How Does HMRC Know About Your Overseas Income? Nudge Letters, CRS and the 2025 Rule Change
If you are UK tax resident and hold a bank account, property or investments in China, Hong Kong, Singapore or elsewhere, HMRC may already hold information about those accounts. It arrives through the Common Reporting Standard (CRS), an automatic exchange of financial account information that more than 100 countries have committed to. That is why some people receive an HMRC nudge letter mentioning overseas income, offshore income or foreign assets — and why the letter itself is not an accusation.
Key Takeaways
A nudge letter is not a tax investigation. It is a prompt to check your own position, not a finding that you owe anything.
An overseas account does not mean the information stays overseas. Under CRS, local banks identify tax residence and the data is passed on through automatic exchange.
Having money abroad is not the same as owing UK tax on it. £100,000 sitting in an overseas account is not £100,000 of taxable income. What matters is what the asset produced.
The rules changed on 6 April 2025. The remittance basis was abolished and replaced by the Foreign Income and Gains (FIG) regime, based on tax residence rather than domicile.
Needing to report is not the same as paying twice. Foreign Tax Credit Relief and double taxation agreements may offset tax already paid abroad.
Do not reply in a hurry, and do not ignore it. Check the position first, then decide how to respond.
1. Receiving a Nudge Letter Is Not the Same as Being Investigated
This is the point most often misunderstood. A nudge letter is not a formal tax investigation notice in a fixed format. "Nudge" means exactly what it sounds like: HMRC uses information it already holds to identify potential tax risk, then writes to prompt you to review your own tax position.
So, to be clear:
Receiving a nudge letter does not mean HMRC has concluded you evaded tax
Receiving a nudge letter does not mean a formal investigation has begun
Holding an overseas account does not mean tax is owed
The question worth asking is a different one: why does HMRC think your records may need rechecking? Where the letter specifically mentions overseas income, offshore income or foreign assets, your past returns deserve a careful review.
2. You Live in the UK, Your Money Is Abroad — So How Does HMRC Know?
Many people hold a traditional assumption: if the money is in China, Hong Kong, Singapore or anywhere else, and it never entered a UK bank, HMRC cannot see it.
That assumption is increasingly inaccurate, and the main reason is the Common Reporting Standard. CRS is an OECD-developed framework for the automatic exchange of financial account information for tax purposes. HMRC's own Worldwide Disclosure Facility guidance notes that more than 100 countries have committed to multilateral exchange under CRS.
In simple terms: if you are UK tax resident and also hold a reportable financial account in another participating country, the local financial institution identifies the account holder's tax residence under local CRS rules. That account information may then be reported to the local tax authority and passed to the relevant tax jurisdiction through automatic exchange.
So an account being overseas does not mean the information stays overseas.
HMRC has also said it uses CRS and similar data to encourage offshore tax compliance, and to remind taxpayers to complete the Foreign pages of their Self Assessment return correctly. This is why the reaction to such a letter is so often the same question: "How does HMRC even know?"
3. Money in an Overseas Account Does Not Automatically Mean UK Tax
This is the single most important distinction in the whole subject. Holding an overseas bank account, overseas property or other foreign assets does not mean the full value of those assets is UK taxable income.
For example, having £100,000 in an overseas bank account does not mean the UK will charge Income Tax on that £100,000.
What actually needs analysing is the nature of the money:
Savings accumulated in earlier years?
Salary or employment income?
Bank interest?
Rental income?
Dividends from shares?
A capital gain on selling an asset?
A distribution from a company?
These are entirely different tax questions. HMRC's guidance on offshore non-compliance describes an "offshore matter" as covering income arising outside the UK, assets situated outside the UK, and activities carried on wholly or mainly outside the UK.
So the real question is usually not "how much do I have overseas?" but "have those overseas assets produced income or gains that need to be dealt with in the UK?"
4. The Foreign Income Most Often Overlooked
Many people hear "foreign income" and immediately think: "But I don't run a business overseas." In practice, foreign income is far more common than that.
