Foreign income and UK tax: what to declare

If you live in the UK and have income from abroad, the starting point is simple: UK residents normally pay UK tax on their foreign income¹. Foreign income means anything from outside England, Scotland, Wales and Northern Ireland, and it covers wages earned abroad, dividends and savings interest from overseas investments, rent from a property in another country, and payments from pensions held overseas¹. The Channel Islands and the Isle of Man count as foreign too¹.

You usually report this income on a Self Assessment tax return, and you may be able to claim relief if you are taxed on the same money in two countries¹. New arrivals to the UK may not have to pay tax on their foreign income at all if they are eligible for the foreign income and gains (FIG) regime, which runs for up to 4 years². Against whatever income remains taxable, most people get a tax-free Personal Allowance of £12,570³, and the first £500 of dividend income each year is taxed at 0%⁴.

What counts as foreign income

Foreign income is any income from outside England, Scotland, Wales and Northern Ireland⁷. That geographic line matters more than you might expect. Interest paid by a bank in Jersey, rent from a flat in Dublin, dividends from a Japanese company and a pension paid from Spain all sit on the same side of it, because the Channel Islands and the Isle of Man are classed as foreign¹.

Official guidance lists the main examples¹:

• wages if you work abroad
• foreign investment income, such as dividends and savings interest
• rental income on overseas property
• income from pensions held overseas

The definition reaches further than the obvious cases. Under the legislation governing taxable foreign benefits, no liability to income tax arises on a taxable foreign benefit if, or to the extent that, the corresponding UK benefit is exempt income⁸. In other words, a benefit from an overseas employer is tested against the UK equivalent: if the UK version would be exempt, the foreign version is too.

Not everything from abroad qualifies for every relief. Under the FIG regime, qualifying foreign income includes profits of a trade carried on wholly outside the UK, overseas property business profits, dividends from non-UK resident companies, interest such as on a foreign bank account, and foreign pension income other than disqualified income⁶. But relevant foreign earnings and foreign specific employment income are not qualifying foreign income for a FIG claim; they may instead be relieved under an Overseas Workday Relief election⁶. So the same overseas salary can be treated differently depending on which relief you are trying to use, and it pays to identify each source of income separately before deciding what to claim.

UK residents normally pay tax on foreign income

The core rule is residence. If you are UK resident, you will normally pay tax on your foreign income¹. When taxed on the arising basis, a UK resident is liable to UK tax on their worldwide income and gains⁹. It makes no difference whether the money is actually brought into the UK: the liability arises where the income arises.

Residence is about facts, not intention. If you went abroad for less than a full tax year (6 April to 5 April the following year), you stayed UK resident, and you usually pay UK tax on your foreign income for the entire time you were away¹⁰. People returning to the UK after a longer period pay UK tax on their UK income and gains and on their foreign income and gains, although they may not have to if they can claim Foreign Income and Gains relief¹⁰. Returning residents may need to register for Self Assessment, for example if they start working for themselves or have other income or gains from the UK or abroad¹⁰.

Some sources of foreign income have their own wrinkles. Payments from an overseas pension may attract UK tax depending on when you were a UK resident¹¹. Foreign students who work in the UK while studying normally pay UK tax and National Insurance in the usual way, and may be entitled to reclaim tax paid when they leave by filling in a form P85¹².

The mirror image also holds. If you are not UK resident, you will not have to pay UK tax on your foreign income². But you usually do have to pay tax on your UK income even when you live abroad¹³, and there are exceptions even to that: non-residents do not usually pay UK tax on the State Pension or on interest from UK government securities (gilts)¹³. Two further rules catch people out. First, temporary non-residence: if you return to the UK within 5 years, you may have to pay tax on certain income or gains made while you were non-resident, though this does not include wages or other employment income¹⁰. Second, UK property: profits from letting property situated in the UK are liable to UK tax whether or not you are resident, under the Non-resident Landlords Scheme⁹.

Domicile rules have ended: the residence-based regime

For most of the last century, the UK taxed long-term residents with overseas connections according to where their permanent home, their domicile, was. That ended on 6 April 2025. The government's policy statement is blunt about what replaced it: the measure "replaces the concept of domicile as a relevant connecting factor in the UK tax system with a system based on tax residence"¹⁴. Inheritance tax moved the same way, replacing the domicile-based system with a residence-based one¹⁴.

The practical effect is that on 6 April 2025 the foreign income and gains regime replaced the remittance basis¹⁵. Before that date, the remittance basis was an alternative tax treatment available to individuals who were resident but did not live permanently in the UK and had foreign income and gains¹⁶. Under it, foreign income and gains were taxed only if they were brought into the UK. The old system also had backstops: people who met the deemed domicile rules were no longer able to claim the remittance basis and were assessed on worldwide income and gains on the arising basis¹⁷, and for inheritance tax a person was treated as domiciled in the UK if they had been resident for Income Tax purposes for at least 15 out of the 20 tax years ending with the tax year in which they died¹⁵.

