Originally posted on: 19 January 2025
Updated on: 2 February 2026
Introduction
Back in 1999, when Helen and I left New Zealand to travel overseas, we cleared out all of our NZ savings accounts and took every available penny with us on our travels. These days, more and more Kiwis and Australians leaving for the UK are choosing to leave a term deposit behind, or maintain investments they’ve purchased using online share trading platforms, or they might have a pension fund, or a rental property.
So for many New Zealanders and Australians living in the UK, it’s now common to keep financial ties to their home country.
Under the current UK rules, if total foreign income for a non-dom remains under £2,000 and is never remitted to the UK, it doesn’t need to be reported there. This rule simplifies tax compliance, allowing most Kiwis and Aussies to handle home-country taxes while largely ignoring these relatively small sums for UK tax purposes.
I took a call last week from a Kiwi who had been living in the UK for the last five years. He was concerned about the reporting requirements for his term deposit account in New Zealand, which was earning interest of around NZD$3,000 per year.
With Self-Assessment tax returns for the 2023/24 tax year due in just a couple of weeks, he was worried about falling foul of the reporting rules and incurring late filing penalties from HMRC.
In his case, he is a non-dom living in the UK and had never remitted any of that interest income to the UK; it remained in his New Zealand bank account. This was fortunate because, under the existing rules, he does not need to declare that income on a UK tax return.
The current rules provide an income exemption for foreign income of less than GBP£2,000, where the individual is a non-dom in the UK and where those funds are not remitted to the UK.
It’s a practical way of avoiding unnecessary complexity in the tax system, with the UK effectively ignoring up to £2,000 of foreign income to keep things simple. In this case, the interest income is taxed in New Zealand, where the term deposit provider deducts tax at source and pays it to the IRD. This ensures the income is not untaxed, and it seems like a fair arrangement.
From April 2025 onwards, however, this all changes. Tax rules based on an individual’s domicile will be eliminated, replaced by a new foreign income and gains regime. For many Kiwis and Australians living in the UK its going to be a monumental pain in the a$$.
What’s Changing? A Snapshot of the New Rules
The UK government is introducing a significant shake-up to the way foreign income is taxed, and it’s going to affect thousands of people, especially those like Kiwis and Aussies with ties to their home countries.
The key change? From April 2025, the £2,000 foreign income exemption is being scrapped altogether, meaning even modest amounts of income earned overseas will need to be reported on a UK tax return.
Under the current system, if you’re a non-dom and your foreign income stays under the £2,000 threshold, you can skip the hassle of including it in your UK tax filings. It’s a straightforward and fair system, particularly for those with a term deposit or small investments back home. But with the abolition of this allowance, the simplicity disappears.
Instead, a new Foreign Income and Gains (FIG) regime will take its place. So, what does that mean? Essentially, any income or capital gains you generate abroad—whether from interest, dividends, rental income, or the sale of overseas assets—will now be fully reportable in the UK.
This is regardless of whether the money stays overseas or is brought into the UK.
Here’s what you need to know about the FIG regime:
- Full Reporting: All foreign income and gains must be declared on your UK Self-Assessment tax return. The £2,000 threshold will no longer apply.
- No Exceptions for Non-Doms: Your domicile status will no longer provide an escape from declaring overseas income.
- Double Tax Relief: You will still be able to claim relief for taxes paid abroad, but you’ll need to work through the double taxation rules to avoid being taxed twice.
The new rules officially take effect from 6 April 2025, impacting all foreign income earned during the 2025/26 tax yearand beyond. This means the first time these changes will appear in your Self-Assessment tax return will be for the tax year ending 05 April 2026, giving you a bit of time to get prepared, but not much.
For Kiwis and Aussies living in the UK, this represents a complete overhaul of how your cross-border finances are handled. It’s no longer just a case of “set and forget” with investments back home, you’ll now have to track, report, and potentially pay UK tax on all foreign income.
And for those with small, straightforward arrangements, it’s likely to feel like a lot of extra hassle for very little gain.
Note that, if you qualify, you will be exempt from reporting your foreign income for the first four years of living in the UK. However, if you choose this route, the downside is that you lose your annual personal allowance and your annual capital gains allowance.
For most Kiwis and Australians, this puts you in a worse position than if you were to declare your foreign income, so for most people its not a great option. Our illustrations later in this article will show you how this works.
Why Does This Matter to Kiwis and Aussies?
For many Kiwis and Aussies living in the UK, staying connected to home isn’t just an emotional thing, it’s often financial too. Whether it’s a term deposit left ticking away in New Zealand, shares in an ASX-listed company, or a modest rental property, these investments are typically low-maintenance and designed to provide a bit of financial security while you’re overseas.
