An employee’s liability to UK tax depends on whether they are resident in the UK for tax purposes, and where they carry out their employment duties. The rules determining how people moving to the UK are taxed in their first few years as a UK resident changed from 6 April 2025, so internationally mobile employees, and their employers, will need to familiarise themselves with the new rules.
‘New’ Overseas Workday Relief
Some employees arriving in the UK who work both in the UK and overseas may not need to pay UK tax on earnings related to their overseas duties - even if they live in the UK full time - thanks to Overseas Workday Relief (OWR). Where OWR is available, employers can apply to HMRC to operate PAYE only on the proportion of the employee’s pay which relates to work done in the UK. Although the employer is responsible for making the correct PAYE deductions, employees qualifying for OWR must also file a Self-Assessment return.
The OWR rules changed from 6 April, and now include a financial limit on the amount of earnings eligible for relief. If you have internationally mobile employees, or are one yourself, it’s important to make sure you understand the new rules – guidance from HMRC is linked below.
How to apply
Before 6 April 2025, employers with staff eligible for 'old' OWR had to submit an application to HMRC and wait for clearance to withhold tax on an agreed proportion of the employee’s pay which related to their UK employment duties. This was often referred to as a 'section 690' application.
As of 6 April 2025, a new process is in place, requiring employers to submit an online notification to HMRC that they will operate PAYE on the UK element of an internationally mobile employee’s total pay. Once the notification has been submitted, HMRC should confirm receipt and provide the employer with a reference number. From the point HMRC confirm receipt, the employer can restrict PAYE deductions to just the amount due on the UK element of total pay. This process promises to be faster than the pre-6 April 2025 procedure.
Where an existing section 690 split had been agreed with HMRC, it does not carry forward past 6 April 2025, so a new submission via the online notification route will be needed for the current tax year.
In addition, the online notification has to be repeated during each tax year where a split of UK/overseas earnings affects the tax payable by the employee, or if circumstances change and a previous submission is no longer correct.
Further information and advice
HMRC have published guidance on tax issues relating to globally mobile employees. HMRC’s Employer Bulletin covered the new processes from 6 April 2025.
As these are complex areas of tax, employers may benefit from professional advice to help them apply the rules to their globally mobile employees. ATT members specialising in this area will be able to assist and can be found via our Find an ATT service.
This article reflects the position at the date of publication shown above. If you are reading this at a later date you are advised to check that that position has not changed in the time since.
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