Arising vs remittance basis, foreign tax credit relief, the SA106 supplement and how overseas earnings, rent, dividends and pensions fit your UK Self Assessment.
Foreign income is one of the areas where UK Self Assessment quietly trips people up. A British contractor with a few months of work in Dubai, an expat returner with a rented flat in Spain, a software engineer holding US shares that pay dividends, a retiree drawing a French pension: all of them can owe UK tax on money that arrives in a foreign currency, often after tax has already been deducted abroad. The instinct is to assume that overseas tax settles the matter, or that money kept offshore is invisible. Neither is true for a UK resident on the arising basis.
This guide explains how foreign income fits your UK return: who is taxed on worldwide income, the difference between the arising and remittance bases, how foreign tax credit relief stops you paying twice, and how the main income types (employment, rent, dividends, interest and pensions) land on the SA106 supplement. Get the residence position and the relief right and the rest is bookkeeping.
The starting point is residence. If you are UK tax resident for the year, you are normally taxed on your worldwide income as it arises, regardless of where it is paid or held. If you are non-resident, the UK generally only taxes your UK-source income. Residence is decided by the Statutory Residence Test, which weighs days spent in the UK against connecting factors such as work, family and available accommodation, so a borderline year deserves careful day counting.
For 2025/26 the same rates apply to your foreign income as to UK income once it enters the calculation: the personal allowance covers the first GBP 12,570, then 20% to GBP 50,270, 40% to GBP 125,140 and 45% above, with the allowance tapering between GBP 100,000 and GBP 125,140 to create an effective 60% band. Scottish residents use an S-coded tax code with six bands (19%, 20%, 21%, 42%, 45% and a 48% top rate); Welsh residents use a C code at rates currently matching the rest of the UK. National Insurance is UK-wide. Foreign income arriving alongside a UK salary can distort your code, so if it looks wrong, run it through the tax code checker.
Most UK residents are taxed on the arising basis: foreign income is taxable in the year it arises, wherever it sits. You keep your full personal allowance and report everything. This is the default and, for the great majority of people, the only sensible route.
The remittance basis is the alternative, historically used by non-domiciled residents, under which only foreign income actually brought into (remitted to) the UK is taxed. From April 2025 the old domicile-based regime was replaced by a new residence-based system, and the long-standing remittance basis as most people knew it was reformed. The headline trade-offs of the old remittance basis still inform why it was rarely worthwhile for ordinary residents: claiming it usually meant losing your personal allowance, and long-term residents faced an annual charge.
Under the old non-domicile regime a narrow easement existed for very small amounts: where unremitted foreign income was under GBP 2,000 in the year, the remittance basis applied automatically without losing your personal allowance or a formal claim. Treat this as a legacy rule rather than current planning, because it lived inside the remittance basis that was reformed from April 2025. If you think it might still help your residence position, take advice before relying on it.
The fear that drives most foreign-income questions is double taxation, paying once abroad and again in the UK. Foreign tax credit relief (FTCR) is the mechanism that prevents it. Where income is taxable in both countries, you claim a credit for the overseas tax against your UK tax on that same income, on the SA106 pages.
The credit is capped at the lower of the foreign tax actually suffered and the UK tax due on that slice of income. So if a country withheld 15% on a dividend and your UK rate on it is higher, you get credit for the 15% and pay the difference here. If the foreign rate was higher than the UK rate, the relief is limited to the UK tax, you do not get a UK refund for the excess. Crucially, the UK's double taxation treaties set the rate that should have been withheld at source. If a country deducted more than the treaty allows, the correct route is to reclaim the excess from that country, not to claim it as UK credit. Keep certificates or statements showing the foreign tax paid, as HMRC can ask for evidence.
Foreign tax credit relief only works on the same income taxed twice. Match each overseas tax payment to the specific income it relates to, and never claim relief for tax you should reclaim from the source country under a treaty.
Foreign income is not one thing, and each stream has its own quirks on the SA106. Where you also have UK income, the multiple-income tax calculator shows how the foreign element stacks on top.
