Guide to overseas workday relief in the UK

Are you a non-domiciled UK resident working abroad and curious about your tax obligations? If so, you’ve come to the right place. This article provides an in-depth look at a valuable tax relief known as Overseas Workday Relief (OWR) in the UK. We’ll explore what it is, how it works, who’s eligible, and how you can benefit from it.

Please note that this information can be complex, and it’s always a good idea to consult a trusted UK tax specialist when making any decisions. Our CIMA-registered accountants at CIGMA Accounting would be happy to assist with any of your personal or corporate tax needs. Go to our contact page to book a free consultation.

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What is Overseas Workday Relief (OWR)?

Overseas Workday Relief is a tax relief available to UK non-domiciled residents who work abroad during the tax year and utilise the remittance basis of taxation. It allows them to legitimately avoid paying tax on earnings from a UK employment when duties are performed wholly or partly overseas. Usually, any UK tax-resident with UK employment income is required to pay tax on all such income. However, OWR provides an exception to this rule for non-doms who work outside the UK as part of their employment.

Who is Eligible for Overseas Workday Relief?

To claim OWR, you must meet certain criteria. You must:

  1. Be a non-dom (non-domiciled) in the UK and utilise the remittance basis of taxation.
  2. Have been considered a non-resident of the UK for the previous three tax years but be considered a UK tax resident in the year you’re claiming the tax relief.
  3. Perform some or all your work duties outside of the UK.

How Does Overseas Workday Relief Work?

OWR operates on the remittance basis of taxation, which means that you are only taxed on the income you bring into the UK. To benefit from OWR, you must pay your foreign-earned income into a non-UK bank account and not remit the earnings to the UK. This process requires keeping accurate records of your movements and work records to provide evidence you have not remitted any foreign-earned funds into the UK.

To be eligible for tax relief, the account should be held in your name and contain less than £10 at the beginning of the tax year. Ideally, the account should only ever have employment income credited to it so that it qualifies as a special mixed fund.

Once you’ve established your tax residence status and you’re considered a UK tax resident, it’s important to start tracking the number of days you’ve worked outside the UK. The real benefits of OWR are for non-doms earning in the highest tax band (over £125,000 per year) who subsequently work for 10% or more of the tax year outside the UK. If someone meets this basic criteria, £12,500 of their income would be exempt from UK tax, saving them £5,625 (i.e., 45% of £12,500).

Claiming Overseas Workday Relief

To claim OWR, you need to provide proof that you worked outside the UK for a UK employer. This requires keeping records of the days you worked overseas along with supporting evidence, such as travel documents and copies of your work calendar. Remember, this is all done via your UK Self-Assessment Tax Return and may require specialist advice to ensure you’re making disclosures with reference to best practice.

Given the complexities around non-doms, the Remittance Basis of taxation, and OWR, it’s highly recommended that people wishing to make use of these schemes seek advice before making decisions. A UK tax specialist can advise you on the most tax-efficient strategy for working in the UK, help you plan your time, and help you keep suitable records to ensure you can benefit from OWR.

In conclusion, if you’re a non-dom UK resident working abroad, the OWR can offer significant tax savings. With careful planning and expert advice, you can optimise this tax relief and ensure that you’re in compliance with UK tax laws.

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