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)
- 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)
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)
- 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.