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HMRC internal manual

Tax Credits Manual

Eligibility - income (other than earnings): Income - foreign (Info)

Foreign income is

  • income arising in the year in question from foreign holdings that isn’t employment income
  • trading income or a taxable gain from an overseas insurer chargeable to income tax under Section 461 of ITTOIA 2005 (use regulation 10(1)(e)).

Broadly, therefore, foreign income is pension, social security, investment and property income arising overseas.

People must declare their income for tax credit purposes who are employed under

  • the Diplomatic Privileges Act 1964
  • Relevant Orders in Council concerning staff of international organisations
  • certain special reliefs in the ITTOIA 2005.

For example: Section 772 of ITTOIA 2005 covering Agents-General of a Commonwealth country, earnings of a consul or the staff of a consulate or any agency of a foreign state, overseas investment income of consuls or their staff, and earnings and other overseas income of members of visiting armed forces or their civilian component.

For tax credit purposes, Regulation 3(6) of the Tax Credits (Definition & Calculation of Income) Regulations 2002 overrides the tax privileges of people such as diplomats and officials of international organisations.

When calculating foreign income disregard in full

  • an annuity or pension payable under special provisions to victims of Nationalist Socialist persecution which is made by a law of the Federal Republic of Germany (or any part of it) or Austria
  • if the customer’s foreign income includes or comprises a pension to which Section 65(2) of the Taxes Act 2001 applies, or to which Sections 567(5) and 617 of the Income Tax (Earnings and Pensions) Act (ITEPA) 2003 applies, the amount authorised to be deducted by the relevant provision


  • any amount which would be disregarded for the purposes of income tax by virtue of

    • Extra Statutory Concession A 10 (lump sums paid by overseas pension schemes)
    • Section 681 of the ITEPA 2003 (foreign social security payments)
    • Extra Statutory Concession A 30 (interest on damages for personal injuries awarded by a foreign court)
    • Extra Statutory Concession A 44 (education allowances payable to public officials of overseas territories).