Overseas bank interest
Interest generated by deposits in accounts in China, Hong Kong, Singapore or elsewhere. Principal and interest are two different things: the capital sitting in the account is not income, but the interest it earns each year may need UK tax treatment.
Overseas rental income
You live in the UK but still rent out a property back home. Whether that rent involves UK tax depends on your UK tax residence status for the year in question and the specific rules that apply.
Overseas dividends
Holding shares in US, Hong Kong or other overseas companies and receiving dividends can equally form part of your foreign income.
Gains on selling overseas assets
Selling overseas shares, funds or property can produce a capital gain. Note carefully: the sale price is not the same as the profit. A capital gain is normally calculated by reference to acquisition cost and other factors.
Overseas pensions and other income
Some overseas pensions, trust-related income and other foreign income may also need UK tax treatment. For anyone living in the UK long term while still holding property, bank accounts or investments back home, this is worth revisiting.
5. A Key Change: The Rules Are Different After 6 April 2025
If you have previously heard the phrase "foreign income is only taxed in the UK if you remit it here," that shorthand can no longer simply be applied.
From 6 April 2025, the UK's remittance basis was abolished and replaced by the Foreign Income and Gains (FIG) regime.
HMRC's helpsheet HS266 sets this out. From 6 April 2025, the regime no longer uses domicile as its central connecting factor and is based on tax residence instead. UK tax residents are in principle taxed on their worldwide income and gains on the arising basis.
Alongside that, the new regime offers qualifying new residents relief on foreign income and gains arising in their first 4 years of UK residence. Two conditions matter in particular:
You must be a qualifying new resident — broadly, in one of your first 4 years of UK residence following a period of at least 10 consecutive tax years of non-UK residence.
Relief is not automatic. You must make a claim for each tax year and for the foreign income or gains you are claiming on.
So deciding whether foreign income is taxable in the UK is no longer just a question of "did I bring the money in?" It also depends on:
Are you UK tax resident?
Which tax year does it fall in?
What type of foreign income or gain is it?
Do you qualify under the FIG regime?
Has tax already been paid overseas?
Can you claim Double Taxation Relief or Foreign Tax Credit Relief?
One time-limited point worth knowing: the Temporary Repatriation Facility
If you previously used the remittance basis, there is a transitional measure that is easy to miss. The Temporary Repatriation Facility (TRF) is available for three tax years from 6 April 2025 and lets former remittance basis users designate pre-6 April 2025 foreign income and gains for tax at a reduced flat rate, after which the funds can be brought to the UK without a further charge.
2025 to 2026: 12%
2026 to 2027: 12%
2027 to 2028: 15%
You must be UK resident in the tax year of designation and have previously used the remittance basis. This window closes after 2027 to 2028, so anyone with pre-April 2025 foreign income and gains should look at it sooner rather than later.
6. I Already Paid Tax Overseas — Do I Pay Again in the UK?
This is another common worry. If tax was already paid on rental income back home, why should the UK be involved at all?
Two ideas need separating here: needing to report is not the same as paying tax twice.
The UK has double taxation arrangements with many countries and territories. Where the conditions are met, tax already paid overseas may be relieved through mechanisms such as Foreign Tax Credit Relief.
How much can be relieved, and whether any UK tax remains payable, depends on the type of income, the foreign tax paid, and the applicable treaty. So do not jump from "I already paid tax at home" to "there is nothing to do in the UK." Those are not the same statement.
7. If You Receive an HMRC Nudge Letter, Do Not Rush to Reply
If you receive an HMRC letter about overseas income, overseas accounts or foreign assets, do not assume tax is due — and do not ignore it either. The account balance HMRC holds is not the same as your taxable income.
The position needs to be assessed against:
Which tax year is involved
Whether you were UK tax resident in that year
Whether the overseas funds are capital, interest, rent, dividends or investment gains
Whether the income was already declared or taxed overseas
Whether the FIG regime or Foreign Tax Credit Relief applies
If you are not sure what HMRC is actually focused on, it is worth having a professional review the position before you reply.
8. What If You Find Something Was Missed?
If a review shows foreign income or gains may have been under-reported in the past, it is generally not advisable to simply file a correction yourself or reply to HMRC off the cuff.