Under the current rules, if the total income from these sources is under £2,000 and never remitted to the UK, there’s no requirement to include it on your UK tax return.
But from April 2025, the removal of the £2,000 foreign income exemption means these small, incidental earnings will be swept into the UK tax net. That’s where the problems start.
Why Kiwis and Aussies Are Disproportionately Affected
Most Kiwis and Aussies don’t have complicated offshore tax arrangements. They’re not raking in millions from overseas investments or setting up intricate structures to shield their wealth.
Instead, they’re dealing with relatively modest sums, like a term deposit earning a few hundred pounds in annual interest or a rental property bringing in small profits after expenses.
The upcoming changes will treat these individuals the same as wealthy non-doms with sprawling portfolios. Here’s where it gets to be a pain:
- Double Taxation Relief: Income from term deposits or rental properties is often taxed in New Zealand or Australia at source, meaning you’ve already paid tax on it before you see a penny. While the UK allows relief for taxes paid overseas, the process for claiming this can be complex and time-consuming – most people will engage an accountant like us at No Worries Accounting.
- Exchange Rate Woes: Income needs to be reported in GBP for UK tax purposes, requiring tracking of exchange rates. A term deposit in NZD that generates a steady return can result in different GBP values each year, adding an unnecessary layer of complication. Its not a major issue, but still, just another level of complication.
- Tax Year Mismatches: The UK tax year runs from 06 April to 05 April, while Australia uses a different tax period (e.g., July to June). This mismatch can create headaches when aligning income figures and ensuring compliance. New Zealand runs a tax year from 01 April to 31 March, which is close enough to the UK tax year.
A Disproportionate Burden
For Kiwis and Aussies, the changes effectively impose a disproportionate administrative and financial burden. What was once a straightforward arrangement—set up back home and left to run itself—now becomes a source of stress, paperwork, and potentially additional costs.
Many will need professional advice to navigate the new reporting requirements, which adds to the hassle 9and cost) of what’s often a relatively small income stream.
These changes don’t target the people they were likely designed for (high-wealth individuals with elaborate offshore setups). Instead, they catch everyday Kiwis and Aussies in the net—those who just want to hold onto a piece of home while living in the UK. It’s a monumental adjustment for what’s often a minor sum of money.
“…the service has been fabulous.”
Ah Mike, we think you’re pretty fabulous too!
Examples of How the Changes Could Impact You
So, let’s take a look at a couple of relatable examples. In all the situations presented below, the individual does not currently have a requirement to report their foreign income on a UK tax return.
Case Study One
Here we have a Kiwi who is living and working in the UK, earning £65,000 per year through a PAYE job. Equally, this could be earnings from a mixture of salary and dividends received through their limited company if they are contracting, or sole trader income.
Let’s say they also have some investments in New Zealand companies where dividends are typically paid out at around NZ$2,500 per year, which is approximately £1,150 annually.
Under the current rules, the individual does not need to report this foreign income on their UK tax return. However, under the new rules from April 2025 onwards, they will.
Assuming they have no other income in New Zealand, they will pay 10.5% tax on those dividends in New Zealand, and they will be taxed in the UK at 33.75%. The tax already paid in New Zealand will be offset against the UK tax bill. However, the change here requires:
a) the individual to file a UK tax return, and
b) the individual to pay additional tax in the UK on their NZ dividend income
Case Study Two
Here we have an Australian earning £85,000 per year in the UK, and they have a term deposit account back in Australia that generates AUD$3,000 a year in interest income. As a non-resident the Australian financial institution withholds 10% tax and pays that across to the ATO.
It’s the same situation as above, where this income must now be reported on a personal tax return in the UK and will be taxed in the UK at a rate of 40%.
Case Study Three
It’s not all doom and gloom, though. Let’s take a look at a good news story. Here we have a Kiwi who recently arrived in the UK and is earning £130,000 per year. At this level of income, due to the way the UK tax system works, they have no personal allowance anyway (the personal allowance slowly decreases once earnings exceed £100,000, and eventually drops to £0 once earnings exceeds £125,140).
So, this individual can ignore reporting any of their foreign income for the first four years of tax residency in the UK 9so long as they qualify for the FIG regime) because losing their UK personal allowance has no impact – they don’t have one anyway. They can remit that income to the UK, or they can leave it in New Zealand, it makes no difference, and it makes the taxation of their foreign income very simple.
What Can You Do to Prepare?
With the abolition of the £2,000 foreign income allowance just around the corner, it’s essential to take a proactive approach to managing your finances. For Kiwis and Aussies living in the UK, preparing now can save a lot of stress and last-minute scrambling when the new rules come into effect. Here are some practical steps to help you get ahead:
Assess Your Foreign Income Sources and Amounts
Start by getting a clear picture of your overseas income. This includes:
- Interest earned on term deposits or savings accounts.
