UK tax on foreign income 2026/27
UK tax on foreign income for 2026/27: residence, the 4-year FIG regime, Foreign Tax Credit Relief with worked examples, and how to report it.
UK residents are normally taxed on their worldwide income. This guide covers how residence is decided, who can use the 4-year FIG regime, how Foreign Tax Credit Relief stops the same income being taxed twice, and how to report foreign income for 2026/27. The dividend examples use the 10.75% and 35.75% dividend rates and the bands for England, Wales and Northern Ireland; Scottish rates apply only to non-savings, non-dividend income.
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Frequently asked questions
Do UK residents pay tax on foreign income?
Yes, normally. GOV.UK says UK residents normally pay UK tax on all their income, from the UK or abroad, including foreign wages, dividends, interest, overseas rent and foreign pensions; non-residents pay UK tax only on UK income. Foreign income is anything from outside England, Scotland, Wales and Northern Ireland, so the Channel Islands and the Isle of Man count as foreign. The main exception is the 4-year foreign income and gains (FIG) regime for people new to the UK.
How do I know if I am UK resident?
Under the Statutory Residence Test you are UK resident if you meet one of the automatic UK tests or the sufficient ties test and none of the automatic overseas tests. The automatic UK tests include spending 183 or more days in the UK in the tax year. You are usually non-resident if you spent fewer than 16 days in the UK (46 if you were not UK resident in the 3 previous tax years), or worked abroad full-time and spent fewer than 91 days in the UK with no more than 30 of them working. In the year you arrive or leave, split-year treatment can apply. HMRC has a residence status checker.
What is the 4-year FIG regime?
From 6 April 2025 it replaced the remittance basis. If you are in your first 4 tax years of UK residence after at least 10 consecutive tax years of non-residence, you can claim on your tax return not to pay UK tax on eligible foreign income and gains, choosing which sources to claim for. A claim costs you the Personal Allowance and the Capital Gains Tax annual exempt amount for that year. Foreign earnings and foreign specific employment income are not eligible: Overseas Workday Relief is a separate claim. See our FIG regime guide.
How does Foreign Tax Credit Relief work?
If foreign tax has already been taken, you can usually claim Foreign Tax Credit Relief on your tax return (TIOPA 2010 s.18). The credit is the lower of the foreign tax and the UK tax on that income, and it is also limited to the rate allowed by the double-taxation agreement: tax deducted above the treaty rate has to be reclaimed from the other country. Foreign tax that exceeds the UK tax on the same income is not set against UK tax on other income.
Worked example: foreign dividends for a higher-rate taxpayer
£80,000 salary plus £20,000 of foreign dividends, with an assumed 15% foreign withholding. The salary uses up the basic band, so after the £500 dividend allowance the dividends are taxed at 35.75%: UK tax £6,971.25. Foreign tax deducted £3,000.00, all of it creditable, so the UK tax left to pay on the dividends is £3,971.25. Figures are in pounds for simplicity; in practice convert at the rate HMRC accepts.
Worked example: when the foreign tax is more than the UK tax
£30,000 salary plus £10,000 of foreign dividends, again with 15% assumed withholding. The dividends fall in the basic band, so UK tax is £1,021.25 after the £500 allowance at 10.75%. The foreign tax is £1,500.00, so the credit is capped at £1,021.25, no UK tax is left to pay on the dividends, and £478.75 of foreign tax goes unrelieved.
How is foreign rental income taxed?
You pay tax on overseas property in the normal way, and if you let more than one overseas property you can offset losses on one against profits on another (GOV.UK). As with UK lettings, furniture and other equipment in a let dwelling-house does not qualify for capital allowances (CAA 2001 s.35); replacement of domestic items relief may apply instead (ITTOIA 2005 s.311A). Foreign tax on the rent can be credited under Foreign Tax Credit Relief.
How are foreign pensions taxed?
GOV.UK says you pay tax on foreign pensions if you are UK resident, or were resident in any of the 5 previous tax years, including unauthorised payments such as early payments and some lump sums. Where a pension is exempt from tax in the paying country under a double-taxation agreement, you may need to apply for that relief in advance using the foreign authority's form and HMRC's confirmation of residence.
How do I report foreign income?
Usually on a Self Assessment return, using the foreign section (SA106), including income already taxed abroad so you can claim Foreign Tax Credit Relief. Foreign capital gains go on the capital gains pages and residence status on the residence pages (SA109). If you do not normally file, register by 5 October after the tax year. You do not need a return if your only foreign income is dividends, your total dividends are within the £500 dividend allowance and you have nothing else to report.