If you’re a UK resident with income from overseas, one of the biggest concerns is double taxation. This is when tax is paid on the same money both in the UK and in the country it came from.
The UK generally taxes residents on their worldwide income and gains, so wages, pensions, rental profits or dividends earned abroad often need to be reported here as well. At the same time, the source country may also want to tax that income.
To prevent people being taxed twice, the UK relies on a mix of solutions: its network of double taxation agreements (DTAs) with other countries, rules that let you claim foreign tax relief, and (since April 2025) the new Foreign Income & Gains (FIG) regime for eligible new arrivals.
What Is Double Taxation?
Double taxation is exactly what it sounds like. The same income being taxed by more than one country. For UK residents, this often happens because the UK generally taxes people on their worldwide income and gains, not just what’s earned here.
That means if you receive money from abroad, you may find that both the country where it arises and the UK want to tax it. Common examples include:
- Overseas employment taxed locally through payroll, but still reportable to HMRC.
- Foreign pensions. Many countries tax these at source, while the UK expects them on your tax return too unless a treaty says otherwise.
- Rental income from property abroad. Local property taxes apply, but you must also declare the income in the UK.
- Dividends and interest from non-UK investments. Often subject to withholding tax overseas, as well as UK tax.
- Capital gains on foreign assets. Such as selling shares or real estate abroad. The UK charges CGT on worldwide disposals if you’re resident.
Without reliefs, these situations would leave you paying tax twice on the same income. The rest of this guide explains how the UK’s treaties and reliefs are designed to stop that happening.
UK Tax Residency and the Statutory Residence Test (SRT)
Whether you’re taxed in the UK on foreign income depends first on whether HMRC considers you a UK tax resident. Since 2013, this has been decided by the Statutory Residence Test (SRT), a set of rules that look at your time in the UK and your personal connections here.
The SRT works in three stages:
- Automatic overseas tests. You’ll be treated as non-resident if you spend very few days in the UK and don’t meet other conditions.
- Automatic UK tests. You’ll be treated as a UK resident if you spend enough time here or have your only home in the UK.
- Sufficient ties test . If neither of the above apply, your residency depends on a mix of factors such as family, accommodation, work in the UK, and how many days you spend here.
If you move in or out of the UK during a tax year, you may qualify for split-year treatment. This means the year is divided into a UK-resident part and a non-resident part, so you only pay UK tax as a resident for the relevant portion.
Sometimes people meet the residency conditions in both the UK and another country this is called dual residence. In these cases, the outcome is usually settled by the double taxation agreement (DTA) between the two countries.
Treaties use “tie-breaker” rules, looking at things like where your permanent home is, where your economic and personal interests are strongest, and where you normally live. These rules decide which country gets primary taxing rights.
Understanding your residency status under the SRT is the starting point for working out how your foreign income will be taxed.
What Foreign Income Is Taxable in the UK?
If you’re UK tax resident, the general rule is that your worldwide income and gains are taxable in the UK. That means you’ll usually need to report and pay UK tax on:
- Earnings from overseas employment, even if taxed locally through payroll.
- Foreign pensions. Most private and occupational pensions are taxable here unless a treaty says otherwise.
- Rental income from property abroad is reportable to HMRC as well as taxed in the country where the property is located.
- Bank interest and dividends from overseas investments are often subject to withholding tax abroad, but still reportable in the UK.
- Capital gains on foreign assets such as selling overseas shares, businesses, or property. UK residents are liable for Capital Gains Tax on disposals worldwide.
It’s important to note that moving money between bank accounts, whether abroad or into the UK, doesn’t create a tax charge by itself. What matters is the source of the money.
If it’s income or gains that arose while you were UK resident, it needs to be declared regardless of whether you transfer it. If it’s long-standing savings or capital you built up before you were UK resident, then simply moving it won’t trigger UK tax.
Since 6 April 2025, the old remittance basis for non-domiciled individuals has been abolished. In its place is the Foreign Income & Gains (FIG) regime.
If you qualify (generally, because you were non-UK resident for the previous 10 tax years), you can claim this regime for up to four tax years. During that period, your foreign income and gains aren’t taxed in the UK and you can even bring them into the UK without a charge.
Everyone else will be taxed on the arising basis, meaning worldwide income and gains are within scope.