- Dividends from shares or managed funds.
- Rental income from properties back home.
- Any other earnings, like royalties or capital gains.
Determine whether your total foreign income exceeds the £2,000 threshold under the current rules and understand how much of it might be taxable under the new FIG regime. Having this information at your fingertips will make it much easier to plan your next steps.
Consider Restructuring Investments
Depending on your financial situation, it may be worth reviewing your investments to see if restructuring could reduce the administrative burden of the new rules. Some options include:
Consolidating small investments that generate minor income streams into more tax-efficient alternatives.
Exploring whether selling or reinvesting in UK-based assets might simplify your reporting requirements.
This isn’t a one-size-fits-all decision, so it’s important to weigh the costs and benefits carefully, ideally with the help of a tax professional.
Start Tracking Income in GBP
The UK tax system requires all foreign income to be reported in pounds sterling, which means exchange rates come into play. Begin tracking your overseas earnings in GBP now by:
- Using the exchange rate from the day the income was earned or a monthly average rate (HMRC accepts both).
- Keeping records of the original income amounts and the corresponding GBP values.
- Ensuring your bank or investment platform can provide clear statements for auditing purposes.
Getting into the habit of tracking income in GBP now will make the transition smoother once the FIG regime kicks in.
The key to navigating these changes is preparation. By understanding your foreign income, considering potential restructuring, and starting to align with UK reporting standards now, you’ll be well ahead of the curve.
While the new rules may be an inconvenience, taking the time to plan now will save you from unnecessary headaches—and potentially costly mistakes—down the line.
If you’re unsure where to start, professional advice can make all the difference. At No Worries Accounting, we specialise in helping Kiwis and Aussies living in the UK manage cross-border tax complexities, and we’re here to help.
A Silver Lining: Strategic Opportunities
While the upcoming changes to foreign income rules may feel like an administrative nightmare, they could also present an opportunity to reassess your financial strategy.
For Kiwis and Aussies living in the UK, the shift could encourage a move toward tax-efficient investments and streamlined financial arrangements. Here are some potential ways to turn the changes to your advantage:
Use UK Tax-Efficient Investments
The UK offers several tax-efficient investment options that can help reduce your overall tax liability:
- Pensions: Contributing to a UK pension scheme can provide significant tax relief while helping you save for the future. In some cases, this can offset any UK tax payable on your foreign income. The tax saving options for pensions in the UK for example are far superior to anything available in New Zealand.
- Enterprise Investment Schemes (EIS) and Venture Capital Trusts (VCTs): These schemes offer attractive tax benefits, including income tax relief and exemptions from capital gains tax, for those willing to invest in qualifying businesses.
Restructure Your Portfolio to Simplify Reporting
For those with multiple income streams from overseas, now might be the time to consolidate and streamline:
- Sell Low-Yield Investments: If certain assets are generating only small amounts of income but causing significant administrative hassle, consider selling or restructuring them.
- Focus on Fewer, Higher-Performing Assets: Reducing the number of income sources can simplify reporting and make it easier to track your obligations under the new rules.
- Restructuring doesn’t just help with compliance—it could also improve the efficiency of your portfolio, saving you both time and money in the long run.
Explore UK ISAs as a Tax-Free Alternative
Individual Savings Accounts (ISAs) are one of the most popular and straightforward ways to invest tax-free in the UK:
- Stocks and Shares ISAs: Generate returns from shares, funds, or other investments without paying tax on dividends or capital gains.
- Cash ISAs: Earn interest tax-free, providing a safe and simple alternative to term deposits back home.
- Annual Allowance: You can contribute up to £20,000 per tax year, making ISAs an excellent tool for building wealth while avoiding additional tax headaches.
By redirecting funds from foreign investments to ISAs, you can maintain or even grow your savings without the need for complex cross-border reporting.
This will require cashing up any investments you have in New Zealand or Australia and bringing the funds to the UK. However, with an investment allowance of up to £20,000 per year, allowing for completely tax-free interest/dividend payments and capital gains, is a pretty good deal.
While the abolition of the £2,000 foreign income allowance may initially seem like bad news, it’s also an opportunity to take a step back and optimise your financial strategy.
Whether it’s leveraging UK tax-efficient investments, restructuring your portfolio, or maximising the benefits of ISAs, there are ways to minimise the impact and even come out ahead.
How Does It Work Back Home?
I realise now that this blog is starting to get a bit long, but I really wanted to briefly represent the flip side. That is, how is foreign income taxed in New Zealand or Australia if a British person (or any other foreign national) were to arrive for a couple of years? Let’s take a quick look.
