The Shift from Domicile to Residence
- Old system (Domicile-based): Non-UK domiciled individuals could avoid UK tax on foreign income/gains by using the remittance basis. Domicile was a complex legal concept.
- New system, effective 6 April 2025: The UK scrapped domicile as a basis, replacing it with a residence-based regime. Foreign income & gains (FIG) from non-UK sources are taxable unless remitted under limited transitional relief.(assets.publishing.service.gov.uk)
Key Features of the New Regime
- Foreign Income & Gains (FIG) Regime: Foreign-sourced income is now generally taxed even if it is not brought into the UK (unless specific transitional relief applies).(assets.publishing.service.gov.uk)
- Temporary Repatriation Facility (TRF): Individuals who previously used the remittance basis for pre-6 April 2025 income can designate such amounts. They’ll pay reduced tax rates during a three-tax-year “cooling off” period via the TRF.(assets.publishing.service.gov.uk)
- Inheritance Tax (IHT) also aligns with residency—not domicile status any longer.(assets.publishing.service.gov.uk)
What This Means for Digital Nomads
Digital nomads often move across borders, earning abroad or remotely while spending part of the year in the UK. The changes have major implications:
- If you become resident in the UK, foreign income (salary, freelancing, investments) may now be taxable even if not remitted.
- TRF may offer relief for foreign incomes that accrued pre-April 2025 but was unremitted—must be formally designated.
- Frequent visitors may want to reconsider patterns—number of UK days, nature of stay may trigger tax residence rules.
Practical Planning Steps
- Track arrival and departure dates carefully—statutory residence test matters.
- Document foreign income source, date accrued vs remitted—to assess eligibility for TRF and transitional relief.
- Review income streams such as remittances, investments, freelance income; adjust timing of remittances if necessary.
- Consult a UK specialist familiar with the changes—mistakes can lead to unexpected tax bills.
Example Scenario
- Sam, born abroad, has been submitting UK returns under remittance basis. As of 6 April 2025, all his income from foreign sources—for instance business income earned abroad—is taxable even if he keeps it overseas. However, his pre-2025 unremitted income can be designated under the TRF for reduced taxation over three years.
Bottom line: For digital nomads, the UK’s new residence-based tax framework is designed to be more straightforward but demands awareness. Always assess your residence status, income accruals vs remittance, and timeline of foreign-source income.