PAYE81517 | PAYE operation: international employments: qualifying new residents - PAYE notification

Section 690D ITEPA 2003

From 6 April 2025, where an employee is, or is likely to be, a qualifying new resident for a tax year ('the notifiable year') for the purposes of Chapter 5C of Part 2 ITEPA 2003 (see EIM43560), and works wholly or partly outside the UK, their employer, or a person designated by their employer, can notify HMRC under section 690D of their intention to treat a specified proportion of the employee’s income as not being PAYE income. This means that once HMRC has acknowledged receipt of a valid notification the employer will only be required to operate PAYE on part of the income paid to that employee.

From 6 April 2026, section 690D will also apply to treaty non-resident employees. Further information can be found at PAYE81518

A payment of, or on account of, the employment income of a qualifying new resident which is likely to be ‘qualifying employment income’ (see from EIM43555 for more information about qualifying employment income). The foreign proportion of a qualifying payment is the best estimate of the overall proportion of all qualifying payments in the notifiable year that is likely to be qualifying foreign employment income. If the best estimate of the overall foreign proportion of all qualifying payments is in excess of 30%, then the amount that can be notified is limited to 30%. This limit aligns with the financial limit allowed for qualifying new residents claiming Overseas Workday Relief (OWR, or foreign employment relief). More information can be found about the OWR at EIM43600. However, the restriction to 30% does not apply where the individual meets the OWR transitional provisions (see EIM43605).

Where a valid notification is made, it has effect from the date that HMRC acknowledge receipt of the notification and allows the employer to only operate PAYE on the proportion of any qualifying payment which is expected to relate to UK duties.

This proportion specified in the notification should be the proportion of the employee’s income which the employer expects to relate to duties performed outside the UK at the time the notification is made.

Example 1

Sarah has arrived in the UK for the first time on 6 April 2025 on secondment from her employment in Canada. She is a qualifying new resident for the 2025 to 2026 tax year.

Sarah will be working inside and outside the UK, and her employer expects her to spend a total of 30% of her time outside of the UK during the course of the tax year, but the exact dates of her flights are unknown. Her employer submits a notification accordingly in April 2025 and starts operating PAYE on 70% of her employment income from when the acknowledgment of the notification was received.

In December 2025, her employer informs her that she will only need to perform 10% of her duties overseas, and that she will be based in the UK for the majority of the tax year. The PAYE GME notification specifying 30% of the employment income is not likely to be PAYE is still in place and has effect. However, from December 2025 the employer now knows that PAYE should be operated on 90% of payments of earnings to the employee. The employer should submit an updated PAYE notification to reflect the new best estimate of the proportion that is a payment of PAYE income to ensure the most accurate amount of tax is paid during the tax year. Payments made in relation to the period where the first, original PAYE GME notification was in place would still validly operate PAYE in accordance with the notification.

Example 2

Christophe has arrived in the UK for the first time on 6 April 2025 on secondment from his employment in France. He is a qualifying new resident for the tax year 2026 to 2027.

Christophe works inside and outside the UK with his employer expecting him to spend 20% of his time in France, 20% of his time in Germany and 60% of his time in the UK. While 40% of Christophe's time is expected to be outside the UK, his employer can only submit a notification specifying that 30% of his income should not have PAYE operated on, due to the alignment Overseas Workday Relief financial limit.

After 3 months, Christophe's employer determines that his time would be better spend in the German office and going forward Christophe is expected to roughly split his time 20% in the UK, 20% in France and 60% in Germany. The notification under section 690D will cease to have effect as, due to a change of circumstances, the proportion specified would no longer be a reasonable estimate. However, Christophe is now expected to become non-resident in the tax year, and the employer could make a notification under section 690A which would displace the previous notification.

Where a notification is made under section 690D for a tax year, the employee will need to file a Self-Assessment tax return for that tax year. When filing their return, an employee will also need to consider the financial limits which may restrict the amount of relief that is due. More about the financial limits for OWR can be found at EIM43600.

Where a notification has been made under section 690D, HMRC can issue a direction under section 690E specifying a different proportion to that included in any notification made by the employer, which will then have effect in relation to any subsequent qualifying payment made during the tax year (see PAYE81521).