Policy paper

Aligning PAYE notifications with the Overseas Workday Relief limit

Published 26 November 2025

Who is likely to be affected

This measure will affect employers who notify HMRC through a PAYE notification, often referred to as a Section 690 application, that they will operate Pay As You Earn (PAYE) on a proportion of the employment income of a qualifying new resident employee that will be eligible to claim Overseas Workday Relief (OWR).

It will also affect the qualifying new resident employee for whom an employer operates PAYE on a proportion of their income.

General description of the measure

When employers submit a PAYE notification form to HMRC on behalf of a qualifying new resident, the measure will require employers to check if the proportion of income they want to exclude from PAYE exceeds 30%. If it does, it will require them to limit the in-year relief provided to no more than 30% of the employee’s income.

Policy objective

Limiting the in-year relief to no more than 30% for OWR eligible employees should ensure in most cases that the provisional relief received in year does not exceed the OWR relief that the employee is able to claim when they file their tax return.

This aligns with the wider intent of PAYE, which is, as far as practicable and without placing undue administrative burden on an employer, to collect the right amount of the employee’s income tax liability on their PAYE income when it is paid.

Background to the measure

This measure was announced at Budget 2025 to reform the taxation of non-UK domiciled individuals introduced on 6 April 2025.

Qualifying new residents who work both in the UK and overseas will be eligible to claim OWR when they file their Self Assessment tax return form at the end of the tax year. Section 690 provisions were introduced as part of the Income Tax (Earnings and Pensions) Act 2003 which came into force on 6 April 2003. These provisions permitted employers to provide provisional in-year relief by submitting a PAYE notification form to notify HMRC that they are not going to operate PAYE on the proportion of income that relates to overseas duties.

Since 6 April 2025, OWR has been subject to a financial limit on the amount of relief that can be claimed, this is the lower of £300,000 or 30% of an individual’s total employment income. This financial limit is currently only applied when the employee makes their OWR claim on their Self Assessment tax return.

In addition, the Section 690 application process was digitised, and a new PAYE notification form became available from 6 April 2025. This form can be used by employers to obtain provisional in-year relief for globally mobile employees who are non-UK resident, eligible to split year treatment, qualifying new residents eligible for OWR or treaty non-UK residents. This measure only affects employees who are qualifying new residents eligible for OWR.

Detailed proposal

Operative date

The measure will take effect from 6 April 2026.

Current law

The current law regarding the OWR financial limit is contained in Section 41R of the Income Tax (Earnings and Pensions) Act 2003.

The provisions relating to PAYE notifications for globally mobile employees are found in s.690-s.690E of the Income Tax (Earnings and Pensions) Act 2003.

Proposed revisions

We will amend the Section 690 legislation to specify that, if the employer’s best estimate of qualifying employment income for an eligible employee is more than 30%, it must be limited to 30% on the PAYE notification form.

Summary of impacts

Exchequer impact (£ million)

2025 to 2026	2026 to 2027	2027 to 2028	2028 to 2029	2029 to 2030	2030 to 2031
Nil	Nil	Nil	Nil	Nil	Nil

This measure is not expected to have an Exchequer impact.

Marcoeconomic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

This measure could impact up to an estimated 9,600 employees who are eligible to claim OWR. However, in practice, most OWR claimants do not use the Section 690 process to obtain in-year relief, so the number of impacted individuals will be less than the total OWR estimate.

Those individuals who wish to benefit from provisional in-year relief can ask their employer to submit a PAYE notification form on their behalf. Not all OWR claimants will opt to receive provisional in-year relief and of those that do, not all will use the Section 690 process to do so. This measure ensures that those individuals who do use the Section 690 process do not receive more in-year relief than they will be able to claim at the tax year end, via Self Assessment.

The measure is not expected to impact on family formation, stability or breakdown.

Equalities impacts

HMRC does not hold data on the population likely to take up OWR, however non-domiciled individuals affected by the broader package of reforms are likely to be represented in each of the groups sharing protected characteristics. Where protected groups are overrepresented in either the eligible or ineligible populations, the measure will have a disproportionate impact on that group.

At Autumn Budget 2024 it was estimated that males (70%), and people aged 35 to 54 (55%) are overrepresented in the population impacted by this measure compared to the UK population where 49% are male and 25% are aged 35 to 54.

HMRC does not hold data on any other protected characteristics of individuals impacted by this measure and so cannot make an assessment of the impacts on those with shared protected characteristics. However, due to the nature of the non-domiciled policy there will be an overrepresentation of non-UK nationalities impacted by this measure both in the eligible and ineligible groups.

Administrative impact on business including civil society organisations

This measure will have a negligible impact on an estimated 800 to 1200 businesses who provide in-year relief to eligible employees. In future, they will not be able to include a proportion higher than 30% on the PAYE notification form.

One-off costs could include businesses needing to familiarise themselves with the changes. There are not expected to be any further one-off or any continuing costs.

This measure is not expected to impact on businesses experience of dealing with HMRC as it does not alter how businesses would interact with HMRC,

This measure is not expected to impact on civil society organisations.

Operational impact (£ million) (HMRC or other)

This measure will not require any new changes to IT systems or impact staff resources and, as such, HMRC do not anticipate any operational impacts.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

This measure will be monitored via analysis of information collected from PAYE notification forms and Self Assessment tax returns.

Further advice

If you have any questions about this change, contact the PAYE Policy Team at payepolicyteam@hmrc.gov.uk.