Foreign Income Reporting 2026/27 — SA106 & Tax Credits

If you are UK resident, you are taxed on your worldwide income — money from a foreign job, a foreign pension, overseas investments or rental property all counts. The 2026/27 Self Assessment return is where it all gets reported, and the golden rule is that tax paid abroad never removes the duty to tell HMRC about the income. You declare the gross amount and claim a Foreign Tax Credit (FTC) to stop the same pound being taxed twice. Check your overall position with the Salary Calculator→ and read the Working Abroad and Double Taxation guide if you split your time between countries.

The remittance basis rules were overhauled from April 2025. Qualifying new UK residents can now claim the four-year foreign income and gains (FIG) regime, while other UK residents are generally taxed on worldwide income as it arises. Getting the residence status and the right SA pages right is the difference between a clean filing and an HMRC enquiry, so this guide walks through what to report, how to convert currency, and how to claim relief.

Which Foreign Income Must You Report

The core return is the SA100, and most foreign income goes on the SA106 supplementary pages. If you were non-resident for part of the year you may also complete SA109, and SA108 covers capital gains. HMRC receives information through international exchange arrangements, so unreported foreign accounts can be identified. Penalties depend on the type of failure, behaviour, tax at stake and disclosure; do not assume a single percentage applies to every omission.

Start with the source, not the bank account

Classify the payment before choosing a box. A foreign bank account is only the place where money is held; it does not decide whether the receipt is employment income, trading profit, rent, interest, a dividend, a pension or a capital gain. For example, rent from an overseas flat is property income even if the letting agent pays it into a current account, while interest credited by that account is savings income. A distribution from a company is normally a dividend, but a payment described as a return of capital may need a different analysis. Keep the contract, payslip, dividend voucher, pension statement or property statement that explains the character of each amount.

The amount to report is normally the gross amount before foreign withholding tax. Do not subtract bank charges, local tax or an agent's fee from the wrong category. Allowable expenses are considered under the UK rules for that category, and some treaty or foreign-law deductions do not automatically become UK deductions. A foreign employer's payroll calculation is evidence of what was withheld, not proof that the same amount is an allowable UK expense or a creditable tax.

There are also boundary cases. A foreign account used by a UK trade may belong in the trade records rather than as a separate item of personal interest. A pension can be taxed under a treaty article that assigns taxing rights to the residence country or, for certain public-service pensions and older treaties, to the source country. Foreign gains are not reported on SA106 simply because the asset was held abroad: the gain analysis, residence position, UK temporary non-residence rules and treaty provisions need to be considered on the capital-gains pages. When facts are mixed, document the conclusion instead of forcing a payment into the first familiar box.

When a return may still be needed even if no extra tax is due

An allowance, exemption or foreign tax credit can reduce the final UK bill to nil without making the underlying facts irrelevant. A FIG claim, for example, is made by declaring eligible foreign income or gains and claiming relief on the relevant supplementary pages; it is not a reason to omit the source. Likewise, interest within the Personal Savings Allowance or dividends within the dividend allowance should be tested against the current Self Assessment reporting rules and HMRC's return prompts. If HMRC has issued a notice to file, follow it or ask HMRC to withdraw it when the facts support that request.

The Remittance Basis and the New FIG Regime

From 6 April 2025 the old remittance basis for non-domiciled individuals was replaced. Under the new rules:

• New arrivals: if you have not been UK resident in any of the previous 10 tax years, you can elect for the FIG regime — foreign income and gains arising in your first four years of residence are exempt from UK tax.
• Long-term residents: after four years, or if you do not elect for FIG, you are taxed on worldwide income and gains as they arise, no matter where they sit.
• Transitional rules: historic remittance-basis income and the temporary repatriation facility have their own rules. They do not turn the old remittance basis into a general 2026/27 exemption, so check the relevant HMRC guidance if you have pre-6 April 2025 foreign income or gains.

The election is made on the tax return and must be claimed deliberately — it is never automatic. If you previously relied on the remittance basis, the FIG regime may leave you better or worse off depending on when you arrived in the UK, so it is worth modelling both ways before 31 January 2028.

The FIG election is source-specific in practical terms. HMRC's 2026 HS266 says that qualifying foreign income can include an overseas trade carried on wholly outside the UK, an overseas property business, dividends from non-UK companies, foreign interest and certain foreign pensions. You must claim relief for the amounts you want relieved and report them on the relevant pages. The relief is not a blanket exemption for every payment labelled foreign, and UK income remains taxable under the ordinary rules. The claim can also affect allowances and reliefs, so compare the result with the no-claim position rather than comparing only the headline foreign tax.

For a new arrival, make a residence timeline covering the previous 10 tax years, the date UK residence began, the date each receipt arose and whether the source is genuinely foreign under the FIG rules. Keep the evidence used for that timeline. A person who was UK resident in one of the previous 10 tax years may fail the new-resident condition, and a person who qualifies can still have excluded or disqualified categories. Historic remittance-basis income arising before 6 April 2025 should be kept separate from post-6 April 2025 FIG amounts. Transitional repatriation arrangements are a separate policy, not an automatic way to convert old untaxed funds into a current-year FIG claim.

