UK Tax: A Guide for Foreign Workers

If you work in the UK but you are not originally from there, you need to understand how the UK tax system works. This guide covers the key points clearly so you can manage your taxes with confidence.

UK Tax and Foreign Workers

When you move to the UK for work, you become part of the UK tax system. In most cases, you must pay tax on the money you earn in the UK, just like local workers. According to HMRC, the UK government uses a system called PAYE (Pay As You Earn), which means your employer takes tax from your wages before you receive them.

How much tax you pay depends on your residency status, how much you earn, and whether your home country has a tax agreement with the UK. Being a foreign worker does not automatically mean you pay more or less. The rules are based on your individual situation, so understanding your obligations early can help you avoid unexpected bills.

Understanding UK Tax Residency

Your tax residency decides how much of your income the UK can tax. If the UK counts you as a tax resident, you usually need to pay tax on your worldwide income. If you are not a UK tax resident, you normally only pay UK tax on income earned inside the UK.

The UK uses a set of rules called the Statutory Residence Test (SRT) to work out whether you are a resident. This test looks at how many days you spend in the UK and what connections you have to the country. Getting your residency status right is one of the most important steps, because it affects everything else about your UK tax.

Automatic Residence and Overseas Tests

The SRT begins with two simple checks. The first is the Automatic Overseas Test. If you were a UK resident in one or more of the previous three tax years but spend fewer than 16 days in the UK during the current year, you are treated as non-resident. If you were not a UK resident in any of the previous three years, the limit is fewer than 46 days.

The second check is the Automatic Residence Test. If you spend 183 days or more in the UK during a tax year, you are automatically a UK resident. You may also qualify if your only home is in the UK for at least 91 consecutive days. These tests give a clear answer for many people, but if neither applies to you, the next step is the Sufficient Ties Test.

The Sufficient Ties Test

If the automatic tests do not give a clear answer, the SRT moves to the Sufficient Ties Test. This test looks at your connections (“ties”) to the UK and combines them with the number of days you spend there. There are five possible ties: a family tie, an accommodation tie, a work tie, a 90-day tie, and a country tie.

The more ties you have, the fewer days you need to spend in the UK to be counted as a resident. Someone who was not UK resident in any of the previous three tax years would need at least four ties and 46 or more days to become resident. Someone who was previously UK resident may become resident with fewer ties and fewer days, meaning the test is stricter for people who already have a history of living in the UK.

Split-Year Treatment

If you arrive in or leave the UK part way through a tax year (which runs from 6 April to 5 April the following year), you may be able to use split-year treatment. This means the tax year is divided into a UK part and an overseas part. During the UK part, you are taxed as a UK resident on your worldwide income. During the overseas part, you are generally only taxed on income from UK sources.

Split-year treatment is not given automatically. You must meet specific conditions, such as starting full-time work in the UK or leaving the UK to work full-time abroad. This option can save you a significant amount of tax in the year you move, so it is worth checking whether you qualify.

Types of UK Income That Are Taxable for Foreign Nationals

As a general rule, if you are a UK tax resident, nearly all of your income may be subject to UK tax, whether earned in the UK or abroad. If you are non-resident, only your UK-sourced income is normally taxable.

Employment and Self-Employment Income

If you work for a UK employer, your salary, bonuses, and most benefits (such as a company car or private health insurance) are taxable. Your employer handles the tax through the PAYE system. If you are self-employed, you are responsible for reporting your income and paying tax yourself through Self Assessment. Self-employed workers must also pay National Insurance contributions on their own.

Rental Income from UK Property

If you own property in the UK and receive rent, that rental income is taxable regardless of whether you live in the UK or abroad. Non-resident landlords are part of the Non-Resident Landlord Scheme (NRLS), under which letting agents or tenants may deduct basic rate tax from your rent before paying you. You can apply to HMRC to receive your rent without this deduction if your UK tax affairs are up to date. Either way, you must report rental income on a Self Assessment tax return each year, and you are allowed to deduct certain costs like agent fees, maintenance, and insurance.

Savings, Dividends, and Investment Income

Interest from UK bank accounts, dividends from UK companies, and investment profits may all be taxed. According to HMRC, UK residents receive a Personal Savings Allowance (PSA) that lets basic rate taxpayers earn up to £1,000 in savings interest tax-free, while higher rate taxpayers can earn up to £500 tax-free.

For dividends, according to GOV.UK, there is a separate Dividend Allowance of £500 per year. Dividends above this are taxed at 8.75% (basic rate), 33.75% (higher rate), or 39.35% (additional rate). Non-residents generally do not pay UK tax on interest from UK banks, but dividends from UK companies may still be taxable depending on your circumstances and any applicable tax treaty.

Domicile vs. Residence

Domicile and residence are two separate legal concepts. Residence is about where you live and how many days you spend in the UK. Domicile is about the country you consider your permanent home. For many years, domicile status affected whether you could use the remittance basis, which allowed certain foreign nationals to avoid UK tax on overseas income they did not bring into the UK. Recent changes have reshaped how domicile affects your tax obligations.

What Is Domicile and How Is It Determined?

