Guide · International Tax
UK Tax on Foreign Income: Rules for UK Residents (2025/26 Update)
UK residents are normally taxed on their worldwide income as it arises — bank interest in New York, a rental flat in Lisbon, dividends from a German plc, a Spanish pension. The old non-dom remittance basis ended on 6 April 2025 and has been replaced by a new four-year Foreign Income and Gains (FIG) regime for people becoming UK resident after at least ten years away. Different income types follow different rules, Double Tax Treaties shield you from being taxed twice on the same pound, and the Statutory Residence Test is the gatekeeper that decides whether the UK gets to tax you at all. This guide pulls every strand together for 2025/26 and the years that follow.
- UK residents are taxed on worldwide income (default arising basis).
- The non-dom remittance basis was abolished from 6 April 2025.
- New 4-year FIG regime for people becoming UK resident after 10+ years of non-residence.
- Double Tax Treaties (DTTs) prevent double taxation in almost all common cases.
- Always disclose on Self Assessment SA106 (foreign pages) if foreign income exceeds £300.
Statutory Residence Test — am I UK resident?
Everything in this guide turns on whether you are UK tax resident for the year. The Statutory Residence Test (SRT) in Finance Act 2013, Schedule 45 settles that with a three-stage flowchart.
Stage 1 — Automatic Overseas Tests. You are not UK resident if any apply:
- Fewer than 16 days in the UK in the tax year, if you were resident in any of the previous three years.
- Fewer than 46 days in the UK, if you were non-resident in all of the previous three years.
- Full-time work overseas with fewer than 91 UK days and no more than 30 UK working days.
Stage 2 — Automatic UK Tests. You are UK resident if any apply:
- 183 or more days in the UK in the tax year.
- Your only home is in the UK and is available for at least 91 days (and used as such for 30+).
- Full-time work in the UK over any continuous 365-day period.
Stage 3 — Sufficient Ties Test. If neither automatic test is decisive, count your UK ties: family (spouse/partner or minor children UK resident), accommodation (somewhere to stay, used ≥1 night), work (40+ days of three-hour work), 90-day (spent 90+ days in either of the previous two years) and, for "leavers", thecountry tie. The more ties, the fewer days you are allowed before becoming resident:
| UK ties | Arriver (not resident in 3 prev years) | Leaver (resident in any of 3 prev years) |
|---|---|---|
| 1 tie | Resident at 183+ days | Resident at 121+ days |
| 2 ties | 121+ days | 91+ days |
| 3 ties | 91+ days | 46+ days |
| 4 ties | 46+ days | 16+ days |
HMRC publishes an online check via RDR3 Statutory Residence Test and a guidance note. For close calls — split-year treatment, ties around 90 days, working patterns near 40 days — keep a contemporaneous day-count log; HMRC routinely requests it.
The new 4-year FIG regime (post-6 April 2025)
The Finance Act 2025 (Schedule 9) replaces the remittance basis with the Foreign Income and Gains regime, a far simpler four-year shelter for genuinely new arrivals.
- Who qualifies: people becoming UK resident after at least 10 consecutive tax years of non-UK residence. Domicile is irrelevant — what matters is residence history.
- Duration: the first four tax years from the year you become UK resident.
- Benefit: 100% UK income tax and capital gains tax exemption on foreign income and foreign gains during those four years.
- No remittance trap: you can bring money to the UK freely. Unlike the old regime, mingling clean and dirty capital does not contaminate the relief.
- Must claim each year on the Self Assessment foreign pages. The claim is annual; you can claim in some years and not others.
- Personal allowance and CGT annual exempt amount are forfeited in any year you claim FIG (same trade-off as the old regime).
- After four years: full UK taxation on worldwide income on the arising basis, forever.
- UK income is always UK-taxed: a UK salary, UK rent, UK dividends — none of those benefit from FIG.
Transitional rules for existing non-doms
The same Finance Act 2025 package contains three transitional reliefs for individuals who actually claimed the remittance basis in 2024/25 or earlier.
- Temporary Repatriation Facility (TRF): a flat tax on previously unremitted foreign income and gains brought into the UK during the window. The rate is 12% in 2025/26 and 2026/27, rising to 15% in 2027/28. The facility closes on 5 April 2028. Use it to clear out historic offshore mixed funds at a fixed cost rather than risking a 45% bill under normal remittance rules.
- CGT rebasing to 5 April 2017: non-doms who claimed the remittance basis in any year from 2017/18 to 2024/25 may rebase foreign personally-held capital assets to their 5 April 2017 market value when calculating CGT on a future disposal. This shrinks the gain to the post-2017 portion.
- 50% foreign income reduction in 2025/26 only: certain former remittance-basis users may include only half of their 2025/26 foreign income in the UK computation. It is a one-year softener, not a recurring relief.
How each income type is taxed (default arising basis)
Foreign bank interest
Treated as savings income in the UK tax bands, after the Personal Savings Allowance (£1,000 basic rate / £500 higher rate / £0 additional rate) and any unused £5,000 starting rate. If the foreign country withholds tax, claim Foreign Tax Credit Relief (FTCR) against the UK tax on that same interest. Common cases: US-source interest (usually 0% under the treaty if a W-8BEN is filed correctly), Irish and Spanish fixed deposits, Channel Islands and Isle of Man accounts.
