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UK-based seafarers may qualify for up to 100% tax relief on earnings from working at sea. If you meet HMRC’s criteria, you could reclaim all the UK income tax paid on your seafaring employment.
The Seafarers Earnings Deduction (SED) is a UK tax rule that allows qualifying seafarers to claim 100% tax relief on income earned while working at sea.
In simple terms, if you meet HMRC’s conditions, you may not have to pay UK income tax on your seafaring wages.
Despite being available for many years, many eligible seafarers still miss out on this valuable relief, often because they don’t know it exists, aren’t sure they qualify, or find the rules confusing.
To claim the Seafarers Earnings Deduction (SED), you’ll need to meet specific HMRC conditions. In short, you must:
You won’t qualify if you:
We’ll look at each of these rules in more detail below:
To qualify for SED, you need to be employed on a ship, such as a superyacht or cruise ship.
Offshore installations in the oil and gas industry do not count as ships for SED purposes. This includes:
To claim SED, at least one of your voyages in the qualifying period must begin or end at a foreign port.
This ensures your work is considered wholly or partly outside the UK. In simple terms, you need to complete a voyage to or from a foreign port during each tax year you are claiming for.
This is often the trickiest part of SED, mainly due to the half-day rule, but it becomes clearer when broken down.
HMRC refers to an eligible period as 365 days or more. You cannot make your first claim until this period has passed. Most importantly, the majority of this time must be spent outside the UK.
The simplest way to meet this requirement is to spend at least 183 days outside the UK within a 365-day period. A day counts as outside the UK if you are not in the UK at midnight, and non-work days abroad also count.
You can return to the UK during your qualifying period, but you must follow these rules:
Breaking the half-day rule invalidates your eligible period, meaning your claim stops and must be restarted. Following these rules carefully ensures you remain eligible for SED.
To qualify for SED, you must be resident in the UK or a tax resident of another European Economic Area (EEA) state.
UK residents: You need to register for self-assessment and submit a tax return showing your income for the relevant tax year.
EEA residents: You can claim SED using the R43M (SED) Repayment Claim Form.
Meeting this residency requirement is essential for your claim to be valid.
Try our handy online tool to calculate your initial qualifying period? Our seafarers tax days calculator will give you a definite answer, and best of all, it’s free!
Discover all the essential information about the seafarers earnings deduction, and whether you qualify for this tax relief in our knowledge base below:
Although UK tax residents claim the Seafarers Earnings Deduction (SED) by filing a tax return, the process differs slightly if you are a resident elsewhere.
Many non-resident crew find themselves employed by UK companies which deduct income tax. If you are from the European Economic Area (EEA), you may be entitled to a refund of your income tax by claiming the SED. You can apply for this refund by completing the R43M(SED) form either online, or by posting it to HMRC.
Legislation introduced in 2017 named the Automatic Exchange of Information (AEOI) has changed the way that financial organisations communicate with tax authorities. Whilst you may believe that your offshore holdings are hidden from prying eyes, this is seldom the case.
It is also a common misconception amongst crew that because UK seafarers are not required to pay tax on their earnings, this means that they are not obliged to file tax returns. This is untrue and although you may not owe income tax, HMRC still expect to be informed of your worldwide income.
For more detailed information on the Automatic Exchange of Information, read our article.
You can claim the SED by filing a UK tax return, an area that we specialise in.
If you’ve never filed a UK tax return before, the first step is to obtain a unique taxpayer reference (UTR) number which registers you for self-assessment in the UK. We handle the application process for you to ensure that the paperwork is completed correctly.
After you have sent us the relevant information regarding your income for the tax year, we will go away and prepare your tax return ready for your approval.
If you are not a UK resident but you qualify for the SED and are looking to reclaim income tax, there is a different route to follow. Completing the R43M(SED) form either online or posting this to HMRC will get the process started. In order to process your claim, HMRC will require evidence of your time outside of the UK, so ensure that you have your ships logs or flight stubs ready before you start the process.
Although we do not require copies of the following documents in order to complete your tax return and claim the Seafarers Earnings Deduction, it is beneficial for you to keep them in case of the unlikely event that HMRC ask to see evidence of your circumstances to substantiate your SED claim.