When Foreign Income May Be Tax-Free in the UK
Not all overseas income ends up taxed twice. There are several situations where foreign income may be free of UK tax, either fully or in part.
Allowances that apply to all residents
Every UK resident gets the personal allowance (£12,570 in 2025/26, unless restricted by income level), which can be set against both UK and foreign income. In addition, the savings allowance and dividend allowance may shelter small amounts of interest or dividend income from tax.
Treaty exemptions
The UK has over 130 double taxation agreements (DTAs). These treaties decide which country has the right to tax particular types of income. Sometimes the UK won’t tax at all (full exemption).
More often, both countries can tax and the UK gives Foreign Tax Credit Relief. For rental income, treaties usually allow the country where the property is situated to tax it; the UK (as the residence state) may also tax it, but you’d normally get Foreign Tax Credit Relief rather than a full UK exemption.
The Foreign Income & Gains (FIG) regime
Since 6 April 2025, the old remittance basis has been abolished and replaced with the FIG regime. If you’ve been non-resident in the UK for at least 10 consecutive tax years and then become resident, you can claim FIG for up to four tax years.
During that window, your foreign income and gains aren’t subject to UK tax and you can bring them into the UK without triggering a charge.
In FIG years you lose the UK tax-free allowances for Income Tax and Capital Gains Tax (including the personal allowance and the CGT annual exempt amount), and certain other allowances (Marriage Allowance/Married Couples Allowance and Blind Person’s Allowance).
Together, these reliefs and exemptions mean that while the UK system is broad in scope, many people won’t actually pay tax on every penny of their foreign income. The key is knowing which rules apply to your situation.
Double Taxation Agreements (DTAs)
The UK has one of the largest treaty networks in the world, with agreements in place with more than 130 countries.
These Double Taxation Agreements (DTAs) are designed to make sure the same income isn’t taxed twice, and to set clear rules about which country has taxing rights.
Broadly, DTAs work in two ways:
Exemption method
One country agrees not to tax certain income at all. For example, a treaty may say that a pension is taxable only in the country it’s paid from, so the UK gives it a full exemption.
Credit method
Both countries can tax, but the UK gives you credit for the tax already paid overseas. You then only pay the difference if UK tax is higher. If the foreign tax is higher, the UK doesn’t refund the excess, but at least you don’t pay twice.
Different types of income are often dealt with in different ways:
Employment income
Usually taxed where the work is physically carried out, though short-term secondments can sometimes be exempt.
Pensions
Private and occupational pensions are often taxable where you live, but UK government service pensions are usually taxable only in the UK, unless the treaty makes an exception for nationals of the other country.
Dividends and interest
Many treaties reduce or remove the withholding tax that foreign countries apply when these are paid to UK residents.
DTAs also contain tie-breaker rules for people who meet the residency conditions in more than one country.
These look at factors such as where your permanent home is, where your personal and economic interests are strongest, and where you normally live. The aim is to settle which country gets primary taxing rights and avoid ongoing conflicts.
Foreign Income & Gains (FIG) Regime (from April 2025)
From 6 April 2025, the long-standing remittance basis was abolished. In its place, the government introduced the Foreign Income & Gains (FIG) regime — a simpler set of rules aimed at new arrivals to the UK.
Who qualifies
You can use FIG if you become UK tax resident after spending at least 10 consecutive tax years non-resident. Once eligible, you can claim FIG for up to four tax years from the year you arrive.
What it offers
During those four years, your foreign income and gains are completely outside UK tax. You can also bring them into the UK freely without triggering a tax charge — a major change compared with the old remittance basis.
What it replaces
The remittance basis, which allowed non-domiciled residents to keep overseas income/gains out of UK tax unless remitted, ended on 5 April 2025. FIG is now the only special regime for new residents.
Downsides
If you claim FIG, you lose entitlement to the UK personal allowance for income tax and the annual exempt amount for capital gains during those years.
For many, the overall benefit of excluding all foreign income and gains outweighs this trade-off, but it’s important to check the numbers.
Temporary Repatriation Facility (TRF)
What about income or gains you built up overseas under the old remittance basis? If you have untaxed foreign income/gains from before 6 April 2025, bringing them into the UK still counts as a taxable remittance, unless you use the new Temporary Repatriation Facility (TRF).
