ rule. If you’re unsure, check with HMRC or an accountant.

How UK companies are taxed on overseas profits

If your company is UK resident for tax purposes, it pays Corporation Tax on all its profits from the UK and abroad. That includes trading profits, investment income, and chargeable gains. Overseas dividends received by UK companies are usually exempt from Corporation Tax, although conditions and exclusions apply.

Where a UK resident company operates overseas through a foreign branch (technically a ‘foreign permanent establishment’), HMRC allows the foreign branch exemption: an election that excludes the branch’s profits and losses from UK Corporation Tax. Before you rely on it, know three things:

• You can’t undo the election once it’s made.
• It applies to every foreign branch your company has. You can’t pick and choose.
• Foreign branch losses cannot be set against UK profits once the election is in place, so it’s rarely worthwhile if a branch is loss-making.

The government announced in May 2026 that the foreign branch exemption will become mandatory for accounting periods beginning on or after 1 January 2027. From that date, foreign branch losses will no longer be available to offset UK profits. If your company has an overseas branch, or you’re planning one, this change matters.

Companies must file a Company Tax Return (the CT600). From 1 April 2026, HMRC’s fixed late-filing penalties for the CT600 doubled. File a return one day late, and you’ll get an automatic £200 penalty, up from £100. Miss the three-month mark, and it’s another £200. If the return is still outstanding after 6 and 12 months, tax-related penalties also apply.

Understanding the remittance basis (up to 5 April 2025)

For tax years up to and including 2024/25, some UK resident individuals who were not UK domiciled could use the remittance basis. Foreign income and gains were taxable in the UK only if and when they were brought to the UK. UK source income and gains remained taxable as normal.

Claiming the remittance basis meant losing the Income Tax personal allowance and the Capital Gains Tax annual exempt amount. Depending on how long you had been UK resident, a remittance basis charge could also apply. From 6 April 2017 to 5 April 2025, the charge was £30,000 for those resident in at least 7 of the previous 9 tax years, and £60,000 for those resident in at least 12 of the previous 14 tax years. A higher £90,000 charge that previously applied to people resident in 17 of the previous 20 tax years was abolished on 6 April 2017, when ‘deemed domicile’ rules took effect and prevented long-term residents from using the remittance basis at all.

An exception applied for small amounts: if unremitted foreign income and gains were under £2,000 for the tax year, the remittance basis could apply automatically, with allowances retained and no charge due.

The 4-year foreign income and gains (FIG) regime

From 6 April 2025, the remittance basis was replaced by the 4-year FIG regime, commonly known as the ‘non-dom’ reforms. Domicile is no longer relevant to your UK tax position. You’re eligible if you’re a UK resident under the SRT and within your first 4 years of UK tax residence after at least 10 consecutive tax years of non-UK residence.

Claims are made annually on your Self Assessment return. If you make a claim, you do not pay UK tax on the foreign income and gains covered, regardless of whether the money is brought into the UK. As with the remittance basis, claiming FIG means losing tax-free allowances for Income Tax and Capital Gains Tax, plus some other allowances depending on your situation.

If your first 4 years of UK residence began before 6 April 2025, your window may be shorter, because the regime is only available from 2025/26 onwards. Someone who became UK resident in 2022/23 can only claim FIG for 2025/26. New arrivals from 6 April 2025 can claim for the full 4-year period.

For foreign employment income, FIG relief is normally capped at the lower of £300,000 and 30% of your total employment income from work carried out wholly or partly overseas. This matters most for senior international hires.

How to file a Self Assessment return for foreign income

You report foreign income and gains through Self Assessment, using the foreign section to record overseas income and gains (including amounts already taxed abroad so you can claim Foreign Tax Credit Relief if eligible). Here is a practical workflow.

Register for Self Assessment if needed

Notify HMRC by 5 October following the end of the relevant tax year if you need to complete a return and you’re new to Self Assessment, or if your account has been inactive.

Use the right supplementary pages

SA106 ‘Foreign’ is used to declare foreign income and gains and to claim Foreign Tax Credit Relief. Depending on the type of foreign income, you may also need SA102 (employment), SA105 (UK property), SA108 (capital gains), or other pages.

Convert foreign figures into sterling

All figures on the return must be in sterling. HMRC accepts the spot rate on the date received, an average for the period, or its published monthly exchange rates, as long as you apply your chosen method consistently. For Foreign Tax Credit Relief, convert foreign tax using the exchange rate on the date it becomes payable.

Submit, pay, and watch the penalties

HMRC’s online filing and payment deadline is 31 January following the end of the tax year. Self Assessment penalties start with a £100 fixed penalty for filing one day late, with further penalties at 3, 6, and 12 months. (Company Tax Return penalties were doubled from 1 April 2026, as set out earlier.)

How to avoid double taxation on foreign income

Foreign income may be taxed both in the UK and in the country where it arises. You can usually claim relief so you do not pay tax twice.

Where you need treaty relief before tax is taken overseas, you apply to the foreign tax authority and may need proof of UK residence (for example, a UK certificate of residence from HMRC).

Where foreign tax has already been paid, you can usually claim Foreign Tax Credit Relief in your tax return. HMRC’s HS263 helpsheet sets out the core rule: the credit is the lower of the foreign tax paid (or allowed under a double-taxation agreement) and the UK tax on the same item of income or gain.

Example: Foreign Tax Credit Relief

You receive £10,000 of foreign dividend income. The foreign country withholds tax at 20% (£2,000), but the UK’s treaty caps the withholding at 15% (£1,500). Your UK tax on the same dividend is £2,500. Your Foreign Tax Credit Relief is the lower of the treaty-capped foreign tax (£1,500) and the UK tax on the income (£2,500), so the credit is £1,500. The extra £500 you actually paid abroad is not recoverable through HMRC and would need to be reclaimed from the overseas authority, if recoverable.

Next steps for reporting foreign income to HMRC

Reporting foreign income can be complex, but the safest approach is to assume tax is due and take the right steps to confirm your position. When in doubt, contact HMRC or a professional accountant with knowledge of international tax. Our blog covers the basics of UK taxes and is a useful starting point if you’re building your knowledge.