Different tax years can be subject to different rules, and the following all need weighing together:
The amount of foreign income and gains involved
Your UK tax residence status
Tax already paid overseas
Interest and any potential penalties
Whether disclosure should be made through the Worldwide Disclosure Facility
Getting the route right matters, because a voluntary and correctly structured disclosure is normally treated more favourably than an error HMRC identifies itself.
Frequently Asked Questions
Does an HMRC nudge letter mean I am being investigated?
No. A nudge letter is a prompt, not a formal investigation notice. HMRC uses data it already holds to flag potential risk and invites you to check your own position. It does not mean HMRC has concluded that tax is owed.
How does HMRC know about my bank account in China or Hong Kong?
Most commonly through the Common Reporting Standard. Under CRS, local financial institutions identify account holders' tax residence and report the account information to their own tax authority, which can then be exchanged automatically with HMRC. More than 100 countries have committed to this exchange.
I have £100,000 in an overseas account. Do I owe UK tax on it?
Not on the balance itself. Holding £100,000 overseas is not £100,000 of UK taxable income. What matters is whether that asset produced income or gains — interest, rent, dividends or a capital gain — and whether you were UK tax resident in the relevant year.
I already paid tax overseas. Do I have to pay again in the UK?
Not necessarily. Needing to report is not the same as paying twice. The UK has double taxation arrangements with many countries, and Foreign Tax Credit Relief may offset tax already paid abroad. How much relief applies depends on the income type, the foreign tax paid and the relevant treaty.
What changed for foreign income on 6 April 2025?
The remittance basis was abolished and replaced by the Foreign Income and Gains (FIG) regime, set out in HMRC helpsheet HS266. The regime is based on tax residence rather than domicile. Qualifying new residents — broadly those in their first 4 years of UK residence after at least 10 consecutive tax years of non-UK residence — can claim relief, but it must be claimed and is not automatic.
What should I do if I think I under-declared foreign income?
Do not file an ad hoc correction or reply to HMRC without checking the position first. The right route depends on the amounts, your residence status, tax already paid overseas, and whether the Worldwide Disclosure Facility is appropriate. Take advice before you respond.
A Word from TB Accountants
Many people have long assumed that if money never entered the UK, HMRC would not know about it. With CRS information exchange and HMRC's growing use of data analysis, that understanding needs updating.
If you hold overseas bank accounts, property, shares, company dividends or other income, the questions that matter are these: have those assets produced income or gains; were you UK tax resident in the relevant year; and were your Self Assessment returns completed correctly?
Check first, then assess, then act.
How TB Accountants Can Help
At TB Accountants, we support UK companies, international businesses, and overseas entrepreneurs with professional accounting and tax compliance services.
Our experienced team can assist with:
Reviewing HMRC nudge letters about overseas income
UK tax residence and Statutory Residence Test analysis
Foreign income and gains reporting on Self Assessment
FIG regime claims and the Temporary Repatriation Facility
Double Taxation Relief and Foreign Tax Credit Relief
Worldwide Disclosure Facility disclosures
With extensive experience supporting international clients and overseas entrepreneurs in the UK, we help you establish the facts before responding to HMRC.
Why TB Accountants?
Professional Assurance: Our team includes ACA members and ACCA-certified professionals, delivering services to the highest industry standards.
Responsive Service: We respond to your inquiries within 24 hours, ensuring efficient communication across time zones.
Multilingual Support: Services available in English, Mandarin, Cantonese, Japanese, French, German, Spanish, Italian, Turkish, and more.
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Contact
Received an HMRC letter about overseas income and unsure how to respond? Get in touch with TB Accountants. We can review the letter alongside your residence status, the source of the overseas income and your filing history, and help you decide on the right course of action.
Get in touch with us at info@tbagroup.uk or for a free one-to-one consultation.
Email: info@tbagroup.uk
WhatsApp: +44 7776 908114
Tel: +44 208 349 3939
This article is intended as general guidance only, and does not replace any legal or professional advice. For enquiries, please contact TBA Group via email or WhatsApp.
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