Declaring foreign income and gains to HMRC is a legal duty for every UK tax resident with overseas earnings. If you receive wages from an employer abroad, dividends or interest from foreign investments, rental income from an overseas property, or capital gains from selling foreign assets, you generally need to report it on your UK Self Assessment tax return.

This guide explains how to declare offshore income to HMRC under the rules in force from 6 April 2025, including the new four year Foreign Income and Gains (FIG) regime that replaced the remittance basis, how to claim Foreign Tax Credit Relief, and the penalties for failing to disclose offshore income.

Key Takeaways

• From 6 April 2025, the remittance basis of taxation was abolished and replaced by the new four year Foreign Income and Gains (FIG) regime for qualifying new UK residents.
• Domicile is no longer relevant for income tax or capital gains tax, the system is now based on UK tax residence.
• The automatic £2,000 unremitted income exemption used by non doms no longer applies for 2025/26 onwards.
• Foreign Tax Credit Relief (FTCR) and UK Double Taxation Agreements help prevent the same income being taxed twice.
• Offshore non compliance can attract penalties of up to 200% of the tax owed and HMRC can go back up to 20 years for deliberate failures.

What Counts as Foreign Income and Gains?

Foreign income, sometimes called offshore income, is income arising from outside the United Kingdom. The Channel Islands and the Isle of Man are also treated as overseas for UK tax purposes.

Common types of foreign income that must be declared to HMRC include:

• Wages, salary or bonuses from an overseas employer
• Self employment profits from a trade carried on wholly outside the UK
• Interest from foreign bank or savings accounts
• Dividends from non UK companies
• Rental income from overseas property
• Pensions paid by a non UK provider
• Royalties received from abroad
• Capital gains from selling foreign assets such as overseas shares, property or cryptocurrency held offshore
• Income or distributions from offshore trusts and structures

Even if income has already been taxed in the country where it arose, you may still need to report it on your UK Self Assessment tax return if you are UK tax resident, and then claim relief for the foreign tax paid.

UK Tax Residency: The Starting Point for Foreign Income

Your liability to UK tax on foreign income depends on whether you are UK tax resident, decided by the Statutory Residence Test (SRT). The SRT looks at days spent in the UK, your work pattern, and your ties to the country.

• UK tax residents are liable to UK tax on their worldwide income and gains.
• Non UK residents generally pay UK tax only on UK source income, such as UK rental property or UK employment.

From 6 April 2025, your domicile or deemed domicile no longer affects your income tax or capital gains tax position. The system is now based purely on residence. If you arrive in or leave the UK partway through a tax year, split year treatment may apply.

The New Foreign Income and Gains (FIG) Regime from 6 April 2025

The four year FIG regime replaced the historic remittance basis on 6 April 2025 and is one of the largest UK tax reforms in a generation. It is a residence based system that gives qualifying new arrivals a four year window of UK tax relief on their foreign income and gains.

Who Qualifies for the FIG Regime?

You are a qualifying new resident if you become UK tax resident after at least 10 consecutive tax years of non UK residence, regardless of where you were born or where your domicile lies.

• New arrivals from 6 April 2025 onwards can claim FIG relief for their first four UK tax years.
• Anyone who became UK resident before 6 April 2025 (but who had been non resident for the previous 10 tax years) can use the regime for any remaining years within their first four tax years of UK residence. For example, someone who first became UK resident in 2023/24 may claim FIG relief for 2025/26 and 2026/27 only.
• Members of the House of Commons and House of Lords cannot claim the relief.

Benefits of the FIG Regime

• 100% UK tax exemption on qualifying foreign income and foreign gains arising during the four year period.
• Funds can be brought into the UK during the relief window without triggering a tax charge, no need to keep money offshore.
• No requirement to maintain segregated bank accounts as was the case under the old remittance basis.

Trade Offs to Consider

If you claim FIG relief in any tax year, you will lose:

• Your UK personal allowance (£12,570 for 2025/26)
• Your capital gains tax annual exempt amount (£3,000 for 2025/26)

You must claim FIG relief on your Self Assessment tax return for each tax year. The deadline is 31 January in the second tax year following the year of claim, so a 2025/26 claim must reach HMRC by 31 January 2028. Claims for foreign income and foreign gains are independent, so you can claim one, the other, or both.

Reporting Foreign Income on Your Self Assessment Tax Return

Most UK residents declare foreign income and gains by completing a Self Assessment tax return and submitting the supplementary SA106 ‘Foreign’ pages.

Key Self Assessment Deadlines

• 5 October following the end of the tax year, register for Self Assessment if you have not filed before
• 31 October, paper return filing deadline
• 31 January, online return filing deadline and payment deadline for any tax owed

What the £2,000 Threshold Change Means for You

Before 6 April 2025, non domiciled taxpayers with less than £2,000 of unremitted foreign income each year qualified for the remittance basis automatically and could avoid filing. This automatic exemption was removed from 6 April 2025. From 2025/26 onwards, almost every UK resident who files a Self Assessment return must report foreign income and gains, however small the amount.

