The previous non-domicile rules regarding operating PAYE on a reduced percentage of an employee’s income (known as Section 690) ended, replaced by a system based on tax residence. Any HMRC directions issued before 6 April 2025 are no longer valid – employers must submit a new notification to operate PAYE on a reduced amount for the 2025-2026 tax year.
Employers can now notify HMRC of a specified proportion of income that will not be treated as PAYE income for globally mobile or non-resident employees. Payments made after 6 April 2025 for earlier tax years will be assessed as PAYE income based on the best estimate of tax status.
Overseas Workday Relief Eligibility criteria have changed, so employers must assess employees’ qualifications under the new rules.
Employees no longer need to pay foreign employment income into a designated overseas account to benefit-except for income from tax years ending before 6 April 2025.
Overseas Workday Relief now has an annual financial limit, applied when the employee files a Self Assessment tax return. It is now available for the first four years of UK residence. New residents can claim deductions for travel expenses for four years (previously five years). Non-residents remain eligible for five years from arrival.
Employees must keep records of their work performed outside the UK to ensure correct tax reporting.