The scale of the change is visible in the numbers HMRC publishes: its statistics on non-domiciled taxpayers in the UK were last updated on 30 July 2026¹⁸, reflecting a population whose tax treatment has now been rewritten around residence rather than domicile. If you previously relied on the remittance basis, the relevant pages are the remittance basis and the rules that replaced it and double taxation.

The foreign income and gains regime, and what it costs you

The FIG regime is the centrepiece of the new system. If you make a claim for relief under the regime, you will not pay tax on your eligible foreign income and gains¹⁵. Relief applies for up to 4 consecutive tax years starting from the year you become UK resident⁶, and income only qualifies if it arises on or after 6 April 2025⁶.

Eligibility is tightly defined. You are a qualifying new resident if it is one of your first 4 years of UK residence after a period of at least 10 consecutive tax years of non-UK residence, and you are not a member of the House of Commons or House of Lords⁶. The regime is open from the 2025 to 2026 tax year, so it covers those who became UK resident from the 2022 to 2023 tax year onwards⁶.

Relief comes at a price, and the price is your allowances. If you claim relief under the FIG regime you lose⁶:

• the Personal Allowance
• the capital gains annual exempt amount
• the blind person's allowance
• tax reductions for married couples and civil partners
• the transferable tax allowance
• relief for payments for life insurance and similar

You also cannot claim Foreign Tax Credit Relief on income covered by a FIG claim, only on the proportion not covered⁶. One point works in claimants' favour: any foreign income relief is disregarded for the purpose of determining your adjusted net income, which is used for tax-free childcare and the High Income Child Benefit Charge⁶.

Claims are made by completing the Residence and FIG regime pages (SA109) and claiming relief on the relevant supplementary pages, using box 28 for foreign income, box 29 for foreign gains and box 30 for UK income or gains deemed foreign under QAHC rules⁶. There is a generous deadline: you have until the anniversary of 31 January following the end of the tax year to which the claim relates, 12 months beyond the normal filing date⁶.

Alongside the FIG regime, the reforms included a Temporary Repatriation Facility, allowing individuals previously taxed on the remittance basis to remit pre-6 April 2025 foreign income and gains¹⁴. Under the facility, a 12% lower rate TRF charge applies to chargeable foreign securities income remitted to the UK in the 2025 to 2026 tax year¹⁹.

Personal Allowance: £12,570, and when you lose it

Most people in the UK get a tax-free Personal Allowance, and it is set at £12,570³. That figure is confirmed across the UK's official documents: it appears in HMRC's rates and allowances for 2026 to 2027³, in the Scottish rates and bands publication for 2026 to 2027²⁰, in the Budget 2025 tax overview, which legislates to set the Personal Allowance at £12,570 for tax years up to 2030 to 2031²¹, and in the Scottish Income Tax technical factsheet, which states the UK-wide Personal Allowance will remain frozen at £12,570²². The UK-wide Personal Allowance applies before Scottish bands, so the allowance itself is the same in Scotland as everywhere else.

The allowance is withdrawn at the top of the income scale. The Personal Allowance reduces where income is above £100,000, by £1 for every £2 of income above the £100,000 limit⁵. The taper is calculated after certain allowable deductions, such as pension contributions and gift aid²³. You do not get a Personal Allowance at all if you earn over £125,140²⁴. The two thresholds describe the same mechanism: £100,000 is where the reduction starts, and £125,140 is where it ends.

Two groups should watch this section closely. First, FIG regime claimants: claiming that relief costs you the Personal Allowance entirely, along with the other allowances listed above⁶. Second, couples: the transferable tax allowance, known as Marriage Allowance, lets a lower earner transfer some of their unused allowance to a partner, but to benefit the lower earner must normally have income below their Personal Allowance, usually £12,570²⁵. A FIG claimant, having lost the allowance, cannot use it.

Foreign dividends and the £500 dividend allowance

Dividends from non-UK resident companies are foreign income⁶, but they are also dividend income, and dividend income has its own allowance. Since 2024 to 2025 the dividend allowance has been £500 a year²⁶, a cut from £1,000 in 2023 to 2024, which itself followed policy decisions to decrease the allowance from £2,000 to £500⁴. The allowance has moved a long way in a decade: it applied to the first £5,000 of an individual's income in the 2016-17 and 2017-18 tax years, and to the first £2,000 in 2018-19 and 2019-20²⁷.

Strictly speaking it is not an allowance at all. HMRC's own manual explains that the "allowance" is a 0% tax rate inserted into the Income Tax Acts, properly called the dividend nil rate²⁷. The practical effect is the same: the first £500 of dividend income each year carries no tax, and dividends above it are taxed at dividend rates, which reach 39.35% for dividends otherwise taxable at the additional rate⁵.

