Income Tax (Trading and Other Income) Act 2005

[F1 Chapter 5 U.K. Relief for new residents on foreign income

Textual Amendments

F1 Pt. 8 Ch. 5 inserted (for the tax year 2025-26 and subsequent tax years) by Finance Act 2025 (c. 8), s. 37(1)(4)

845A Claim for relief for qualifying new residents U.K.

(1) An individual may make a claim for relief for a tax year under this section (a “foreign income claim”) if the individual is a qualifying new resident for that year (see section 845B).

(2) Where an individual makes a foreign income claim for a tax year, the individual is entitled to relief for the tax year that is equal to so much of the total income of the individual for that year as—

(a) reflects qualifying foreign income (see section 845H), and

(b) is identified as such in the claim.

(3) The relief is given by deducting the amount of the relief in calculating the individual's net income for the tax year (see Step 2 of the calculation in section 23 of ITA 2007).

(4) A foreign income claim must be made in a return.

(5) A foreign income claim in relation to a tax year must be made before the end of the period of 12 months beginning with 31 January after the end of that tax year.

(6) A foreign income claim may not be made as a consequential claim (within the meaning of section 43C(5) of TMA 1970) if the circumstances which give rise to the consequential claim result from a loss of tax brought about carelessly or deliberately by the individual or a person acting on the individual’s behalf.

(7) See also—

(a) Chapter 5C of Part 2 of ITEPA 2003 which provides for a claim for relief that may be made in respect of foreign employment income where a foreign employment election is made, and

(b) Schedule D1 to TCGA 1992 which provides for a claim for relief that may be made in respect of foreign gains (a foreign gain claim).

(8) Sections 845C to 845E set out some income tax consequences of a foreign income claim, a foreign employment election or a foreign gain claim.

(9) See also section 1K of TCGA 1992, which provides for the loss of an individual’s annual exempt amount for capital gains tax where a foreign income claim, a foreign employment election or a foreign gain claim is made.

(10) For the purposes of this section—

(a) “return” means a return under section 8 of TMA 1970 (personal return),

(b) references to a claim being included in a return include a claim being so included as a result of an amendment of the return, and

(c) subsections (5) to (7) of section 118 of TMA 1970 (loss of tax brought about carelessly or deliberately) apply for the purposes of this section as they apply for the purposes of that Act.

845B Qualifying new residents U.K.

(1) For the purposes of this Chapter, an individual is a qualifying new resident for a tax year if—

(a) the individual is UK resident for that tax year,

(b) the individual is not disqualified for that tax year, and

(c) for each of the 10 tax years before that tax year, the individual was not UK resident.

(2) An individual is also a qualifying new resident for a tax year if—

(a) the individual is UK resident for that tax year,

(b) the individual is not disqualified for that tax year, and

(c) that tax year is one of the next three tax years after a qualifying tax year in relation to the individual.

(3) A tax year is a qualifying tax year in relation to an individual if—

(a) the individual was a qualifying new resident for that tax year as a result of subsection (1),

(b) the individual would have been a qualifying new resident for that tax year as a result of that subsection, but was not only as a result of the individual being disqualified for that tax year, or

(c) the tax year—

(i) is the tax year 2022-23, 2023-24 or 2024-25, and

(ii) is a tax year to which paragraph (a) or (b) would have applied in relation to the individual had this section had effect for that tax year.

(4) An individual is disqualified for a tax year if the individual would, for the purposes of section 41 of the Constitutional Reform and Governance Act 2010, be regarded as—

(a) a member of the House of Commons for any part of that tax year, or

(b) a member of the House of Lords for any part of that tax year.

845C Effect of claim, foreign employment election or foreign gain claim on losses U.K.

(1) Subsection (2) applies where—

(a) an individual who carries on a relevant business wholly outside the United Kingdom makes a foreign income claim, a foreign employment election or a foreign gain claim for a tax year,

(b) the individual has a loss for that tax year from the relevant business, and

(c) the profits (if there were any) of the business would be qualifying foreign income for that year.