If you do not currently file a Self Assessment return and your foreign income is fully covered by allowances such as the personal allowance, personal savings allowance, dividend allowance, or capital gains annual exempt amount, you may not need to register, although it is wise to check with a qualified tax adviser.

What to Include on the SA106 Foreign Pages

• Each source of foreign income, listed by country
• The gross amount converted to sterling using HMRC published exchange rates
• Any foreign tax already paid
• Details of any FIG claim or Foreign Tax Credit Relief being claimed

Keep clear records of all overseas income, foreign tax paid, and exchange rates used for at least five years and ten months after the end of the tax year.

Claiming Foreign Tax Credit Relief to Avoid Double Taxation

If you have already paid tax on foreign income in the country where it arose, you can usually claim Foreign Tax Credit Relief (FTCR) to offset that foreign tax against your UK tax on the same income. This stops the same money being taxed twice.

The UK has Double Taxation Agreements (DTAs) with more than 130 countries. These treaties set out how income is taxed between the two countries and which country has the primary right to tax different types of income.

How FTCR Works

• The credit is the lower of the foreign tax paid or the UK tax due on that income.
• Each source of foreign income must be calculated separately.
• Tick the relevant box on the SA106 foreign pages of your Self Assessment return.
• Provide supporting details such as the foreign tax certificate, country, and amount paid.

You may need a Certificate of Residence from HMRC to prove your UK tax residence to a foreign tax authority before you can claim relief at source overseas.

Reliefs and Allowances for Foreign Income

Several reliefs can reduce the UK tax burden on overseas income and gains.

Overseas Workday Relief (OWR)

Available to qualifying employees who claim the FIG regime. From 6 April 2025, OWR runs for up to four tax years (extended from three) and applies to the overseas portion of employment income. Earnings can now be brought into the UK during the relief period without triggering a tax charge. The relief is capped at the lower of £300,000 or 30% of total qualifying employment income per year.

Temporary Repatriation Facility (TRF)

A three year window for individuals who previously claimed the remittance basis to bring pre 6 April 2025 foreign income and gains into the UK at a flat reduced rate of tax:

• 12% for designations made in 2025/26 and 2026/27
• 15% for designations made in 2027/28

Designations are made by election in the Self Assessment return. Once designated and the TRF charge paid, the funds can be remitted to the UK without further UK tax even after the TRF window closes.

Capital Gains Rebasing to 5 April 2017

Individuals who claimed the remittance basis in any year between 2017/18 and 2024/25, and who were never UK domiciled or deemed domiciled before 6 April 2025, may rebase the value of personally held foreign capital assets to 5 April 2017 for CGT purposes. This means only the gain accruing from April 2017 onwards is taxed when the asset is sold. The asset must have been situated outside the UK throughout the period from 6 March 2024 to 5 April 2025.

Business Investment Relief (BIR)

Still available after 5 April 2025 for qualifying investments of pre April 2025 foreign income and gains in UK trading companies. No new BIR investments can be made after 5 April 2028.

Smaller Allowances That Still Apply

• Personal savings allowance, up to £1,000 of foreign and UK interest combined for basic rate taxpayers (£500 for higher rate, nil for additional rate)
• Dividend allowance of £500 for 2025/26, applying to UK and foreign dividends combined
• Capital gains annual exempt amount of £3,000 for 2025/26 (lost if you claim FIG relief)

Penalties for Failing to Declare Foreign Income to HMRC

HMRC takes offshore non compliance very seriously. The penalty regime for unreported foreign income is significantly stricter than for UK only errors.

Offshore Penalty Rates

Penalties depend on the territory category, your behaviour, and whether the disclosure was prompted or unprompted:

• Category 1 territories (automatic information exchange with the UK): up to 100% of the tax
• Category 2 territories (information shared on request): up to 150% of the tax
• Category 3 territories (no information sharing): up to 200% of the tax

How Far Back HMRC Can Go

• 4 years from the end of the tax year where reasonable care was taken
• 6 years for careless errors
• 12 years for offshore matters and offshore transfers (from tax year 2015/16 onwards)
• 20 years for deliberate behaviour

Through the Common Reporting Standard (CRS), HMRC automatically receives banking and investment data from over 100 territories, so undisclosed offshore accounts are far more likely to be detected than ever before.

How to Disclose Undeclared Foreign Income

If you have undeclared offshore income or gains, the safest route is a voluntary disclosure through the Worldwide Disclosure Facility (WDF) before HMRC contacts you. Voluntary, unprompted disclosure usually leads to lower penalties than disclosure after HMRC opens an enquiry.