One point of legislation narrows the allowance in a way that mattered under the old rules: references to dividend income do not include dividend income which is relevant foreign income charged on the remittance basis²⁸. With the remittance basis gone, this chiefly affects historical years.

Scotland is different for income tax bands, but not here: you pay the same tax as the rest of the UK on dividends and savings interest²⁴. So a UK resident receiving dividends from foreign shares converts them to pounds, adds them to other dividend income, and applies the £500 nil rate in the same way wherever in the UK they live.

Converting foreign income into pounds

Foreign income arrives in foreign currency, but HMRC wants pounds. The rule set out for tax credits income is to include the gross amount, before any tax, whether or not it came into the UK²⁹. The same legislation provides that income paid in a currency other than sterling is converted into sterling at the average of the exchange rates in the period of 12 months ending on 31 March in the tax year in which the income arises³⁰. So a US dividend received during 2025 to 2026 would be converted using the average dollar rate over the 12 months to 31 March 2026, not the rate on the day the money arrived.

Other UK taxes take a different approach. For Scottish Land and Buildings Transaction Tax, chargeable consideration in foreign currency is calculated by translating it into sterling using the London closing exchange rate on the effective date of the transaction³¹. The lesson is that there is no single official exchange rate for all purposes: the average-rate rule belongs to income-based calculations, and the spot-rate rule to transaction taxes.

Whichever rate you use, keep a record of it and of where it came from. The gross amount rule means you cannot net off foreign tax already withheld: you declare the full amount and then claim relief for the foreign tax separately, which is where double taxation relief comes in.

Taxed twice? Claiming double taxation relief

Foreign income can be taxed where it arises and again in the UK. You may be able to claim tax relief if you are taxed in more than one country¹. The main mechanism is the network of double taxation agreements: the UK has such agreements with many countries, so that you do not pay tax on the same income twice³². If the country your income comes from has a double-taxation agreement with the UK, you can claim tax relief in the UK to avoid being taxed twice¹³.

Relief is capped. If the foreign tax you have paid is more than that payable as UK tax, you only get relief up to the amount of UK tax payable, and you will need documentary evidence of the foreign tax⁹. In other words, relief removes the double charge, but it never turns foreign tax into a refund of UK tax.

Two special cases are worth knowing. If you live abroad and have UK income, you do not need to report that income to HMRC if you have already claimed tax relief under a double-taxation agreement¹³. And if you are only working in the UK for a short time and plan to leave, you can claim tax relief or a tax refund; foreign nationals assigned to the UK who think they have paid too much can apply to claim tax back².

The dedicated page on double taxation explains the mechanics of claims in more depth, including how relief is given on the return.

How to report foreign income on a Self Assessment return

Foreign income is usually reported in a Self Assessment tax return¹. You have to send one if you have to pay UK tax on foreign income, for example an overseas pension, savings interest in an overseas bank account or income from renting out a property abroad². People who live abroad usually have to send a return if they rent out property in the UK, have taxable savings interest from UK banks or building societies, have a pension outside the UK and were UK resident in one of the 5 previous tax years, or have any other untaxed UK income¹³.

The mechanics depend on how you file. Non-residents can fill in a Self Assessment tax return and an SA109 form and send them by post, use commercial Self Assessment software that supports SA109 reporting, or get a tax professional to report their UK income for them¹³. Within the return itself, foreign income or gains go on the SA106: Foreign pages³⁴. FIG regime claims go on the SA109 Residence and FIG regime pages, with the claim boxes noted above⁶.

Some types of foreign income have their own reporting routes. Gains on foreign life insurance policies are reported in the Foreign section of the tax return, under "Other overseas income and gains"; if you are not within Self Assessment and the gain, together with your other savings and investment income, does not exceed £10,000, you can instead contact Self Assessment general enquiries or send a copy of the chargeable event certificate with your National Insurance number³⁵. If you are moving or retiring abroad, you need to tell HMRC, to make sure you pay the right amount of tax³⁶.

A practical checklist before you file:

1. Work out your residence position for the tax year, including any split-year or temporary non-residence issues¹⁰.
2. List every foreign source: country, gross amount and any foreign tax withheld²⁹.
3. Convert each amount to sterling, keeping a note of the rate used³⁰.
4. Decide whether a FIG claim, Overseas Workday Relief or double taxation relief applies⁶.
5. Complete the SA106 foreign pages, plus SA109 if your residence position or a FIG claim requires it³⁴.

If your tax affairs are straightforward, HMRC sometimes collects tax owing through your tax code or a Simple Assessment bill instead, but foreign income usually puts you in Self Assessment territory, and registering late is one of the commonest ways people end up with penalties. The pages on Form P85, offshore accounts and the Common Reporting Standard cover related situations, including why your offshore bank asks where you pay tax.