MTD and Overseas Income: What You Need to Report

Many sole traders work with international clients or earn income from abroad. MTD does not change your obligation to report worldwide income to HMRC, but it does change how you report it.

UK Tax Residency

If you are UK tax resident, you are taxed on your worldwide income. This includes:

• Income from overseas clients
• Rental income from foreign property
• Income earned while working abroad

MTD applies to your self-employment and property income regardless of where that income originates.

Overseas Self-Employment Income

If you invoice clients outside the UK, that income counts towards your MTD threshold and must be included in your quarterly updates. The currency conversion should be done at the exchange rate on the date you received the payment (for cash basis) or the date you earned the income (for accruals basis).

Your MTD software should allow you to record foreign currency transactions and convert them to sterling. Record the exchange rate used for each transaction in case HMRC queries it.

Foreign Property Income

If you rent out property outside the UK, this is treated separately from UK property income for tax purposes. Foreign property income is still subject to Income Tax and counts towards the MTD threshold.

You may be able to claim relief for foreign tax paid on the same income, to avoid being taxed twice. This is handled through the final declaration.

Practical Considerations

• Keep records in sterling — all MTD submissions are in pounds sterling
• Use consistent exchange rates — HMRC accepts the exchange rate on the date of the transaction, or HMRC's own published exchange rates
• Record the original currency and rate — for your own records and in case of queries
• Consider foreign tax credits — if you pay tax abroad on the same income, you may be able to offset it against your UK tax

Accounted supports foreign currency transactions and handles exchange rate conversions.

Accounted handles your bookkeeping, tax estimates, and MTD submissions automatically. Start your free trial — no credit card required.