The UK Government has announced key reforms to Overseas Workday Relief (OWR), a long-standing tax concession available to certain internationally mobile individuals who become UK-resident.
For advisers, these changes introduce new compliance considerations for clients with inbound employees, particularly around PAYE operations and how OWR can be applied in payroll.
Key Budget Changes to OWR
OWR allows eligible new UK tax residents to exclude income relating to overseas workdays from UK taxation. The Budget reforms tighten how this relief is capped and how it interacts with PAYE withholding.
Effective 6 April 2026, the following rules will apply:
- Relief cap: OWR will be limited to the lower of £300,000 or 30% of total employment income per tax year
- PAYE alignment: Employers may still reduce PAYE withholding through a Section 690 direction, but must ensure that the PAYE reduction does not exceed the new statutory limits
- Transitional rules: Individuals who claimed the remittance basis before 6 April 2025 and remain within their first four years of UK residence are not currently subject to the cap, though HMRC has not yet clarified how the new framework will interact with ongoing claims
These changes are intended to bring PAYE more closely into line with statutory OWR limits and reduce the risk of excessive relief being given through payroll.
What This Means for Advisers and Their Clients
The updated OWR rules have several implications for employers managing inbound moves:
- Existing payroll processes may need updating to ensure PAYE reductions comply with the new cap
- Employers must review how they assess non-UK workdays and the associated income
- Incorrect PAYE treatment could lead to under-withholding and penalties
- Transitional cases require careful evaluation until HMRC provides further clarity
Clients with globally mobile talent, or those supporting executives relocating to the UK, will require proactive guidance in the coming months.
How Corridor Supports You and Your Clients
Corridor works alongside tax, legal, and HR advisers to ensure clients understand and comply with the revised OWR framework. We can help you:
- Interpret the new OWR thresholds and confirm eligibility
- Support Section 690 applications and PAYE process updates
- Advise on transitional rules for existing remittance basis users
- Provide integrated support across international tax, mobility, and payroll compliance
If your clients have inbound employees or are planning UK assignments in 2025 and beyond, early preparation will help minimise risk and avoid unexpected payroll exposures.