Foreign Employment and Remote Work

If you work abroad for a UK employer, or remotely from abroad for a foreign employer, the UK and foreign treatment depends on residence, where duties are performed, the employment rules and the applicable treaty. Do not assume that the employer’s country decides the answer or that every foreign deduction is creditable. If you worked partly in the UK and partly abroad, keep a workday and travel record and obtain advice on the relevant treaty and payroll obligations.

Foreign Tax Credit — How the Relief Works

FTC is claimed on the SA106 pages and is calculated income by income, as the lower of the foreign tax actually paid and the UK tax attributable to that income. You never get a cash refund of excess foreign tax; you simply stop paying UK tax twice.

Example: Priya receives €5,000 of dividends from a German company, with €750 of German withholding tax. Using an illustrative conversion of €1.16 to the pound, the gross dividend is about £4,310. Her £500 dividend allowance covers the first £500. As a higher-rate taxpayer in 2026/27 she owes 35.75% on the remaining £3,810, which is roughly £1,362. The German tax of about £647 is fully creditable because it is lower than the UK tax in this simplified example, leaving about £715 due to HMRC. The actual credit depends on the treaty, the UK tax attributable to the income and the evidence available.

Interest from foreign banks is taxed as savings income, so the £1,000 Personal Savings Allowance for basic-rate taxpayers (or £500 for higher-rate) applies before any tax is due.

Exchange Rates and Record Keeping

HMRC does not mandate a single conversion method, but you must be consistent. The easiest and most defensible approach is an applicable HMRC annual average exchange rate once published; alternatively use the spot rate on the day each item of income was received, or a monthly average. Keep a note of the method used and the rates applied. Do not hardcode a forecast 2026/27 exchange rate into a tax return. You also need foreign tax certificates or vouchers to support any FTC claim — without evidence, HMRC can disallow the credit.

Build the working paper in sterling, but retain the original currency beside every line. For each receipt record the date received, currency, gross amount, sterling conversion, exchange-rate source, foreign tax withheld, date that foreign tax became payable or was paid, and the UK return page used. For an overseas property business, add a schedule of rent, periods let, finance costs and expenses; for a portfolio, reconcile the dividend and interest schedule to the year-end statements; for employment, reconcile payslips to the annual certificate. This makes it easier to identify a duplicate entry when a bank statement and a tax certificate cover the same payment.

Foreign Tax Credit is not a simple refund of the foreign deduction. First establish whether the foreign amount is a tax covered by the relevant treaty and whether it was paid by the taxpayer or withheld on the taxpayer's behalf. Then cap the credit at the UK tax attributable to that foreign income. If the foreign tax is higher, the excess is not normally converted into a UK repayment through the SA106 claim. A treaty can limit the source country's tax or prescribe a different relief mechanism, so an incorrect foreign withholding rate may need to be reclaimed from the source country rather than claimed in full from HMRC. Retain correspondence and certificates until the UK's record-retention period has expired.

Common Filing Mistakes

• Reporting net instead of gross — always declare the gross foreign income and claim the foreign tax separately.
• Forgetting foreign bank interest — interest below the savings allowance still must be declared.
• Using different exchange rates for the same income — inconsistency invites questions.
• Ignoring the NRL scheme — non-resident landlords need separate approval for UK rental income.
• Missing the 5 October registration deadline — you must register for Self Assessment by 5 October following the end of the tax year.

Action Plan for the 2026/27 Return

A practical reconciliation before submission

Before pressing submit, reconcile four totals rather than checking only the final tax calculation. First, reconcile every foreign account and broker statement to receipts, transfers and closing balances; transfers between your own accounts are not new income, but they can hide a receipt if the source is not traced. Second, reconcile gross income to the foreign tax certificate, because the amount withheld may relate to a different payment date or include tax on a prior period. Third, reconcile sterling totals to the exchange-rate schedule and check that the same rate convention was not used for income in one section and foreign tax in another without an explanation. Fourth, reconcile the SA106 claim to the treaty and to the UK tax attributable to each source.

If you are claiming FIG relief, add a fifth check: each relieved amount should appear on the appropriate supplementary page and the FIG claim should not silently remove allowances or reliefs that you used elsewhere in your estimate. If you are using a treaty position, retain the treaty article and a short fact note explaining residence, source and work location. That note is more useful than a generic statement that the income was taxed overseas.

If a return has already been filed and you discover an omitted account or wrong credit, do not overwrite the working papers. Save the original return, identify the error, calculate the corrected UK liability and use HMRC's amendment or disclosure route that applies to the year and failure. The correction route and penalty position depend on whether the return can still be amended and on the taxpayer's behaviour; professional advice is appropriate where the error is deliberate, repeated or involves historic remittances.

Frequently Asked Questions

Model your UK tax position with the Salary Calculator→, then read the Working Abroad and Double Taxation guide for treaty relief and the Non-Dom Tax Status guide if the new FIG regime affects you.

Official sources

• HMRC: Foreign income and gains (FIG) regime — HS266 (2026)
• GOV.UK: Check if you can claim the 4-year foreign income and gains regime
• HMRC: Relief for foreign tax paid — HS263 (2026)
• HMRC: Self Assessment — Foreign (SA106)
• GOV.UK: Income Tax rates and allowances — 2026 to 2027
• GOV.UK: Self Assessment tax returns — deadlines