What has changed?
From 6 April 2025, the UK has abolished the remittance basis of taxation for non-UK domiciled individuals. The concept of domicile as a key basis for tax liability has been replaced by a residence-based system under the new foreign income and gains (FIG) regime. (gov.uk)
Key features include:
- New arrivals to the UK, who have not been UK tax resident during the prior 10 years, can benefit from 100% relief on foreign income and gains (FIG) in their first four years of UK residence. (gov.uk)
- Removal of preferential trust rules: settlor interested trusts (and other structures) will lose protection for income or gains arising after 6 April 2025 unless the settlor qualifies for FIG. (gov.uk)
- Introduction of a Temporary Repatriation Facility (TRF) for past unremitted foreign income/gains: using this facility, qualifying individuals who claimed the remittance basis can designate remittances from income/gains arising before 6 April 2025, taxed at reduced rates (12–15%) during a limited period. (gov.uk)
- Inheritance Tax (IHT) will shift from a domicile-based to a residence-based system, with “long-term UK residence” test: residence for 10 out of the past 20 tax years triggers liability on worldwide assets. Trusts and settlements are affected under similar long-term resident criteria. (gov.uk)
Tax Planning Strategies to Consider
If you may be affected by these changes, here are actionable steps:
1. Determine your eligibility for the new FIG regime
- Did you spend zero days in the UK (for tax resident purposes) in the 10 years prior to arriving? If yes, you're likely a “qualifying new arrival.”
- If you’ve been resident already, check how many years you have been in the UK and whether you qualify for the four-year relief.
2. Use the Temporary Repatriation Facility (TRF)
If you previously used the remittance basis and accumulate foreign income/gains before 6 April 2025:
- TRF gives you a window of 3 tax years (2025-26 to 2027-28) to bring in (remit) these amounts at reduced tax rates.
- Assess whether it's financially favourable to remit earlier rather than paying tax later on arising basis amounts.
3. Review foreign assets and trust arrangements
- Assets held in offshore trusts may lose protection under new rules unless settlor qualifies under FIG. Consider restructuring or distributing assets before changes bite.
- If you hold foreign property or investments, rebasing elections may be available (e.g., for disposals of personally held foreign assets held since 5 April 2019) to limit capital gains exposure. (gov.uk)
4. Plan for Inheritance Tax exposure
- If you meet the “long-term resident” test (10/20 years) or are approaching it, inheritance on overseas property/assets will become relevant.
- Trusts you have established will need review: excluded property status may be lost once long-term resident, triggering IHT or exit charges. (gov.uk)
Practical Examples
| Scenario | Outcome under old regime | Outcome under new rules |
|---|---|---|
| Alice moves to UK April 2025, has been non-resident for 10 years | Could use remittance basis for decades | Gets full FIG relief for first 4 years |
| Ben held foreign investments pre-2019, wants to sell in 2026 | CGT on full gain since acquisition | May rebase to 5 April 2019 for gains, reducing chargeable gain |
| Trust settlor who’s UK resident 12 of past 20 years | Trust’s non-UK assets excluded for IHT | Trust may lose excluded status; trustee or settlor may trigger IHT on worldwide assets |
What to watch for going forward
- Clarifications in the Finance Bill and further HMRC guidance on FIG rules, especially defining “qualifying foreign income” and designating “new arrival”.
- Monitoring when TRF elections must be made and how mixed foreign funds are treated.
- Proactive estate planning if IHT changes move into effect for individuals or families near long-term residence thresholds.
The new FIG and residence-based rules represent a seismic shift for non-dom and foreign asset holders. Early action can materially reduce tax liabilities and exposure.