Foreign rental property
UK tax on the net profit after allowable expenses — broadly the same expense rules as UK property, but each overseas property business is ring-fenced country by country. Mortgage interest is restricted to a basic-rate (20%) tax credit, as for UK residential lets from 2020/21. Report on SA106. If the property is in a treaty country, that country usually has primary taxing rights (it is the situs) and the UK gives credit for the foreign tax. Properties in non-treaty countries still benefit from unilateral relief for foreign tax paid, capped at the UK liability on the same income.
Foreign dividends
Taxed at the UK dividend rates of 8.75% / 33.75% / 39.35% after the £500 dividend allowance. Foreign withholding tax is common — for example 15% on US dividends under the UK–US treaty when a W-8BEN is in place (without one, 30%). FTCR is available up to the UK rate on the same dividend, so a higher-rate taxpayer pays the additional 18.75% to HMRC and the 15% to the IRS.
Foreign pensions
Generally 100% of the foreign pension is taxable as pension income in the UK from 6 April 2017 onwards (the old 90% rule was abolished by Finance Act 2017 except for certain grandfathered situations). State pensions paid by other governments are usually taxable on the same basis. Special regimes apply to QROPS transfers, US 401(k) / IRA draws (the UK–US treaty has detailed pension articles) and pre-2017 EEA pensions. If you live abroad in a non-treaty country, the UK State Pension is frozenat the rate when you left — the well-known "frozen pension" problem.
Foreign employment
A UK resident is taxed on worldwide employment income, run through PAYE if the employer is UK-based and via Self Assessment otherwise. The old Foreign Earnings Deductionwas abolished in 2008 except for seafarers (the Seafarers' Earnings Deduction lives on). Short overseas assignments may benefit from detached duty or temporary workplace rules, which allow travel and subsistence costs to be tax-relievable.
Foreign capital gains
UK residents pay CGT on worldwide gains. The 2025/26 rates are 18% / 24% across residential property and other assets (the 18%/24% split was harmonised from 30 October 2024). The annual exempt amount is £3,000. Private Residence Relief on a foreign main home is available but the day-count test (90 days actually in the home in the tax year) must be met.
Double Tax Treaties (DTTs)
The UK has more than 130 Double Tax Treaties, ranging from full OECD-model conventions (US, France, Germany, India, Australia, Canada, Ireland) to narrower agreements. A treaty does three things: it allocates primary taxing rights to one country, caps withholding rates, and provides a tie-breaker for individuals who are technically resident in both countries (permanent home, then centre of vital interests, then habitual abode, then nationality, then mutual agreement procedure). Treaty relief is claimed on HS304 "Non-residents — relief under double taxation agreements" or the relevant boxes on SA109 / SA106.
Foreign Tax Credit Relief (FTCR)
FTCR is available whether or not there is a treaty — without one, the UK gives unilateral relief for foreign tax. The credit is limited to the UK tax on the same income. If France withholds 25% on dividends and the UK higher-rate dividend tax is 33.75%, the FTCR is £25 of credit and the UK collects the residual £8.75. If French withholding had been 40% (above the UK rate), the excess £6.25 is lost — you cannot use it against other income.
Reporting on Self Assessment
- SA106 "Foreign" pages are mandatory if foreign income exceeds £300 in the year.
- Report each country separately, with its two-letter ISO code and the foreign tax paid.
- Convert to GBP using HMRC published rates — pick monthly average or annual average and stick to it.
- Filing deadlines: 31 January after the tax year (online), 31 October (paper).
- Pay any UK tax due by 31 January; payments on account may apply.
Worked scenarios
Scenario A — UK resident draws a US 401(k) lump sum
Sarah, UK resident, withdraws her $80,000 US 401(k) as a single lump sum. The plan administrator withholds 30% (no W-8BEN on file) — $24,000. In the UK, the full $80,000 (GBP-converted) is taxable as foreign pension income at her marginal rate, say 40% on most of it (£25,000 of UK tax). She claims FTCR for the US tax actually creditable under the treaty (typically capped at the treaty article rate) and pays the difference to HMRC. Filing a W-8BEN before the withdrawal, and using the periodic-pension treaty article, normally produces a much cheaper outcome.
Scenario B — UK resident with a French rental flat earning €15,000
Marc, UK resident, lets a Paris flat for €15,000 gross. After French allowable expenses the French tax is €2,500. In the UK he reports the same net profit converted to GBP on SA106, taxed at his marginal rate — say £3,400 of UK tax. FTCR of £2,150 (the GBP equivalent of the French tax) reduces his UK liability to £1,250. The total tax paid worldwide is roughly equal to the higher of the two countries' tax on the income — the treaty's purpose.