(2) No relief for that loss is available in the tax year for which the claim or election is made or in any other tax year.

(3) In this section “relevant business” means—

(a) a trade, profession or vocation, or

(b) a property business.

845D Effect of claim, foreign employment election or foreign gain claim: costs of dwelling-related loan U.K.

(1) This section applies where an individual—

(a) has a relievable amount for a tax year in respect of an overseas property business for the purposes of section 274A (reduction for individuals: entitlement), and

(b) makes a foreign income claim, a foreign employment election or a foreign gain claim for the tax year.

(2) The individual is not entitled to relief under section 274A for that tax year in respect of that relievable amount.

(3) For the purposes of section 274A, the individual’s brought-forward amount for the following tax year in respect of the overseas property business is nil.

845E Effect of claim, foreign employment election or foreign gain claim on personal allowance etc U.K.

Where an individual makes a foreign income claim, a foreign employment election or a foreign gain claim for a tax year, the individual is not entitled, for that year, to—

(a) any allowance under Chapter 2 of Part 3 of ITA 2007 (personal allowance and blind person's allowance),

(b) any tax reduction under Chapter 3 of that Part (tax reductions for married couples and civil partners),

(c) any tax reduction under Chapter 3A of that Part (transferable tax allowance for married couples and civil partners), or

(d) any relief under section 457 or 458 of ITA 2007 (payments for life insurance etc).

845F Effect of claim on relief for contributions to registered pension schemes U.K.

(1) Subsection (2) applies where—

(a) an individual makes a foreign income claim for a tax year,

(b) the individual is entitled to relief under section 188 of FA 2004 (relief for contributions) for that tax year, and

(c) the maximum amount of relief to which the individual is entitled under that section for that tax year is greater than the basic amount within the meaning of section 190(4) of that Act.

(2) The maximum amount of relief to which the individual is entitled under section 188 of that Act for that tax year is to be reduced by the lesser of—

(a) the relevant amount, and

(b) the amount that would reduce the maximum amount of relief to the basic amount.

(3) The “relevant amount” is the amount of the relief to which the individual is entitled under section 845A(2) of this Act as a result of making the foreign income claim, so far as that amount reflects relevant qualifying foreign income.

(4) An amount of qualifying foreign income is “relevant qualifying foreign income” if the income is relevant UK earnings within the meaning of section 189(2) of FA 2004.

845G Foreign income relief ignored for purposes of determining adjusted net income U.K.

(1) Subsection (2) applies for the purpose of determining the adjusted net income under section 58 of ITA 2007 of an individual for a tax year for which the individual has made a foreign income claim.

(2) The adjusted net income is to be determined as if the relief allowed by the claim had not been deducted in calculating the individual's net income for the tax year.

845H Qualifying foreign income U.K.

Income is qualifying foreign income if it—

(a) falls within a description set out in the following table, and

(b) is not disqualified income (see section 845I).

