Foreign Income UK Tax 2025: Complete HMRC Guide
Last updated: February 2026
A UK resident with foreign income? This guide covers every type of overseas income — from foreign employment and rental income to dividends, pensions, and bank interest — and how to use Double Taxation Agreements and Foreign Tax Credit Relief to avoid paying tax twice.
Foreign Income Tax Relief Calculator
Estimate your UK tax on foreign income after claiming Foreign Tax Credit Relief.
Who Pays UK Tax on Foreign Income?
Your UK tax obligation on foreign income depends primarily on your residence status:
UK Tax Resident
Taxed on worldwide income — all income from all countries must be declared to HMRC.
UK Non-Resident
Only taxed on UK source income (UK employment, UK rental, etc.). Foreign income is not subject to UK tax.
The UK Statutory Residence Test (SRT) determines whether you are resident. Key factors include the number of days you spend in the UK, whether you have a UK home, and your work patterns. If you spend 183 or more days in the UK in a tax year, you are automatically resident. Fewer days may still result in residence depending on other “ties”.
Foreign Employment Income
If you work abroad while remaining a UK tax resident (e.g., a remote worker employed by a foreign company, or seconded abroad), your earnings are subject to UK income tax. You must declare all foreign employment income on your Self Assessment tax return, converting it to sterling at the exchange rate on the date of payment (or the average annual rate as published by HMRC).
Key points:
- Foreign employment income is taxed as employment income under PAYE rules but reported via Self Assessment
- If the overseas employer also deducts foreign income tax, you can claim Foreign Tax Credit Relief
- The Overseas Workday Relief (OWR) applies from 6 April 2025 for new arrivals to the UK in their first 3 years, exempting income for days worked outside the UK
- If you work in a country with a DTA, the agreement may allocate taxing rights to the country where work is performed, not the UK
HMRC requires details of all foreign employers, the country of employment, the tax reference number abroad (if applicable), and the total sterling equivalent of earnings and tax deducted.
Foreign Rental Income
Overseas property rental income is one of the most commonly under-declared sources of foreign income in the UK. Whether you own a holiday home in Spain, investment property in Portugal, or inherited rental property abroad, the income must be declared to HMRC.
How Foreign Rental Income Is Taxed
- Declared on the “Foreign” pages (SA106) of your Self Assessment return
- Income is converted to sterling at the exchange rate on each payment date
- Allowable expenses can be deducted (mortgage interest subject to the finance cost restriction from April 2020, management fees, repairs, insurance, letting agent costs)
- Net rental profit is taxed at your marginal UK income tax rate (20%, 40%, or 45%)
- Foreign tax paid on the rental income can be claimed as credit relief
Foreign property losses can generally only be offset against other overseas property income, not UK property profits. Similarly, UK property losses cannot offset foreign property profits.
Foreign Dividends
Dividends received from foreign companies are subject to UK income tax, not CGT. They are taxed at the same rates as UK dividends:
| Taxpayer Band | Dividend Tax Rate 2025/26 | Dividend Allowance |
|---|---|---|
| Basic Rate | 8.75% | £500 tax-free |
| Higher Rate | 33.75% | £500 tax-free |
| Additional Rate | 39.35% | £500 tax-free |
Many countries apply withholding tax to dividends paid to UK residents — commonly 15% or 30%. Under most UK DTAs, this withholding tax is capped (often at 10-15%) and you can claim credit in the UK for the capped amount. You cannot claim credit for withholding tax that exceeds the DTA limit.
Dividends from foreign companies held in an ISA are exempt from UK tax (though withholding tax from the source country may still apply and cannot be reclaimed in an ISA).
Foreign Pensions
Foreign pensions are generally taxable in the UK, but the situation depends on the specific Double Taxation Agreement with the country paying the pension.
General rules:
- Government pensions (civil service, military, police): Usually only taxable in the country that pays them. Under most DTAs, foreign government pensions are exempt from UK tax.
- Private and workplace pensions: Usually taxable in the country of residence (i.e., the UK if you are UK resident), regardless of where the pension scheme is based.
- State pensions from other countries: Usually taxable in the UK, though some DTAs exempt them.
A 10% deduction (the “exemption”) used to apply to foreign pensions received by UK residents, but this was abolished from 6 April 2017. Foreign pension income is now taxed in full at your marginal rate, subject to any applicable DTA relief.
Double Taxation Agreements: How They Work
The UK has over 130 Double Taxation Agreements (DTAs) with countries around the world — more than almost any other country. DTAs prevent UK residents from paying full income tax in both the UK and the country where income arises.
DTAs work in one of two ways:
Exemption Method
The income is taxed in one country only and exempt in the other. HMRC may still count exempt foreign income to determine which tax rate applies to your other income (exemption with progression).
Credit Method
The income is taxed in both countries, but the country of residence (UK) gives a credit for the tax paid abroad. You pay the higher of the two tax rates overall, not both in full.
Common DTA countries for UK residents include the USA, Australia, Germany, France, Spain, Ireland, Canada, and the Netherlands. Each DTA has specific provisions for different income types. Always check the specific DTA for your country.
Foreign Tax Credit Relief: How to Claim
Foreign Tax Credit Relief (FTCR) is the main mechanism for preventing double taxation. It allows you to offset tax paid in another country against your UK tax liability on the same income.