Your domicile is the country considered your permanent home in the eyes of the law. It is not the same as your nationality, visa status, or where you currently live. Everyone receives a domicile of origin at birth, usually based on the domicile of their father. You can acquire a domicile of choice by moving to a new country with the clear intention of staying permanently.

Changing your domicile is not easy. You would need to show strong evidence such as selling property in your home country, settling your family in the UK, or making a will under UK law. There is also a rule called deemed domicile: if you have been a UK resident for at least 15 out of the previous 20 tax years, HMRC may treat you as UK-domiciled, and you lose access to special tax treatment previously available to non-domiciled individuals.

The End of the Non-Dom Regime in 2025

For decades, individuals who were UK resident but not UK-domiciled (“non-doms”) could use the remittance basis of taxation, meaning they only paid UK tax on overseas income if they brought it into the UK. Starting from 6 April 2025, according to HMRC, the UK government abolished this system entirely.

In its place, a new regime based on years of UK residence has been introduced. Individuals who have been UK tax resident for fewer than four out of the previous seven tax years may qualify for a temporary exemption on foreign income and gains during their first four years of residence. After that, all worldwide income and gains become fully taxable. Transitional provisions exist for people who were already using the remittance basis before April 2025.

The New Foreign Income and Gains Regime

From 6 April 2025, the Foreign Income and Gains (FIG) regime replaced the old remittance basis. Instead of looking at your domicile, it focuses on how long you have been a UK tax resident. Eligible individuals can claim full relief on their foreign income and gains for a limited period after arrival, without needing to keep that money outside the UK.

Who Is Eligible for the 4-Year FIG Regime?

To qualify, you must have been non-UK tax resident for at least 10 consecutive tax years immediately before the year you become UK resident. According to HMRC’s official guidance, if you meet this requirement, you can have your foreign income and gains completely exempt from UK tax for up to four tax years. Unlike the old remittance basis, there is no restriction on bringing your foreign income into the UK during the relief period.

There is a trade-off, however. If you claim the FIG regime, you lose your Personal Allowance (£12,570) and the Annual Exempt Amount for capital gains. You must make an active election on your tax return for each year you wish to use it, and the four-year clock starts from the first year you become UK resident, whether or not you claim in every year.

How the FIG Regime Compares to the Old Remittance Basis

The table below highlights the main differences between the two systems.

The new regime is more generous in the short term because it does not tax foreign income even when brought into the UK. However, it is much shorter in duration. After four years, there is no further relief. The old system allowed non-doms to use the remittance basis for many years, though they had to pay a substantial annual charge after the seventh year.

Overseas Workday Relief Under the New Rules

Overseas Workday Relief (OWR) allows eligible individuals to exclude from UK tax the portion of their employment income relating to duties performed outside the UK. According to PwC’s UK tax summary, under the new FIG regime, OWR has been extended to match the same four-year eligibility window. You do not need to claim the full FIG exemption to use it, and qualifying income no longer needs to be kept in an overseas bank account.

To claim, you must be UK tax resident and meet the same residency history requirement (not UK resident for at least 10 consecutive tax years before arriving in the UK). This relief is especially valuable for employees who work across multiple countries, since earnings from non-UK workdays are not taxed during the relief period.

Income Tax Rates and Bands for the 2025-26 Tax Year

The UK uses a progressive tax system, meaning different portions of your income are taxed at different rates. The more you earn, the higher the rate on your additional income. Knowing which band your income falls into helps you understand how much you will take home after tax.

Current Tax Brackets at a Glance

The table below shows the income tax rates for England, Wales, and Northern Ireland for 2025-26, according to GOV.UK.

For example, if you earn £60,000 per year, the first £12,570 is tax-free, the next £37,700 is taxed at 20%, and the remaining £9,730 is taxed at 40%. Note that income above £100,000 triggers a gradual reduction of your Personal Allowance: for every £2 you earn above £100,000, you lose £1 of the allowance. This creates an effective 60% tax rate on income between £100,000 and £125,140, which catches many foreign workers by surprise.

The Personal Allowance: Who Can Claim It?

The Personal Allowance for 2025-26 is £12,570. Most UK residents are entitled to it, but there are exceptions. If you claim the FIG regime, you give up the Personal Allowance for that tax year. Non-residents do not automatically receive it unless they are a citizen of the UK or a country in the European Economic Area (EEA), or unless a Double Taxation Agreement gives them the right.

If you are a resident from a country without such an agreement and you are not an EEA citizen, you may not receive any tax-free allowance at all. Checking your eligibility is an important step in calculating your actual tax bill.

Scottish Income Tax: A Separate System

If you live in Scotland, you pay Scottish income tax rates, which differ from the rest of the UK. According to GOV.UK, for 2025-26, Scotland uses six tax bands with rates ranging from 19% to 48%.

Whether you pay Scottish rates depends on where you live, not where you work. If you live in Scotland but commute to England, you still pay Scottish rates. For foreign workers moving to Scotland, this means your take-home pay could differ noticeably from living in another part of the UK, especially at higher income levels.