No.	Description
1	Profits of a trade carried on wholly outside the United Kingdom (see Chapter 2 of Part 2).
2	A UK resident partner’s share of the profits of a trade carried on by the firm wholly outside the United Kingdom.
3	Profits of an overseas property business.
4	Adjustment income (within the meaning of Chapter 17 of Part 2) in respect of a trade carried on wholly outside the United Kingdom (see that Chapter).
5	Income chargeable under Chapter 2 of Part 4 (interest) that arises from a source outside the United Kingdom.
6	Income chargeable under Chapter 4 of Part 4 (dividends from non-UK resident companies).
7	Income chargeable under Chapter 7 of Part 4 (purchase life annuity payments) that arises from a source outside the United Kingdom.
8	Income chargeable under Chapter 8 of Part 4 (profits from deeply discounted securities) that arises from a source outside the United Kingdom.
9	Income chargeable under section 579 (royalties and other incored.me from intellectual property) that arises from a source outside the United Kingdom.
10	Income chargeable under Chapter 3 of Part 5 (films and sound recordings: non-trading businesses) that arises from a source outside the United Kingdom.
11	Income chargeable under Chapter 4 of Part 5 (certain telecommunication rights: non-trading income) that arises from a source outside the United Kingdom.
12	Income that arises from a source outside the United Kingdom and that is treated as arising to an individual under section 624 or 629 (income arising under settlement attributed to settlor).
13	So much of any amount of income treated as arising to an individual under section 633 (capital sums paid to settlor by trustees of settlement) for the tax year as falls within the foreign amount of income available up to the end of the tax year.
	The foreign amount of income available up to the end of a tax year is the amount that would be determined, in accordance with sections 635 to 637 (amount of available income), as the amount of income available up to the end of the tax year if all income arising under the settlement from a source in the United Kingdom were ignored.
14	Income treated as arising to an individual under section 643A (benefits paid out of protected income).
15	Income chargeable under section 649 (estate income) that arises from a source outside the United Kingdom.
16	Income chargeable under Chapter 7 of Part 5 (annual payments not otherwise charged) that arises from a source outside the United Kingdom.
17	Income chargeable under Chapter 8 of Part 5 (income not otherwise charged) that arises from a source outside the United Kingdom.
18	Accrued income profits (within the meaning of Part 12 of ITA 2007) made by an individual as a result of a transfer of securities if income from the securities would be qualifying foreign income.
19	Income treated as arising under regulation 17 of the Offshore Funds (Tax) Regulations 2009 (offshore income gains).
20	Income that is treated as arising to an individual under section 721, 728 or 732 of ITA 2007 (transfer of assets abroad: deemed income) and that is “foreign” for the purposes of (respectively) section 726, 730 or 735 of that Act.
21	Pension income that arises from a source outside the United Kingdom (see Part 9 of ITEPA 2003).
22	A benefit to which section 678 of ITEPA 2003 applies (foreign social security benefits).
23	The foreign proportion (see paragraph 46 of Schedule 2 to FA 2022) of income arising as a result of the payment of interest, or the making of a distribution or qualified distribution (within the meaning of paragraph 45(5) of that Schedule), by a QAHC (within the meaning of that Schedule).

845I Disqualified income U.K.

Income is disqualified income if—

(a) it is income of a settlement (within the meaning of Chapter 5 of Part 5) arising in the tax year 2024-25 or an earlier tax year that is treated as arising in tax year 2025-26 or a later year as a result of section 648(3) to (5),

(b) it is income arising from a security treated as situated in the United Kingdom as a result of section 138ZB of TCGA 1992 (share exchanges involving non-UK incorporated close companies),

(c) it is income chargeable to income tax as a result of section 809AZB of ITA 2007 (transferred income streams),

(d) it is performance income (see section 845J),

(e) it is income from a pension to which section 629 of ITEPA 2003 applies (pre-1973 pensions paid under the Overseas Pensions Act 1973), or

(f) it is a payment made to or in respect of—

(i) a relieved member of a relevant non-UK scheme (within the meaning of Schedule 34 to FA 2004), or

(ii) a transfer member of such a scheme,

to which the member payment provisions (within the meaning of that Schedule) apply.

845J Performance income U.K.

(1) Performance income is any income chargeable to income tax (however that charge arises) that results, directly or indirectly, from the performance of a relevant activity by a performer (whether performed in the United Kingdom or not).

(2) “Performer” means any individual who gives performances of entertainment or sport.

(3) For the purposes of this section “performances of entertainment or sport” includes any activity of a physical kind performed by an individual (alone or with others) which is or may be made available to the public or any section of the public, whether for payment or not.

(4) The following are “relevant activities”—

(a) the giving of a performance of entertainment or sport;

(b) the participation of the performer in any sound or video recording;

(c) any activity in connection with a commercial occasion or event (including the appearance of the performer in connection with the occasion or event).

(5) The reference to a commercial occasion or event includes any description of occasion or event—

(a) for which any person might receive or become entitled, as a result of anything done by the performer, to receive anything by way of cash or any other form of property; or

(b) which is designed to promote commercial sales or activity by advertising, the endorsement of goods or services, sponsorship, or other promotional means of any kind.]