Overview of the Residence-Based Regime
- As of 6 April 2025, the concept of domicile for tax purposes has been abolished. In its place: a residence-based tax regime. (gov.uk)
- Individuals who become UK tax resident after being non-resident for 10 tax years may qualify for a 4-year Foreign Income & Gains (FIG) regime, during which foreign income/gains may not be taxed immediately. (gov.uk)
- A Temporary Repatriation Facility (TRF) exists for certain FIG arising before 6 April 2025, allowing reduced tax rates during a transition period. (assets.publishing.service.gov.uk)
Key Impacts & Areas of Adjustment
| Area | Before | After Regime Change |
|---|---|---|
| Foreign income & gains tax treatment | Based on remittance basis if non-UK domicile applies | Arising basis for almost all; FIG regime may delay immediate taxation for 4 years if criteria met (gov.uk) |
| Trusts & foreign structures | Domicile could affect taxation of overseas trusts | Trusts exposed under new residence rules; many old reliefs removed (gov.uk) |
| Inheritance Tax (IHT) | Domicile status influenced IHT on worldwide estates | IHT becomes residence-based across assets, removing previous domicile-based differences (gov.uk) |
Practical Examples
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Emma, who moved to the UK in 2024 after 15 years abroad, becomes tax resident. Under new rules, she qualifies for the four-year FIG regime starting 2025-26. Her foreign dividends during that period are not taxed until later, but post that she pays arising basis.
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Arun, who had overseas trusts under domicile planning, now faces altered tax status. Trust distributions may be taxed differently under residence basis rules. Planning must adapt.
Actions You Should Take Now
- Review foreign assets/income: Identify gains & income that could be taxed now vs those covered by FIG or TRF.
- Understand your residency history: Non-UK residence for 10 years prior is key to FIG eligibility.
- Plan estate and trust structures: New IHT rules may mean earlier IHT liabilities if you were depending on domicile-based reliefs.
- Consult tax experts: Professional guidance can help optimize within the new regime.
What This Means for Digital Nomads & International Individuals
- Digital nomads who enter UK residence may benefit from FIG if eligible but should expect full exposure after 4 years.
- Those with foreign income/gains need streamlined reporting and must understand how incoming payments (remittances) are treated—no more remittance basis for non-doms after transition.
Takeaway: The UK’s switch to a residence-based tax system marks a seismic shift in how foreign income, inheritance, and trusts are taxed. If you had been planning based on domicile, you’ll need to rethink your strategy now.