Do I need to disclose my overseas income to HMRC?

Over the past few years, we’ve seen an increasing number of clients receiving nudge letters from HMRC to ask them to take action now to bring their UK tax affairs up to date; or they need to declare to HMRC that, to their best knowledge, all their foreign income and gains are reported to HMRC correctly.

Who’s likely to receive this letter?

Foreign income or gains are reported on your Self Assessment Foreign page (SA106). It’s easy for HMRC to figure out whether you have declared foreign sources of income or gain.

In addition, HMRC have agreements with over 100 countries about information exchange. They have received 22 billion lines of data from over 90% of countries worldwide, leading to more than 500,000 enquiries each year. 

It’s possible that the foreign income or gains are minimal and can be covered by tax-free allowances. For example, a basic rate taxpayer who only receives £100 foreign savings interest won’t pay UK tax on this due to the tax-free savings allowance of £1,000. However, this doesn’t stop HMRC sending out the nudge letter; it’s up to you to declare to HMRC that your tax is correct.

What’s changing?

The new four-year ‘Foreign Income and Gains’ (or FIG) regime introduced in the Spring Budget 2024 is expected to become effective from April 2025.

If you become UK resident after 10 consecutive years of non-residency, you’ll get full tax relief on your foreign income and gains for the first four years of residency. Any foreign income and gains can be brought into the UK without any additional tax charge (unlike the current remittance basis regime for non-UK domiciles).

However, by claiming this relief you’ll lose entitlement to the tax-free personal allowance against income (currently £12,570) and the tax-free annual exemption against gains (currently £3,000). You may therefore be better off paying UK tax on your foreign income and gains and keeping your tax-free allowances.

With the new regime coming into place, it’s very important for you to thoroughly check your overseas income and gains and report them accordingly, or make use of the favourable tax schemes if you’re eligible.

You can also refer to our previous blog regarding overseas income disclosure to HMRC here and our brochure ‘What are offshore income and gains?’ here.

Need help?

We have a team of people who can help you through the reporting process, the calculations, and can speak to HMRC for you. If you have received a nudge letter, or think you may need to disclose offshore income, please speak to your usual Larking Gowen contact. You can find contact details in the Our People section of our website. Alternatively, call 0330 024 0888 or email enquiry@larking-gowen.co.uk.

Yinchao Zou