Foreign Income in the UK: Do You Need to File a Tax Return?

So you're living in the UK, but some of your money comes from overseas. Maybe you've got a rental property in Spain, dividends from a US company, or interest sitting in a foreign bank account. And now you're wondering: Do I actually need to tell HMRC about this?

‍Short answer: Yes. Yes, you do.

‍Long answer: Keep reading, because the rules around foreign income have changed quite a bit, and ignoring them could cost you more than just money.

Yes, You Need to Tell HMRC (And Here's Why)

If you're a UK tax resident, HMRC wants to know about all your income. Not just the stuff that happens within British borders. That rental income from your flat in Barcelona? They want to hear about it. Those dividends from your Apple shares? Yep, those too.

This isn't HMRC being nosy for the sake of it. It's the law. The UK operates on a worldwide income basis for residents, which means that once you're a UK tax resident, your global income becomes their business.

And here's the kicker: it doesn't matter if you've already paid tax on that income abroad. You still need to declare it on your UK tax return. (Don't worry: there are ways to avoid paying twice, which we'll get to in a minute.)
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What Actually Counts as "Foreign Income"?
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Foreign income is basically any money you earn or receive from outside the UK. That includes:
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• Employment income from working abroad (even if you're remote)
• Interest from foreign bank accounts or savings
• Dividends from overseas companies or investments
• Rental income from property you own outside the UK
• Pension income from foreign pension schemes
• Capital gains from selling overseas assets
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If money is flowing into your pocket from somewhere that isn't the UK, HMRC considers it foreign income.
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The Death of the £2,000 Rule (RIP)
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For years, there was a handy little loophole: if your foreign income was under £2,000 and you didn't bring it into the UK, you didn't have to declare it. It was called the remittance basis, and it made life simpler for a lot of people.
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But as of April 2025, that rule is dead. Gone. Extinct.
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The government replaced it with something called the Foreign Income and Gains (FIG) regime, which is a completely different beast. Under the FIG regime, if you've recently moved to the UK (and meet certain conditions), you might get a temporary break from UK tax on your foreign income: but only for the first four years of UK residence.
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After that? Everything gets taxed. No exceptions, no thresholds, no "it's only a small amount" defence. So if you were relying on that old £2,000 rule, it's time to update your playbook.
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The FIG Regime: What You Need to Know
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The Foreign Income and Gains (FIG) regime is basically the government's way of giving newcomers to the UK a bit of breathing room: but only if you qualify. Here's how it works:

You might be eligible if:

• You haven't been a UK tax resident for at least 10 consecutive years before moving here
• You're now a UK resident under the Statutory Residence Test
• You're within your first four tax years of UK residence

What you get:

• Your foreign income and gains are exempt from UK tax
• No need to file complicated paperwork to get the relief

What happens after four years:

• The relief stops
• All your worldwide income becomes taxable in the UK

The FIG regime is useful if you're new to the UK and still have income streams abroad. But it's not a permanent solution: it's more like a grace period.

When Do You Actually Need to File a Tax Return?

‍You DO need to file if:

• You receive rental income from overseas property
• You have foreign investment income (interest, dividends, etc.)
• You made capital gains on foreign assets
• You're claiming Foreign Tax Credit Relief

If you've never filed a UK tax return before, you'll need to register for Self Assessment by October 5th following the tax year in which you received the foreign income. Miss that deadline, and you could be looking at penalties.

For ongoing help with UK tax returns for expats, we work with clients to make sure nothing slips through the cracks.
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What Happens If You Don't Report?
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Let's be honest: ignoring HMRC is never a good strategy. If you don't declare your foreign income, you're looking at:
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• Penalties calculated as a percentage of the unpaid tax (the exact amount depends on whether HMRC thinks you made an honest mistake or deliberately hid income)
• Interest charges on any unpaid tax
• Potential criminal prosecution in serious cases of tax evasion

HMRC has access to international tax data through agreements like the Common Reporting Standard (CRS), which means foreign banks are reporting your accounts to them anyway. So the chances of flying under the radar are basically zero.

If you've already missed declaring foreign income in previous years, it's worth considering a voluntary disclosure to get things straightened out before HMRC comes knocking.
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The Silver Lining: Foreign Tax Credit Relief (FTCR)
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Here's the good news: if you've already paid tax on your foreign income in another country, you don't have to pay it all over again in the UK.

Foreign Tax Credit Relief (FTCR) allows you to offset the foreign tax you've paid against your UK tax bill. It's not automatic: you have to claim it on your Self Assessment return: but it can significantly reduce what you owe.

For example:

• Let's say you earned £10,000 in rental income from a property in France
• You paid £2,000 in French tax on that income
• The UK would normally charge you £4,000 in tax (assuming you're a higher-rate taxpayer)
• With FTCR, you'd only pay £2,000 to HMRC (£4,000 minus the £2,000 already paid in France)

The key is making sure you claim it properly and have documentation to prove the foreign tax you paid. If you're dealing with multiple countries or complex income sources, it's worth getting advice to make sure you're claiming everything you're entitled to. For more on how this works in practice, check out our guide on how to avoid paying tax twice.
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Bottom Line: Don't Ignore Your Foreign Income
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If you're a UK resident with money coming in from abroad, you need to tell HMRC about it. The rules have tightened, the old exemptions are gone, and HMRC has more data-sharing tools than ever before. The good news? If you declare everything properly and claim the reliefs you're entitled to (like FTCR), you can avoid double taxation and stay on the right side of the law.