How to Calculate FTCR
The relief is limited to the lower of:
- The foreign tax paid on the income, or
- The UK tax due on the same foreign income
Worked Example
You earn £10,000 foreign rental income. Spain deducts 19% (£1,900). Your UK higher rate tax on this income is 40% = £4,000. FTCR = £1,900 (lower amount). Net UK tax = £4,000 - £1,900 = £2,100.
If Spain deducted 50% (£5,000), FTCR is still capped at £4,000 (UK tax). You cannot reclaim the excess foreign tax through FTCR (though the DTA may provide other relief).
How to Claim
Claim FTCR on the Foreign pages (SA106) of your Self Assessment return. You will need to provide:
- The country where the income arose
- The type and amount of income in sterling
- The foreign tax paid in sterling equivalent
- The DTA country code (if applicable)
Non-Domiciled Residents: Changes from April 2025
One of the most significant tax changes in a generation took effect on 6 April 2025: the abolition of the remittance basis for non-domiciled residents.
The Old System (before April 2025)
Non-domiciled UK residents could elect to pay UK tax only on foreign income that was brought into (“remitted to”) the UK. Foreign income kept offshore was not taxable. This attracted wealthy international residents to the UK.
The New System (from April 2025)
The government replaced the remittance basis with a residence-based system:
- New arrivals to the UK (those who were not UK resident in the preceding 10 years) are exempt from UK tax on foreign income and gains for their first 4 years of UK residence
- After 4 years, UK residents are taxed on worldwide income and gains like any other resident
- Those who had been using the remittance basis before April 2025 face a transitional period with specific rules and potential rebasing of overseas assets
Currency Gains and Foreign Bank Accounts
Foreign Bank Interest
Interest earned on foreign bank accounts is taxable in the UK as savings income. It counts towards your Personal Savings Allowance (£1,000 for basic rate taxpayers, £500 for higher rate in 2025/26). Any foreign withholding tax can be claimed as credit relief. You must declare foreign interest even if it was withheld at source — it is not automatically exempt.
Currency Gains
Currency exchange gains can be subject to CGT. If you buy a foreign currency (for investment purposes, not personal use) and later sell or convert it at a profit, the gain is taxable. The personal use exemption means that currency bought for personal use (holiday money, day-to-day expenses) is generally not subject to CGT.
However, holding large amounts of a foreign currency as an investment — for example, holding US dollars while the dollar strengthens against sterling — can result in taxable currency gains that must be reported. Professional advice is recommended for significant forex positions.
When You Must File a Self Assessment Return for Foreign Income
You are required to file a Self Assessment tax return and declare foreign income if:
| Trigger | Threshold | Action Required |
|---|---|---|
| Foreign income (any type) | Over £2,500 | File Self Assessment (SA106 pages) |
| Foreign dividends or interest | Any amount above PSA/dividend allowance | Declare on Self Assessment or via HMRC online service |
| UK income over £100,000 | Any foreign income at all | File Self Assessment regardless of foreign income amount |
| Foreign income under £2,500 | Up to £2,500 | HMRC may collect via PAYE code adjustment — contact them |
| Capital gains on overseas assets | Over £50,000 disposals or £3,000 gains | File Self Assessment (SA108 pages) |
The Self Assessment deadline for the 2024/25 tax year is 31 January 2026 for online filing. Late filing incurs an automatic £100 penalty, with daily penalties of £10 per day after 3 months.
Frequently Asked Questions
Do UK residents pay tax on foreign income?+
Yes. UK tax residents are taxed on worldwide income from all sources. This includes employment, rental, dividends, pensions, and interest from overseas. You must declare all foreign income on your Self Assessment return and can claim Foreign Tax Credit Relief for tax already paid abroad.
What is a Double Taxation Agreement?+
A DTA is a treaty between two countries preventing the same income being taxed twice. The UK has 130+ DTAs. Under a DTA, you typically pay tax in one country only, or receive a credit in the UK for tax paid abroad. Always check the specific DTA for the country where your income arises.
What is Foreign Tax Credit Relief?+
FTCR lets you offset tax paid overseas against your UK tax on the same income. The relief is limited to the lower of the foreign tax paid or the UK tax due. Claim it on the SA106 Foreign pages of your Self Assessment return. It prevents double taxation on most types of foreign income.
Is foreign rental income taxable in the UK?+
Yes. UK residents must declare all overseas rental income on Self Assessment. Allowable expenses can be deducted. Foreign tax paid on rental income can be claimed as credit relief. If your net foreign rental income exceeds £2,500, Self Assessment is compulsory.
What happened to the non-dom remittance basis?+
The remittance basis was abolished from 6 April 2025. New UK arrivals (not resident in the previous 10 years) now receive a 4-year exemption on foreign income. After 4 years, worldwide income is fully taxable. Those who used the remittance basis before April 2025 have complex transitional rules and should take professional advice.
Do I need to declare foreign bank interest?+
Yes. Foreign bank interest is taxable in the UK as savings income and counts toward your Personal Savings Allowance. It must be declared on Self Assessment. Foreign withholding tax on the interest can be claimed as credit relief. The full gross amount (before foreign tax deduction) is declared, with credit claimed separately.
When do I need to file Self Assessment for foreign income?+
If your foreign income exceeds £2,500, or your UK income exceeds £100,000 and you have any foreign income, you must file Self Assessment. The deadline for 2024/25 is 31 January 2026 online. Late filing carries automatic penalties of £100 rising to daily fines after 3 months.