New Zealand
If you have not lived in New Zealand for the last ten years, you do not need to report any foreign income for the first four years of living there. This is a great system, not only for temporary visitors but also for returning New Zealanders who have been away for ten years or longer. It’s simple and straightforward. Foreign earnings can be freely remitted to New Zealand for up to four years.
Australia
Australia taxes foreign income based on the visa the person holds. If you arrive in Australia on a temporary visa, you do not need to report any foreign income on an Australian tax return, and you can remit the income to Australia with no impact. Again, it’s a simple and easy-to-understand process.
For people who are new to New Zealand or Australia and plan on living and working there for a few years, the taxation of foreign income tends to be fairly straightforward. If only the UK could replicate this!
To be fair, the new UK system is very similar to the New Zealand system. The key difference is that, in the UK, you need to be earning over £125,140 per year to avoid feeling the impact of foreign income taxation.
Summary
The upcoming changes to the UK’s foreign income rules mark a significant shift for Kiwis and Aussies living in the UK. From April 2025, the £2,000 foreign income exemption will be scrapped, bringing even modest overseas earnings into the UK tax net.
For many, this will mean additional reporting requirements, more complexity in managing cross-border finances, and potentially higher tax bills.
While the new Foreign Income and Gains (FIG) regime creates challenges, it also presents opportunities to reassess your financial strategy. Whether it’s leveraging UK tax-efficient investments, restructuring portfolios to reduce administrative headaches, or taking full advantage of ISAs, there are ways to minimise the impact—and in some cases, even come out ahead.
The key is preparation. Understanding your foreign income sources, tracking them in GBP, and exploring options to simplify your financial arrangements can save you a lot of stress when the new rules take effect.
And while navigating these changes might feel like a monumental hassle, professional advice can make the process much smoother.
At No Worries Accounting, we specialise in helping Kiwis and Aussies living in the UK manage the complexities of cross-border tax. If you’re unsure where to start, get in touch—we’re here to help you stay ahead of the curve and keep your finances as stress-free as possible.
These changes may not be ideal, but with the right planning and guidance, you can tackle them head-on. And who knows? It might even be the nudge you need to optimise your finances for the future.
“…the service has been fabulous.”
Ah Mike, we think you’re pretty fabulous too!
Frequently Asked Questions
Do I have to declare income if it’s already taxed in NZ/AUS?
Yes, you do. Even if your income is taxed in New Zealand or Australia, you’ll still need to declare it on your UK Self-Assessment tax return under the new rules. However, you won’t pay tax on it twice—relief is available for taxes paid abroad through the UK’s double taxation relief system.
What happens if I earn under the personal allowance in the UK?
If your total taxable income in the UK (including any foreign income) is below the personal allowance (currently £12,570), you will not owe any UK tax on that income. However, you may still be required to complete a Self Assessment tax return if you receive foreign income that meets certain reporting thresholds or conditions.
Even if your income is below the personal allowance and no tax is due, the UK’s reporting obligations can still apply. Unfortunately, the obligation to file a return is based on whether the rules require a Self Assessment, not on whether you actually owe tax.
As a general rule, if the HMRC have asked you to file a tax return, you must do so, even if there is no tax due.
What types of foreign income do I need to report?
Under the new rules, you’ll need to report all types of foreign income that exceed the reporting threshold, including:
Interest from term deposits or savings accounts.
Dividends from shares or managed funds.
Rental income from properties.
Royalties, and capital gains.
Even if this income stays in your home country and isn’t brought into the UK, it must still be reported and potentially taxed under the FIG regime.
Do I have to track foreign income in GBP?
Yes, the UK requires all foreign income to be reported in pounds sterling. You’ll need to convert income earned in NZD, AUD, or any other currency into GBP for tax reporting purposes. HMRC allows you to use either the exchange rate on the date the income was received or an average rate for the month or year.
Keep good records of both the original amount and its GBP equivalent will help ensure your return is accurate.
Are there any exemptions for newcomers to the UK?
Yes, if you’ve recently moved to the UK, you may qualify for the four-year rule, which exempts you from reporting foreign income. However, this option usually comes with a catch—you’ll lose your personal allowance and capital gains tax allowance.
For most Kiwis and Aussies, this makes the exemption less beneficial unless their UK income is already high enough (£125,140 or more) to eliminate those allowances anyway, or if the foreign income is large enough that the increased tax bill from losing your personal allowance is still less than any additional UK tax due on the foreign earnings.
What happens if I don’t report my foreign income?
Failing to report foreign income could lead to penalties from HMRC, including fines and interest on unpaid tax. HMRC is increasingly focused on foreign income, so it’s essential to get your reporting right. Basically, you get in trouble if you don’t report it.