This allows you to remit those historic funds at a flat rate: 12% in 2025/26 and 2026/27, or 15% in 2027/28. After that, normal rules apply.
Foreign Pensions
If you’re UK tax resident, pensions from overseas are generally part of your taxable income. But exactly how they’re treated depends on the type of pension and whether a double taxation agreement (DTA) applies.
Private and occupational pensions
Most foreign private or workplace pensions are taxable in the UK at your marginal income tax rate.
However, many DTAs give taxing rights to the country where the pension originates. In those cases, the UK may either exempt the income or allow you to claim foreign tax credit relief for tax already paid abroad. The outcome depends on the treaty wording, so it’s always worth checking the relevant agreement.
UK government service pensions
Pensions paid for UK government service, for example from the civil service, armed forces, police or local authority roles, are usually taxable only in the UK, regardless of where you live.
The standard treaty rule is that the UK keeps taxing rights, unless you’re both resident in and a national of the other country. Only then may the pension be taxed abroad instead.
Because pension treatment can vary significantly between treaties, it’s important to check the pensions article in the relevant DTA. The article will spell out which country gets taxing rights, and whether you can offset foreign tax or avoid it altogether.
Capital Gains Tax and Foreign Assets
If you’re UK tax resident, you’re normally liable to Capital Gains Tax (CGT) on disposals of worldwide assets. That means gains from selling overseas property, shares, or other investments need to be reported to HMRC, unless a specific exemption or relief applies.
When it comes to UK land and property, the position is even stricter. Since April 2019, non-residents as well as residents are within UK CGT on disposals of UK real estate and certain property-rich entities.
Most DTAs preserve the UK’s taxing rights on UK land, so even if you live abroad, the UK will usually keep the primary right to tax those gains. Your country of residence may then give credit for the UK tax.
There’s also a temporary non-residence rule to be aware of. If you leave the UK and realise gains while non-resident, but then return within five full tax years, some of those gains can be “recaptured” and taxed in the UK as if you’d never left.
This is designed to stop people making disposals offshore during short breaks in residency purely to avoid UK CGT.
In practice, this means careful planning is essential if you hold significant overseas assets and are considering a move abroad.
Practical Steps to Avoid Double Taxation
Double taxation can usually be avoided, but only if you take a proactive approach:
- Keep detailed records. Log all foreign income and gains, tax paid overseas, and currency conversion rates. HMRC may ask for evidence to support any relief claims.
- Use separate accounts. Keep foreign capital, income, and gains apart to make it easier to show what has (and hasn’t) been taxed. This is especially important if you have pre-2025 foreign income/gains under the Temporary Repatriation Facility.
- Check if a treaty exists. HMRC publishes a full list of the UK’s tax treaties. Always look at the relevant treaty before assuming an exemption applies.
- Plan your timing. If you’re moving to or from the UK, split-year rules and the temporary non-residence rule can make a big difference to your tax bill.
- Claim relief on your return . Use the SA106 Foreign pages of your Self Assessment return to report foreign income and claim Foreign Tax Credit Relief (FTCR). Claims normally need to be made within four years of the tax year end.
- Get advice where needed. International tax can be complex, and mistakes often prove costly. Professional guidance can help you avoid unnecessary double taxation.
How Ryans Can Help You Avoid Double Taxation
Working out your UK tax position when you have overseas income isn’t always straightforward. From determining your residency status to understanding how a particular double taxation agreement applies, the rules can quickly get complex. That’s where we come in.
At Ryans, we regularly help clients with:
Residency and treaty analysis
Applying the Statutory Residence Test and checking tie-breaker clauses in relevant DTAs.
Relief claims
Whether under a treaty or through unilateral relief if no agreement exists, making sure you’re not taxed twice.
Compliance support
Completing the SA106 Foreign pages of your Self Assessment, preparing claims for Foreign Tax Credit Relief, and providing residency certificates or other forms HMRC and overseas tax authorities require.
Long-term planning
Advising internationally mobile individuals and businesses on timing moves, structuring income, and managing assets to keep cross-border tax efficient.
Our goal is to give you confidence that your affairs are compliant while minimising the risk of unnecessary double taxation.
Get in touch today to speak to our tax team on 01204 523263 or email us at tax@ryans-uk.com