| Foreign income type | How it is taxed in the UK | Watch out for |
|---|---|---|
| Overseas employment | Earnings taxable on the arising basis; relief for foreign tax via FTCR | Social security overseas is not the same as UK NIC; check treaty position |
| Foreign rental income | UK-style property rules, SA106 not SA105; pooled separately | 20% finance-cost credit restriction applies to residential lets |
| Foreign dividends | Taxed as dividends; GBP 500 allowance then 8.75/33.75/39.35% | Withholding tax may be reclaimable down to the treaty rate |
| Foreign interest | Savings income; personal savings allowance may apply | Often paid gross abroad, so set tax aside |
| Foreign pensions | Generally taxable in the UK on the arising basis | Treaty may give one country exclusive taxing rights |
| Overseas capital gains | Reported separately under CGT rules, not SA106 income | Disposals of foreign assets still report on the CGT pages |
Overseas dividends are taxed exactly like UK dividends once converted to sterling: the GBP 500 dividend allowance for 2025/26 applies, then 8.75% at basic rate, 33.75% at higher and 39.35% at additional rate. Many countries withhold tax on dividends at source. You claim FTCR for the treaty-rate withholding, and where a country has deducted more than the treaty permits, you reclaim the excess from that country. Compare your overall dividend position with the dividend tax calculator. Foreign interest is taxed as savings income, where the personal savings allowance can shelter the first GBP 1,000 for a basic-rate taxpayer or GBP 500 for a higher-rate one.
Overseas property is calculated under broadly the same rules as a UK property business but reported on the SA106 foreign pages, and overseas lettings are pooled separately from UK ones, so a loss on a Spanish flat cannot be set against a profit on a UK buy-to-let. You deduct the usual allowable expenses, letting agent and management fees, repairs and maintenance, insurance, ground rent and service charges, and accountancy. The residential finance-cost restriction applies: mortgage interest on a foreign residential let is relieved only as a basic-rate 20% tax credit, not as a full deduction. Foreign tax paid on the rent is relieved through FTCR. Sense-check the property maths with the rental income tax calculator.
Two practical points catch people out. First, expenses: foreign income is reported net of genuinely allowable costs, on the same wholly-and-exclusively basis as UK income. Overseas employment may allow travel and subsistence; foreign rent allows the property expenses above; foreign self-employment is reported as a trade with its own expenses. Second, currency: every figure on the return must be in sterling. Convert income and the foreign tax paid using a consistent and reasonable exchange rate, HMRC publishes monthly and yearly average rates, and apply the same approach throughout so income and credits are coherent. Keep the rate source you used in your records.
A British freelancer working partly abroad often has both foreign self-employment and UK trade income in the same year. If you also operate as a sole trader at home, our software contractor tax guidance covers how the UK trade is taxed alongside the overseas element.
Take a UK-resident higher-rate taxpayer with a UK salary plus two foreign streams: GBP 3,000 of US dividends (15% treaty withholding, so GBP 450 foreign tax) and net Spanish rental profit of GBP 4,000 after expenses, on which GBP 600 of Spanish tax was paid.
Foreign dividends: GBP 3,000, with the GBP 500 dividend allowance used elsewhere, taxed at the higher dividend rate of 33.75% = GBP 1,012.50 UK tax. FTCR credits the GBP 450 US withholding, leaving GBP 562.50 to pay here.
Foreign rent: GBP 4,000 profit taxed at 40% = GBP 1,600 UK tax. FTCR credits the GBP 600 Spanish tax (lower than the UK tax on it), leaving GBP 1,000 to pay here.
Combined extra UK tax after relief: GBP 1,562.50, instead of GBP 2,612.50 without relief. The GBP 1,050 of foreign tax has been credited rather than wasted, and nothing has been taxed twice. The figures convert to sterling at consistent rates, and both streams sit on the SA106 supplement.
Making Tax Digital for Income Tax replaces the once-a-year return with quarterly digital updates and a year-end finalisation, but it is driven by your self-employment and property income, including overseas property. The thresholds are on gross income, not profit:
Foreign rental income counts towards the property element of this test, so an expat landlord with substantial overseas rent can be pulled into MTD even if they have no UK property. Purely investment foreign income, overseas dividends and interest, does not by itself trigger MTD. Our MTD for sole traders guide walks through the quarterly rhythm, and the same digital record-keeping discipline makes the currency conversions and foreign tax certificates far easier to assemble at year end.
Assuming offshore money is invisible. UK residents on the arising basis are taxed on worldwide income whether or not it is remitted, and automatic exchange of information means HMRC often already sees overseas accounts.
Claiming credit for over-withheld foreign tax. FTCR is limited to the treaty rate. Tax withheld above the treaty rate must be reclaimed from the source country, not credited here.
Putting foreign rent on the SA105. Overseas property belongs on the SA106 foreign pages and is pooled separately from UK lettings; mixing them up distorts loss relief.
Forgetting the finance-cost restriction abroad. Mortgage interest on a foreign residential let is a basic-rate 20% credit, not a full deduction, exactly as for UK property.
Inconsistent exchange rates. Converting income at one rate and the foreign tax at another produces a mismatched credit. Use a consistent, reasonable rate throughout and record your source.
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