If you pay foreign employees or those who work abroad, you might need to take steps immediately because of new tax rules. What’s the full story?
What’s changed? Accountancy and tax organisations are warning employers that they are at risk of falling foul of HMRC if they don’t follow the new tax residency rules that took effect in April 2025. The changed rules are a side effect to the overhaul of the UK taxation of non-UK individuals, known as the “foreign income and gains” (FIGS) regime. The rules also affect UK individuals paid by UK employees for work they do abroad.
Tax only UK earnings. If one of your employees works both in and outside of the UK, before April 2025 you could have asked HMRC for permission to only apply PAYE to salary relating to their UK work. This was called “s.690 relief” . This relief came to an end with the introduction of FIGS.
New process. Since April 2025 employers should not assume that employees who qualified for s.690 relief will do so under the FIGS regime. Because of this there’s a new mandatory process for employers to follow if they want to limit PAYE to operate the new version of s.690 relief (see The next step ).
Tip. The good news is that the new process is all online and can be completed by you or your accountant in very little time and it has immediate effect. This means that you don’t need to wait for HMRC’s permission before limiting PAYE to UK-generated earnings.
Trap. The new process must be followed for employees for whom you have previously received permission from HMRC under the old rules.
Tip. The new procedure only relates to PAYE tax. It doesn’t affect your or your employees’ NI contributions if they are foreign nationals. There are separate rules for these (see The next step).
Since April 2025 if you want to exclude an employee’s earnings for work they do abroad from PAYE you must apply to HMRC online. HMRC approvals under the old rules are no longer valid. You must reapply.
The next step
HMRC Guidance: New employee coming to work from abroad
Tell HMRC that you’ll operate PAYE on a proportion of an employee’s income
This article has been reproduced by kind permission of Indicator – FL Memo Ltd. For details of their tax-saving products please visit www.indicator-flm.co.uk or call 01233 653500.