Filing Your UK Tax Return as a Foreign National

Many foreign workers need to file a tax return, even if their employer already deducts tax through PAYE. You are typically required to file if you are self-employed, have income from multiple sources, earn over £150,000, receive rental income, or need to claim the FIG regime or other reliefs. The process is called Self Assessment and is managed by HMRC.

Self Assessment: When and How to Register

Your first step is to register for Self Assessment with HMRC by 5 October following the end of the tax year in which you first need to file. You complete form SA1 (or CWF1 if self-employed), and HMRC will send you a Unique Taxpayer Reference (UTR). You will also need a National Insurance number, which you can apply for through Jobcentre Plus.

If you are a foreign national who has never been in the UK tax system, the registration process may take longer. Once registered, you can file online through HMRC’s website or use commercial tax software. Many foreign workers choose to use a tax adviser to make sure everything is done correctly.

Key Deadlines and Late Filing Penalties

The UK tax year runs from 6 April to 5 April, and according to HMRC’s Self Assessment guidance, there are strict deadlines for filing and paying.

According to HMRC’s penalties guidance, if you miss the 31 January deadline, HMRC charges an automatic £100 penalty. After three months, daily penalties of £10 per day begin (up to £900). At six months, a further £300 or 5% of tax due (whichever is higher) applies, and the same again at twelve months. Late payments also attract interest from the date the payment was due.

The Non-Resident Landlord Scheme

Foreign nationals who own UK rental property but live outside the UK must deal with the Non-Resident Landlord Scheme (NRLS). Under this scheme, UK letting agents or tenants are normally required to withhold 20% basic rate tax from your rental income and send it to HMRC.

You can apply using form NRL1 to receive rental income without tax being deducted, provided your tax affairs are up to date. Even if approved, you must still file a Self Assessment return each year. The NRLS simply determines whether tax is collected upfront by your agent or paid later through your tax return.

National Insurance Contributions: Do Foreigners Have to Pay?

National Insurance contributions (NICs) are payments separate from income tax that fund state benefits such as the State Pension, statutory sick pay, and maternity allowance. In most cases, if you work in the UK, you must pay NICs regardless of your nationality. The key factor is where you are working, not where you come from.

Generally Speaking, You Need to Pay

If you are employed or self-employed in the UK, you are generally required to pay NICs just like a British worker. Your obligation begins once you earn above the relevant threshold. Paying NICs also builds your entitlement to certain state benefits, including the UK State Pension, which you may be able to claim even if you eventually leave the UK. According to HMRC’s rates and thresholds, for 2025-26, both employees and self-employed workers start paying NICs once earnings exceed £12,570 per year.

How NIC Works for Employed and Self-Employed Foreigners

For employed workers, your employer deducts Class 1 NICs from your wages through payroll. According to GOV.UK, in 2025-26, employees pay 8% on earnings between £12,570 and £50,270, and 2% on anything above that. Your employer also pays a separate contribution on top of your salary.

Self-employed workers pay Class 4 NICs through Self Assessment at 6% on profits between £12,570 and £50,270, and 2% above that. The flat-rate weekly Class 2 contribution was removed as a mandatory payment from April 2024, though voluntary payments are still available for those who want to protect their State Pension entitlement.

Social Security Agreements with Other Countries

Some foreign workers may be exempt from UK NICs if their home country has a social security agreement with the UK. These agreements prevent workers from paying contributions in two countries at the same time. If your home country has such an agreement and you have been sent to the UK temporarily, you may be able to continue paying into your home country’s system instead.

To prove your exemption, you typically need a certificate from your home country’s social security authority. EU and EEA workers use an A1 certificate, while workers from other countries use a form specific to their treaty. The UK currently has agreements with countries including the USA, Canada, Japan, South Korea, Australia, and most European nations. If your country does not have an agreement, you will need to pay UK NICs even if you are also paying contributions at home.

FAQ

Q. Do I pay UK tax if I work remotely for an overseas employer?

A. If you are a UK tax resident and carry out your work while physically in the UK, your income is generally subject to UK tax, even if your employer is based overseas. What matters is where the work is performed, not where your employer is registered. You may need to register for Self Assessment, since an overseas employer is unlikely to operate UK PAYE.

Q. Can I be a tax resident in both the UK and my home country?

A. Yes, it is possible. When this happens, you could face double taxation. However, many countries have Double Taxation Agreements (DTAs) with the UK, which provide rules to determine which country has the primary right to tax you and offer relief so you are not taxed twice.

Q. Do I need to report overseas bank accounts to HMRC?

A. If you are a UK tax resident, you must report any taxable income earned worldwide, including interest from overseas accounts. You do not need to separately declare the account itself, but any income it generates must appear on your Self Assessment return. Under international agreements such as the Common Reporting Standard (CRS), many countries automatically share financial data with HMRC.

Conclusion

Your UK tax obligations depend mainly on your residency status, the type of income you earn, and whether your home country has agreements with the UK. With the new FIG regime from April 2025 and the end of the non-dom remittance basis, staying informed about these changes is more important than ever. Taking the time to check your residency status, register for Self Assessment if needed, and meet all deadlines will help you stay on the right side of HMRC.