Overview of the UK Reforms
enacted from 6 April 2025, the UK is removing the concept of domicile and replacing it with a residence-based tax regime. Foreign income and gains will be taxed on a residence basis but with reliefs for new residents for the first four years. (gov.uk)
Key changes include:
- Abolition of the remittance basis of taxation. (gov.uk)
- A four-year foreign income and gains (“FIG”) relief for individuals newly resident in the UK. (gov.uk)
- Retention and reform of Overseas Workday Relief for employment income earned while working abroad. (gov.uk)
- The rules for overseas trusts and inheritance tax rules also realigned with the residence-based approach. (legislation.gov.uk)
Implications for Individuals
| Scenario | What changes | What to do now |
|---|---|---|
| You’re moving to the UK in 2025 | You’ll qualify for the 4-year FIG relief – foreign income and gains won’t be taxed initially. | Keep careful records, plan timing of income, consider delaying some foreign gains until after relief expires. |
| You’re non-resident but have UK ties | Trust and inheritance tax may catch some overseas assets more broadly than before. | Review trust headings, revisit estate plans, check whether some trusts need reporting or restructuring. |
| You already rely on remittance basis | That option ends on 6 April 2025. | Evaluate the benefit vs cost of earlier remittance; perhaps realise gains before date if favorable. |
Practical Strategies Before 6 April 2025
- Rebase foreign assets if allowed under transitional rules, to reset low assets’ cost base to 5 April 2017 where possible. (legislation.gov.uk)
- Use Opportunities for tax-efficient growth (e.g., figure out if some gains or income can be crystallized before regime change).
- Reassess overseas trusts: whether they meet the new conditions, or whether distributions will be taxed.
- For employment income abroad: due attention to Overseas Workday Relief thresholds and eligibility.
- Estate planning: incorporate the new inheritance-tax implications for foreign assets or trusts; may be changes for those with multiple jurisdictions.
Example Cases
- Global consultant moving to Bath in May 2025: Their foreign rental income earned before April 2025 might benefit from remittance basis; after 6 April, their FIG relief applies for four years; rental income after that taxed as UK-resident income.
- Trust holding international real estate: Under the new rules, trust’s settlor or beneficiaries may face additional UK tax if assets are held offshore, depending on residency.
- Family with second home abroad: Capital gains or income from that home may now be taxable sooner; explore selling before regime change or structuring via UK exposures where tax-efficient.
Action Plan Checklist
- Confirm residency status under the new regime (UK tax year counts).
- Inventory of foreign income, trusts, assets – check dates of gain, source, whether brought into UK.
- Consult with a UK cross-border tax advisor to map your personal situation.
- Use transitional and relief periods to minimize surprise liabilities.
Bottom line: If you're non-UK domiciled or considering moving to the UK, the residence-based tax regime starting 6 April 2025 changes how your foreign income and gains are taxed. With planning, you can make use of reliefs and mitigate risk.