Scenario C — Returning expat after 12 years abroad
Priya returns to the UK in August 2025 after twelve years in Singapore. She has more than 10 consecutive years of non-UK residence, so the FIG regime applies for tax years 2025/26 through 2028/29. During those four years her Singapore dividends, foreign rental income and capital gains on foreign assets are 100% UK-tax-free, provided she claims FIG each year on SA106. Her UK salary as a London-based consultant is taxed normally. From 2029/30 onwards she moves to full worldwide arising-basis taxation, so a sensible strategy is to realise foreign gains, draw down offshore portfolios and bring funds onshore inside the four-year window.
Special situations
- Bringing inheritance money: a foreign inheritance received as a beneficiary iscapital, not income, so no UK income tax arises on receipt. The deceased's estate may still have UK or foreign Inheritance Tax exposure depending on the deceased's domicile (now "long-term residence" from 6 April 2025) and the situs of assets.
- Cash gifts from family abroad:not taxable income in the UK recipient's hands. The donor may have foreign gift-tax obligations; the UK does not have a separate gift tax.
- Foreign trust distributions:highly technical — distributions can be matched against the trust's relevant income and stockpiled gains and taxed at up to 45% plus a supplemental charge. Get advice before accepting a distribution.
- Cryptocurrency on offshore exchanges: for UK CGT and income tax purposes, crypto follows the residence of the beneficial owner, not the location of the wallet or the exchange. A UK resident on Binance with a Cayman wallet is fully UK-taxable on disposals.
Penalties for non-disclosure
- Worldwide Disclosure Facility (WDF): the standing route to put right historic offshore omissions. You disclose, calculate the tax, interest and a self-assessed penalty (typically 15-30% if prompted) and HMRC normally agrees.
- Civil penalties under FA 2015 / FA 2016 (offshore): 100-200% of unpaid tax for deliberate offshore non-compliance, with category-3 territories (those poor at exchanging information) at the top of the range.
- Common Reporting Standard (CRS): over 100 jurisdictions now automatically share financial-account data with HMRC each year. Banks in Spain, France, Germany, Switzerland, Singapore, the Channel Islands and the UAE all report UK-resident account holders. Concealment is no longer a viable strategy — HMRC almost certainly already has the data.
Frequently asked questions
- Do I pay UK tax if I am temporarily abroad?
- It depends on the Statutory Residence Test (SRT). If you remain UK resident under the SRT — typically because you spend 16+ days here, have a UK home, family or substantive UK work — you continue to be taxed on your worldwide income on the arising basis. Only by failing all the UK ties and meeting an automatic overseas test (such as full-time work overseas with fewer than 91 UK days and no more than 30 working days in the UK) do you actually break UK residence for the year.
- Can I still use the remittance basis in 2025/26?
- No. The remittance basis was abolished from 6 April 2025 under the Finance Act 2025 (giving effect to the changes announced in the 2024 Budgets). For 2025/26 onwards every UK resident is taxed on worldwide income on the arising basis. Former remittance-basis users have access to transitional reliefs — the Temporary Repatriation Facility, 2017 CGT rebasing and a one-off 50% reduction on foreign income in 2025/26 — but the remittance basis as an ongoing election has gone.
- How does the FIG regime work for digital nomads?
- The new 4-year Foreign Income and Gains regime is only available to people who become UK tax resident after at least ten consecutive tax years of non-UK residence. A digital nomad who has been mostly outside the UK for a decade-plus and then arrives can claim 100% relief on foreign income and foreign gains for their first four UK-resident tax years. A nomad who left the UK only three or four years ago does not qualify; they will be taxed on worldwide income from day one of their return.
- Do I have to declare foreign income under £100?
- Strictly, all foreign income is taxable on the arising basis and must be reflected on your tax return if you are otherwise within Self Assessment. HMRC provides a simplified reporting threshold of £300 of unremitted foreign income for those eligible for the foreign pages, but this is an administrative ease — not an allowance. If your total foreign income exceeds £300, complete the SA106 pages in full and report each country separately.
- What about my Irish bank account?
- Interest on an Irish bank account is foreign-source savings income for a UK resident and is taxable in the UK on the arising basis. Ireland may also tax it (DIRT was historically 33%, though it has fallen). The UK–Ireland Double Tax Treaty allows you to claim Foreign Tax Credit Relief for any Irish tax actually paid, up to the UK tax on the same income. Report it on SA106 with the Irish country code.
- I am a UK citizen but have always lived abroad — am I non-resident?
- Citizenship is irrelevant to UK tax residence. The Statutory Residence Test looks only at days in the UK, ties to the UK (family, accommodation, work, 90-day, country tie) and any qualifying work or home. A British citizen who has never lived in the UK and has no UK ties is simply non-resident, and the UK only taxes them on UK-source income such as UK rental property or UK employment.
- How do exchange rates work?
- You must convert each item of foreign income into pounds sterling. HMRC publishes monthly and annual average rates (the "HMRC exchange rates") and accepts either method, applied consistently within a tax year. For one-off receipts like a foreign pension lump sum, use the spot rate on the date of receipt. Keep records of the rates used — HMRC can ask to see them under the four-year enquiry window.