How are foreign gains and income taxed?

Foreign income tax and the amount you’ll pay depend on various factors.

By staying on top of current taxes, you may prevent yourself from receiving a surprise tax bill.   

There are various types of income you may pay tax on, and the rules on UK residency can be complex.

This guide on foreign gains and income tax will help you understand the fundamental rules and outline the tax you can expect to pay if you earn money from outside the UK. 

Paying tax on foreign gains and income

Foreign income is anything earned from outside England, Scotland, Wales and Northern Ireland.

If you’re a UK resident and you only earn income from any of these four countries, the associated tax is relatively simple.

But if you are a resident of the UK and earn foreign gains and income, tax can become more complex. 

You can earn foreign income and gains in many ways.

These can include: 

• Earnings from work performed outside the UK.
• Profits from a foreign business that you run or have shares in. 
• Income from overseas property rentals.
• Profits from the sale of overseas assets — such as property or shares in a company. 
• Interest earned through foreign savings accounts. 
• Pension income from overseas.

Am I a UK resident?

Working out whether you are a resident of the UK is key to determining whether you’ll have to pay UK tax on foreign gains and income and how much.  

According to HMRC, you will be a UK resident if the following applies:

• You meet one of the automatic UK tests or the UK sufficient ties test.
• You don’t meet any of the automatic overseas tests.

The automatic UK tests are as follows:

• You spent 183 days or more in the UK during the tax year.
• Your only home (owned or rented) was in the UK for 91 days or more in a row, and you spent at least 30 days of a tax year in it.
• You worked full-time in the UK for 365 days, including one day during the tax year you’re checking.

You may also be a UK resident if you have additional ties to the UK, known as the sufficient ties test.

The automatic overseas tests are as follows:

• You lived in the UK fewer than 16 days (or 46 days if you weren’t a UK resident in the previous three tax years).
• You worked overseas full time (for at least 35 hours a week on average) and stayed in the UK fewer than 91 days (of which 30 or fewer were spent working).

It’s important to note you can be a UK resident even if your permanent home is abroad.

Whether you are a ‘domiciled’ or ‘non-domiciled’ resident depends on specific criteria and will impact how foreign gains and income tax will affect you.

Domiciled and non-domiciled status

In UK law, your “domicile” status could affect the tax you pay. Broadly speaking, ‘domicile’ refers to where your ‘permanent’ home is.

However, the rules are complex, and you can remain domiciled in the UK even after living overseas for many years. 

Likewise, living in the UK for many years won’t necessarily affect your domicile status if you previously lived abroad.

Non-domiciled status, known as “non-dom” status, could have a significant impact on the tax you pay. It means you’ll only owe tax on income you “remit” or bring into the UK. You’ll also only owe capital gains and inheritance tax on UK assets.

However, the non-dom rules are changing significantly in April 2025.

Changes to domicile rules

From April 2025, non-dom status will be scrapped and replaced with a new 'modern residency system.’ 

This new system will ensure all UK residents who stay in the UK for over four years pay the same tax on their foreign income and gains, regardless of their domicile status.

New arrivals won’t have to pay tax on most foreign income and gains for the first four tax years. This tax relief might not be available if they were a UK tax resident in any of the 10 tax years before their arrival.

The UK government will offer existing non-doms a lower tax rate of 12% on income and capital they bring into the UK over the 2025/26 and 2026/27 tax years. There will also be a 15% tax rate in the tax year 2027/28.

Inheritance tax rules are also changing. You will be assessed for inheritance tax on non-UK assets if you are classed as a long-term UK resident - you have been resident in the UK for 10 of the last 20 years.

It's a good idea to seek expert advice to support your finances, especially with the planned changes next year.

Unbiased can quickly find you an accountant who will help you every step of the way.

Can I claim overseas workday relief?

From April 2025, rules on overseas workday relief are also changing. This relief will be limited to £300,000 or 30% of your total employment income, whichever is lower.

Overseas workday relief allows you to get tax relief on your foreign earnings. It is currently available for your first three years in the UK, depending on strict criteria. This will be extended to four years in April 2025, in line with the other rules.

To claim overseas workday relief, you need to meet the criteria set out by HMRC.  

It’s a good idea to get advice as the rules are complex.

Paying tax as a domiciled UK resident

The current rules mean that as a domiciled or deemed domiciled resident in the UK, you must pay UK tax on an ‘arising’ basis.

This means you’ll need to pay tax on all your income and gains from the UK and abroad, regardless of whether you bring it into the UK.

You’ll also owe UK inheritance tax on all your worldwide assets when you die.  

Paying tax as a non-domiciled UK resident

As a non-domiciled UK resident, you can currently pay tax on UK income and gains under the remittance basis of taxation for the tax year in which your income and gains arise.

However, you will only pay UK tax on foreign income and gains when you bring them (they are ‘remitted’) to the UK.

This should help to prevent double taxation.  

The remittance of taxation applies automatically to those with unremitted foreign income or gains of less than £2,000 per tax year. 

Need expert advice?

Navigating foreign taxation in the UK can be challenging, but we’re here to help.

Unbiased can connect you with a qualified accountant who will help guide you through the process and protect your income.