Complying with PAYE and Overseas Workday Relief Limits in the UK from April 2026

Background: Overseas Workday Relief & Section 690 Notifications

The UK introduced Overseas Workday Relief (OWR) effective 6 April 2025, allowing qualifying new residents to exclude income from duties performed outside the UK. Employers can also submit a Section 690 PAYE notification, providing in-year provisional relief resembling the relief claimed later at Self Assessment. (gov.uk)

What Changes from April 2026?

From 6 April 2026, employers submitting Section 690 notifications must limit the proportion of income excluded via PAYE to no more than 30% of the employee’s total income. This aligns the in-year relief with what the employee can claim at Self Assessment. (gov.uk)

Who Is Affected?

• Qualifying new residents eligible under the FIG rules issued as part of tax reforms in 2025. (gov.uk)
• Employers who notify HMRC via Section 690—often multinational employers or those with globally mobile staff.
• UK employees who perform work both in the UK and abroad and who often use PAYE notifications to smooth cash flow during the tax year.

Practical Steps for Employers & Employees

Employers:

• Review Section 690 notification practices—ensure no provisional exclusion requests exceed 30%.
• Update payroll policies and train HR/ payroll staff on the revised minimum thresholds.
• Monitor employee earnings carefully—estimates of overseas workdays must be reasonable.

Employees:

• Track overseas workdays accurately—day-by-day logs help in calculating legitimate OWR claims.
• Coordinate with employer to ensure Section 690 notification stays within the 30% cap if seeking in-year relief.
• File a Self Assessment return correctly—any in-year relief claimed under PAYE must correspond with Self Assessment outcome.

Typical Scenario

Maria moves from Spain to the UK in April 2025 after 10 full years abroad, becoming a qualifying new resident. She works 60 workdays overseas, 240 in the UK. Her total earnings are £100,000. Under OWR, she could exclude up to 25% overseas work income—but from 6 April 2026, if her employer submits a Section 690, they cannot exclude more than 30% (so up to £30,000). If used, Maria must reflect this in her year-end return. Over-claims are disallowed.

Compliance & Risk

• Over-exclusion at in-year stage may lead to HMRC disallowing excess relief or even applying penalties.
• Employers failing to limit provisional relief above 30% risk non-compliance and need for refunds or corrections.
• Permanent residence status and tax domicile still influence eligibility—residency tests must be correctly evaluated.

Actionable Advice

1. Employers: audit Section 690 requests and ensure compliance ahead of 6 April 2026 deadline.
2. Employees: maintain records (workday counts, contracts, travel documentation).
3. Consult UK tax adviser if claiming OWR for the first time or when split-365 work/year mixes.
4. Use HMRC guidance tools and rate calculators issued by GOV.UK to check projected relief.