Compliance
Compliance Essentials: Navigating PAYE and Overseas Workday Relief Notifications
From 6 April 2026 employers submitting PAYE notifications for qualifying new residents must cap non-UK income at 30 %. Missing this risks under-withholding and penalties.
By NomadicTax Research Team • 5-8 min read • April 29, 2026
Starting **6 April 2026**, HMRC introduced a new cap in PAYE notifications for employees eligible for **Overseas Workday Relief (OWR)**. Employers must ensure PAYE notifications reflect estimated non-UK earnings accurately — and in no case **above 30 %**. Below is what employers and globally mobile employees must know, and how to stay compliant.
## What the OWR notification cap change means
- **Aligning PAYE with OWR**: Employers previously submitting “section 690” notifications — now called PAYE notifications — will need to estimate the portion of earnings **not subject to UK PAYE** for globally mobile employees eligible for OWR. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-april-2026/april-2026-issue-of-the-employer-bulletin?utm_source=openai))
- **30 % limit**: From 6 April 2026 any such notification must not exceed **30% of non-UK (non-PAYE) earnings**. This is the maximum relief that can be claimed through the employee’s Self-Assessment. ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-april-2026/april-2026-issue-of-the-employer-bulletin?utm_source=openai))
## Why compliance is crucial
- **Avoid under-withholding**: Excess non-UK percentage may lead to insufficient PAYE contributions and eventual tax liabilities or penalties.
- **Ensure accurate tax records**: HMRC uses this cap to align employer payroll data with individual Self-Assessment claims. Accurate notifications reduce audits or adjustments.
## What employers need to do
- **Review employee statuses**: Which staff are “qualifying new residents” under OWR? Check each case.
- **Estimate non-UK earnings carefully**: Documented estimation process (travel, contracts, invoices) to justify the non-PAYE portion.
- **Update payroll systems and training**: Ensure teams understand and consistently apply the 30 % ceiling.
- **Keep precise records**: Contracts, diaries, travel logs to demonstrate proportion of work done abroad vs in the UK. These will be critical in case of HMRC queries.
## Example scenarios
- **Sarah**, a developer new to the UK, works remotely 40 % of time for UK client and 60 % abroad. Her employer filing a PAYE notification should cap non-PAYE earnings at ≤ 30 %. This means only 30 % treated as non-PAYE even though actual non-UK work is 60 %. Any claim above 30 % through Self-Assessment may be rejected.
- **Liam**, an employee covered by OWR but whose employer submits notification estimating non-UK earnings at 25%, which is acceptable. That 25% will be used for PAYE and self-assessment alignment for next tax year.
## Key steps to implement now
- Audit your payroll data to identify globally mobile employees.
- Update your payroll policy and notification templates reflecting cap.
- Coordinate with HR and legal for contract revisions to capture abroad work clearly.
- Engage with tax advisors experienced in tax treaties, international reliefs and IP residency.
## Quick compliance checklist
- [ ] Identify which can qualify under OWR
- [ ] Refer to manual PAYE instructions section PAYE81517 for detailed guidance ([gov.uk](https://www.gov.uk/government/publications/employer-bulletin-april-2026/april-2026-issue-of-the-employer-bulletin?utm_source=openai))
- [ ] Train payroll staff on estimating non-UK earnings and applying limit
- [ ] Document with supporting evidence (travel logs, client invoices)
### Conclusion
For employers and employees with international work arrangements, the 30 % ceiling in PAYE notifications under OWR from 6 April 2026 is a compliance must. Proper estimation, documentation, and system updates aren’t just good practice—they protect against underpayment, penalties, and potential trouble with HMRC.