---
title: "How Does Cross-Border Tax Work for Workers? 2026/27 UK Rules"
description: "The taxation of internationally mobile employees underwent a generational shift starting in April 2025. With the outdated concept of domicile abolished, the UK now operates a strictly residence-based system. If you are an advisor or an employer asking, How* does cross-border…"
url: "https://www.accountingfirms.co.uk/knowledge-bank/how-does-cross-border-tax-work-for-workers/"
updated: "2026-08-11"
category: The tax basics
---

# How Does Cross-Border Tax Work for Workers? 2026/27 UK Rules

The taxation of internationally mobile employees underwent a generational shift starting in April 2025. With the outdated concept of domicile abolished, the UK now operates a strictly residence-based system. If you are an advisor or an employer asking, How* does cross-border tax work for workers?*, you must navigate the new Foreign Income and Gains (FIG) regime, updated Statutory Residence Test (SRT) metrics, and strict new PAYE notification procedures for the 2026/27 [tax year](https://www.accountingfirms.co.uk/blog/good-timing-can-save-a-lot-of-tax/).

## 1. Determining Residence: The SRT and Cross-Border Trips

The foundation of UK cross-border taxation is the Statutory Residence Test (SRT), which determines an individual's residence status based on automatic UK tests, automatic overseas tests, and sufficient ties.  Under the SRT, you are either resident or not resident for the entire tax year.

For cross-border workers, "day counting" and the "work tie" are critical.  The rules dictate exactly how you must count travel days. For the purposes of establishing a UK work tie, any day an individual makes a cross-border trip that *starts* in the UK automatically counts as a day where they worked for more than 3 hours in the UK.

> "If a cross-border trips starts outside the UK, an individual will be treated as not having worked for more than 3 hours in the UK; provided they do not make another trip on the same day which starts in the UK."

## 2. The 4-Year FIG Regime and Overseas Workday Relief (OWR)

The government removed the remittance [basis of taxation](https://www.accountingfirms.co.uk/blog/remittance-basis/) from 6 April 2025.  In its place, the UK introduced a 4-year Foreign Income and Gains (FIG) regime.  New arrivals who have been non-UK resident for 10 consecutive years can claim 100% relief on foreign income and gains for their first four years of UK residence.

For cross-border workers, this ties directly into the newly reformed Overseas Workday Relief (OWR). OWR allows qualifying workers to avoid UK tax on earnings relating to duties performed overseas. For the [2026/27 tax year](https://www.accountingfirms.co.uk/knowledge-bank/the-benefits-of-a-limited-company/), the relief is subject to a strict financial cap. The maximum relief an individual can claim is the lower of £300,000 or 30% of their total employment income.  Because the remittance basis no longer exists, workers do not need to keep their foreign earnings in an offshore bank account to benefit from OWR.

### Temporary Repatriation Facility (TRF)

For workers who accumulated untaxed foreign income under the old remittance basis rules prior to April 2025, the government provides a Temporary Repatriation Facility.  This allows individuals to bring those historic earnings into the UK at a reduced [tax rate](https://www.accountingfirms.co.uk/blog/interesting-dividends/) of 12% during the 2026/27 tax year.

## 3. Employer PAYE Notifications (Section 690D)

To streamline the administration of the new FIG regime for cross-border workers, the Finance Act 2025 introduced section 690D into the [Income Tax](https://www.accountingfirms.co.uk/blog/hmrc-payment-niers/) (Earnings and Pensions) Act 2003 (ITEPA 2003).

If an employer hires a "qualifying new resident" who works partly outside the UK, the employer no longer needs to wait for HMRC to approve an application for a direction to operate PAYE on a proportional basis.  Instead, under section 690D(2) ITEPA 2003, the employer can actively give notice to HMRC specifying the "foreign proportion" of the employee's income.  Once HMRC acknowledges this notice, the employer is legally permitted to treat that specified foreign proportion as not being PAYE income, stripping it out of the UK payroll [tax calculation](https://www.accountingfirms.co.uk/blog/capital-allowances-whats-new/).

## 4. Double Taxation Relief (DTR)

When a worker's income is exposed to tax in both the UK and another jurisdiction, Double Taxation Agreements (DTAs) prevent the income from being taxed twice. Section 2 and Section 6 of the Taxation (International and Other Provisions) Act 2010 (TIOPA 2010) give statutory effect to these arrangements in the UK.

The UK charges its residents to income tax on their worldwide income (whether or not the source is in the UK).  However, under a relevant DTA, the UK will grant relief by allowing the foreign tax paid to be credited against the UK [tax liability](https://www.accountingfirms.co.uk/blog/in-with-the-new-basis-period-rules/) on that same income.

## 5. Social Security and National Insurance (NICs)

Cross-border workers face separate rules for social security. Under domestic law, liability for Class 1 NICs arises under section 4(4)(a) of the Social Security Contributions and Benefits Act 1992.

However, international agreements take precedence over domestic law to ensure a worker is only insured in a single state at any one time.  For workers moving between the UK and the EEA, the EC Regulations (such as 883/2004) remain applicable in specific cross-border situations.  The basic principle dictates that a person pays social security in the state where they physically work.  Exceptions exist for "posted workers" (employees sent by a UK employer to work overseas for up to 24 months), who can obtain an A1/S1 certificate to remain within the UK NICs system and be exempt from host-country social security.

## Summary Table: Cross-Border Tax Rules 2026/27

| Part | Party | Provision / Event | Date / Limit | Outcome |
| --- | --- | --- | --- | --- |
| **Residence** | Taxpayer | SRT Work Tie | Per tax year | Cross-border trips starting in the UK count as >3 hours of UK work. |
| **Relief** | Qualifying New Resident | Overseas Workday Relief | 2026/27 | Relief capped at the lower of £300,000 or 30% of total employment income. |
| **Repatriation** | Taxpayer | Temporary Repatriation Facility | 2026/27 | Historic pre-2025 remitted foreign income is taxed at a 12% rate. |
| **Compliance** | Employer | s 690D ITEPA 2003 | From 2025/26 | Employers can notify HMRC to exclude the foreign proportion of earnings from PAYE. |
| **Double Tax** | Taxpayer | s 2 & 6 TIOPA 2010 | Continuous | Statutory mechanism to credit foreign tax against UK [tax liability](https://www.accountingfirms.co.uk/blog/employment-allocation-of-tips-act-2023/). |
| **NICs** | Taxpayer / Employer | SSCBA 1992 / EC Regs | Continuous | Workers are insured in the state of work, unless holding a posted worker certificate. |

*Next steps for research: Audit the payroll setups for any internationally mobile employees arriving after April 2025 to ensure the new section 690D ITEPA 2003 notifications have been formally acknowledged by HMRC, and verify that total OWR claims do not breach the £300,000/30% financial limits for the 2026/27 tax year.*