If you have income or assets held abroad that have not been declared to HM Revenue & Customs (HMRC), you may face tax liabilities in the UK.

The Worldwide Disclosure Facility (WDF) is designed to help individuals, companies, and trusts correct past errors and bring their tax affairs in line, particularly when foreign income or gains have gone unreported.

When overseas income must be declared in the UK

UK tax residents are required to declare all global income and gains, regardless of where the assets are held. This includes:

• Interest on non-UK bank accounts
• Dividends from foreign investments
• Rental income from overseas property
• Profits from selling foreign property or shares
• Income earned while working abroad, if still UK tax-resident

Unintentional mistakes are common. Complex foreign tax systems, incorrect assumptions about exemptions, or misunderstandings about residency rules can all lead to non-compliance.

From April 2025 onwards, all UK tax residents are subject to tax on their worldwide income and gains, regardless of their domicile.

How HMRC uncovers offshore non-compliance

Under international data-sharing agreements such as the Common Reporting Standard (CRS), HMRC receives automatic information from over 100 countries.

This includes details of bank accounts, investments, and property held by UK taxpayers overseas.

If HMRC suspects irregularities, it may send a so-called ‘nudge’ letter to prompt disclosure.

Once this happens, the opportunity to benefit from reduced penalties narrows.

To minimise risk and limit penalties, it is strongly advised to act before receiving such communication.

Using the Worldwide Disclosure Facility

The WDF offers a formal route for voluntary disclosure of offshore income or gains. The process involves two main steps:

1. Notify HMRC of your intention to disclose using the Digital Disclosure Service.
2. Submit a full disclosure within 90 days, which must include:
   • A breakdown of undeclared income or gains
   • Calculations of tax owed
   • Applicable interest
   • A personal statement outlining the background to the non-compliance
   • A declaration that the information is complete and accurate

You must also disclose the nature of the behaviour that led to the error (e.g. careless or deliberate), which will influence the level of penalty applied.

What penalties can you expect?

HMRC determines penalties based on the nature of the non-compliance:

• Careless errors typically attract lower penalties
• Deliberate or concealed actions can result in much higher charges

In serious cases, penalties can be as much as 200 per cent of the tax owed. Acting promptly and voluntarily usually results in a more favourable outcome.

Think you may need to make a disclosure?

The longer an issue is left unresolved, the greater the potential cost.

Taking advice from our specialists can help you with the disclosure process confidently and reduce the risk of harsh penalties. Contact us today for guidance.