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4-Year Foreign Income and Gains Regime (FIG) for New Arrivals
The remittance basis for UK resident non-doms will be abolished from the 2025/26 tax year (commencing 6 April 2025) and replaced by a 4-year FIG regime based on an individual’s tax residence. Where individuals arrive to the UK after 10 consecutive tax years of non-residence, they can claim for 4 tax years to forgo their Income Tax Personal Allowance and Capital Gains Tax (CGT) Annual Exempt Amount and have their FIG be exempt from UK tax (regardless of whether remitted to the UK).
For the purpose of this residence-based exemption, the residence of an individual will be determined by the Statutory Residence Test (i.e. not treaty residence). A split years (partial year of residence) will count as one of the 4 years and an individual does not have to be resident throughout the period.
Transitional Arrangements for Non-doms
There are transitional arrangements for non-doms who have previously claimed the remittance basis and will be ineligible for the 4-year FIG scheme.
Non-doms leaving the remittance basis will only pay UK Income Tax on 50% of their foreign income for 2025/26. Foreign capital gains will be subject to UK tax, however, the CGT can be reduced by rebasing the base cost of assets to their 5 April 2019 value where the remittance basis was claimed previously.
For the 2025/26 and 2026/27 tax years, individuals who have claimed the remittance basis will be able to remit FIG that arose before 6 April 2025 to the UK via the Temporary Repatriation Facility, incurring a relatively low UK tax rate of 12% (FIG that arose within trusts will be excluded). The ordering rules for ‘mixed funds’ will be revised.
Overseas Workday Relief (OWR)
Previously for the first 3 years of UK residence, a non-domiciled worker with UK and overseas employment duties could claim OWR and not be subject to UK Income Tax on income from overseas duties if the earnings were not remitted to the UK.
From 6 April 2025, domicile will be irrelevant for OWR and earnings from foreign employment duties for the first 3 years of UK residence will be free from UK tax after being non resident for at least 10 years, regardless of whether these earnings are remitted.
Inheritance Tax & Trusts
Non-doms can only create trusts excluded from UK Inheritance Tax until April 2025.
In future, Inheritance Tax will move from a domicile-based system to a system based on being UK resident for 10 years
FIG arising until 6 April 2025 in protected non-resident trusts will not be taxed unless distributions or benefits are paid to individuals who have been UK resident for over 4 years.
From 6 April 2025, non-domiciled and deemed domiciled settlors of settlor interested trusts will be directly taxed on trust FIG.
From 6 April 2025, the remittance basis cannot be claimed by UK resident non-dom beneficiaries in respect of pre-6 April 2025 FIG matched with trust distributions to UK resident beneficiaries.