Forms of evidence that you can keep for yourself include:
The deadline for filing your UK tax return is the 31st January following the end of the tax year in question. For example, the 2023/24 tax year runs from 6th April 2023 to 5th April 2024, meaning the filing deadline for 2023/24 tax returns is 31st January 2025.
Most commonly queries are the Channel Islands, the Isle of Man and the Republic of Ireland which we\tre happy to confirm do all count as outside the UK.
Do bear in mind that the onus is on you to demonstrate that you were outside the UK, meaning that a short walk over the Irish border just before midnight really isn\tt going to be viable.
Unfortunately not. In May 2020 the Supreme Court ruled that as UK waters, this area is not considered to be outside the UK for the purpose of counting you days.
Whilst proving you were outside the UK at exactly Midnight in any given date does come with its obvious challenges, it\s important to keep as much documentary evidence as possible. Good examples which are used commonly follow:
Whilst the above are the most common, any document which assists in confirming your whereabouts on a given day should be added to your records.
A qualifying day is one in which you are absent from the UK at midnight. Normally this will mean a position outside the UK 12nm limit is required however, having identified issues in recording and evidencing this, HMRC have allowed that a vessel which leaves it\s UK berth before midnight and heads directly to a foreign port can be considered to be outside the UK for that day.
There is no limit as to the number of holiday days you can include in your count if days outside the UK. As long as you are outside the UK at midnight then there\ts no reason this can\tt be included.
This is not a problem at all. As you will know you are entitled to spend just a little less than half your time in the UK and there\ts nothing to stop you working here or elsewhere, when you don\tt have employment in a vessel.
Whilst this income won\tt qualify to be declared under the deduction, you\tre still entitled to claim your tax-free personal allowance meaning an element of this will also be declared with no tax to be paid.
No, any fixed installation like FPSOs, FSUs or flotels do not count as vessels for the purposes of claiming SED. Current guidelines state that in order to qualify, an individual must be engaged on a "self-propelled vessel", meaning that those working on barges, wind turbines and the like will also not qualify.
Having discussed this point with HMRC, the key point identified is that in order to sustain an eligible claim period the vessel must be capable of navigation at the specific date in question.
It therefore follows that a vessel may qualify for a claim during periods of dry docking, dependent upon whether ongoing work renders the vessel incapable of navigation for a period.
This is a question posed regularly and in most cases, has a simple answer.
In order for an eligible claim to be made, the vessel must be "capable of and used for navigation". The earliest point at which this can be the case will usually be the first sea trial.
The results of this trial will also be crucial in terms of the work to be carried out after this date.
If the works required following the sea trial are cosmetic only, then the vessel is capable of navigation from then onwards.
If the works required are fundamental to the safety and operation of the vessel, it could be said that the vessel is not yet capable of navigation.
There is nothing to stop you studying alongside your employment and continuing to claim the SED.
It is important however to understand that if you are being paid to study, this income will not qualify to be declared under the deduction.
The UK tax year runs from 6th April to 5th April each year.
With the introduction of the Automatic Exchange of Information (AEoI), allowing tax authorities to request details of your income from your bank, it is important that all income between these two dates each year be included in your return.
Each year HMRC allow a window between the 6th April and 31st January each year for filing of the previous year\ts return.
If you miss your opportunity to file and file after the following 31st January, HMRC will begin to impose fines which will increase the longer you wait to bring your affairs up to date.
The fact is that once you have established a qualifying period which extends beyond a 365-Day period, your "anniversary date" is no longer relevant as the half day rule (see above) comes in to effect.
However, having noticed conflicting information supplied by accountants online, we have confirmed with HMRC that in order to establish your initial 365 day qualifying period, you MUST be outside the UK at midnight in day 365.
Example: If you begin working on a yacht on 1st January, in order to establish a valid claim period you must be outside the UK at Midnight on the following 31st December.
Student loan repayments, whether they be Plan 1 or Plan 2, are calculated based upon your taxable income.
As income declared under the SED is not taxable, a liability for Student loan repayment will not arrive with regard to this employment income.
When your tax return is filed, confirmation that you have a student loan should be included and HMRC will contact the SLC to confirm the amount which you have received in taxable income.
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