If you have received an HMRC nudge letter about offshore assets, do not ignore it. Take professional advice immediately.

Bringing Money into the UK: Tax Implications

Transferring funds from overseas accounts into the UK can trigger an unexpected tax charge, especially if those funds represent foreign income or gains from earlier tax years.

Key Points to Remember

• Anyone who used the remittance basis up to 2024/25 still has to pay UK tax on pre April 2025 foreign income and gains when those funds are brought into the UK, unless designated under the TRF.
• Transferring money from an interest bearing offshore account is likely to be treated as remitting some foreign interest income.
• Selling a foreign asset and bringing the proceeds to the UK can trigger UK CGT, especially where mixed funds were used to acquire the asset.
• Cash of £10,000 or more carried between Great Britain and any other country must be declared to UK customs. For Northern Ireland the equivalent threshold is €10,000 when travelling to or from a non EU country. Failure to declare can result in penalties of up to £5,000 and seizure of the cash.

Always seek advice before making large transfers from overseas, particularly if you previously claimed the remittance basis or hold mixed offshore funds.

When You Should Seek Professional Tax Advice

The rules around declaring offshore income and gains to HMRC are technical and the consequences of getting them wrong are severe. You should consider speaking to a qualified UK tax adviser if any of the following apply:

• You arrived in the UK in the last four years and want to assess FIG eligibility
• You previously used the remittance basis and need to plan for the TRF
• You have not declared offshore income from previous years
• You have received an HMRC nudge letter or compliance check
• You hold offshore trusts, structures, or foreign rental properties
• You are unsure whether you are UK tax resident under the SRT

At Target Accounting UK, we help individuals, expats, and internationally mobile professionals declare foreign income and gains to HMRC correctly, claim every available relief, and use the Worldwide Disclosure Facility where appropriate to regularise past non disclosure.

Frequently Asked Questions

What is considered foreign income for UK tax purposes?

Foreign income is any income arising outside the UK, including overseas employment wages, foreign dividends and interest, rental income from non UK property, foreign pensions, royalties from abroad, and gains from selling foreign assets. Income from the Channel Islands and the Isle of Man also counts as foreign income.

Do I still have to report foreign income under £2,000 to HMRC?

For tax year 2025/26 onwards, the automatic £2,000 unremitted income exemption no longer applies. If you are UK tax resident and you file a Self Assessment return, you generally must report all foreign income and gains regardless of amount. Smaller amounts may be covered by allowances such as the personal savings allowance, dividend allowance, or capital gains annual exempt amount.

How do I prevent being taxed twice on my foreign income?

Claim Foreign Tax Credit Relief on the SA106 foreign pages of your Self Assessment return. The credit is the lower of the foreign tax paid or the UK tax due on the same income. Most countries have a Double Taxation Agreement with the UK that determines how the income is treated.

What are the penalties for not declaring offshore income to HMRC?

Offshore penalties can reach up to 200% of the unpaid tax depending on the territory category and behaviour. HMRC can go back 12 years for offshore matters and 20 years for deliberate non disclosure. Penalties are reduced significantly if you make an unprompted voluntary disclosure through the Worldwide Disclosure Facility.

What changed for non doms in April 2025?

From 6 April 2025, the remittance basis was abolished and domicile is no longer relevant for income tax or capital gains tax. UK residents are now taxed on the arising basis on their worldwide income and gains, unless they qualify as a new resident under the four year FIG regime. A separate Temporary Repatriation Facility allows former remittance basis users to bring pre April 2025 funds into the UK at reduced flat rates of 12% (2025/26 and 2026/27) or 15% (2027/28).

How do I claim the four year FIG regime?

You must claim FIG relief in your Self Assessment tax return for each year you want to use it. The deadline is 31 January in the second tax year following the year of claim, so for 2025/26 the claim must be made by 31 January 2028. You can claim relief on foreign income, foreign gains, or both, and each claim is independent. Claiming the regime means losing your UK personal allowance and CGT annual exempt amount for that year.

What is the Worldwide Disclosure Facility?

The Worldwide Disclosure Facility (WDF) is HMRC’s online channel for taxpayers to voluntarily disclose previously undeclared offshore income, gains, or assets. Using the WDF to come forward before HMRC contacts you usually results in significantly lower penalties than waiting for an enquiry.

Need help declaring foreign income and gains to HMRC?

Target Accounting UK offers expert support with FIG regime claims, Worldwide Disclosure Facility submissions, and Self Assessment. Book a free consultation today or call 03300 887912.

This article reflects UK tax rules as at the 2025/26 tax year and is for general guidance only. It is not personal tax advice. For advice on your specific circumstances, please contact a qualified tax adviser.