In the Spring Budget 2024, the UK government announced a seismic shift in the way it will tax foreign income and gains (FIG) of individuals who are UK tax resident. The long-standing “non-dom” regime has been abolished and replaced by a new system based purely on tax residence. These changes took effect from 6 April 2025.
This article explains the key changes and transitional measures and highlights planning considerations for those who are affected.
The End of Non-Dom Taxation
From 6 April 2025, the concept of domicile ceased to play a role in determining liability to UK tax on foreign income and gains. The remittance basis was abolished. Instead, the UK has adopted a residence-based approach more aligned with international standards.
Under the new rules:
- All UK tax residents are subject to UK tax on their worldwide income and gains unless they qualify for a new FIG regime, and
- All non-UK assets of individuals who have been UK tax resident for at least 10 out of the previous 12 tax years fall within the scope of UK Inheritance Tax (IHT).
This means that long-term UK residents face tax on foreign income and gains as they arise, and their global assets are liable to UK IHT.
The Four-Year FIG Exemption Regime
To provide a degree of transitional relief, the government has introduced a new FIG regime. This is available to individuals who become UK tax resident after a period of at least 10 consecutive years of non-residence.
Qualifying individuals benefit from:
- Exemption from UK tax on foreign income and gains for their first four tax years of UK residence (starting from the year of arrival), and
- Freedom to remit foreign income and gains to the UK without any UK tax consequences during this period.
This regime is not automatic — individuals must make an election to use it. Those who qualify will not be able to claim double tax relief on foreign income or gains under this regime, but they can choose to opt out.
It’s worth noting that individuals who arrived before 6 April 2025 may qualify for the FIG regime if they meet the 10-year non-residence condition.
Transitional Provisions
To ease the transition from the remittance basis to the new system, the government has introduced several transitional rules for the 2025/26 and 2026/27 tax years.
1. Temporary Repatriation Facility (TRF)
Taxpayers are permitted to remit pre-6 April 2025 foreign income and gains (FIG) to the UK at a flat rate of 12%. This is a time-limited opportunity and is available only during 2025/26 and 2026/27. The TRF applies only to historic FIG and is subject to election and further conditions, including record-keeping obligations.
2. Temporary Reduction in FIG Tax Rate
For the 2025/26 tax year only, individuals who were formerly taxed on the remittance basis (but no longer qualify for the FIG exemption) pay UK tax on their foreign income and gains at 50% of the usual rates. This temporary concession is designed to ease taxpayers into the new regime.
3. Asset Rebasing for Capital Gains Tax
Individuals who have previously used the remittance basis and are not eligible for the FIG exemption are able to elect to rebase their foreign assets to their value as at 5 April 2025. This election applies only to foreign assets held at that date, and gains realised after this date will be subject to UK CGT in the normal way.
This is not a full exemption — it simply means that the UK disregards gains accrued up to 5 April 2025. The rebasing must be claimed and is subject to specific conditions.
Inheritance Tax Reforms
Alongside income and gains reforms, the UK has moved to a residence-based IHT system from 6 April 2025.
Under this regime:
- UK residents are subject to IHT on their worldwide estate once they have been resident for at least 10 out of the previous 12 tax years, and
- Once an individual has left the UK, they continue to be within the scope of UK IHT on worldwide assets for a 10-year period after ceasing UK residence — commonly known as the “IHT tail” or “exit charge”.
The changes affect both lifetime transfers and death estates. This change aligns IHT treatment with the new income and gains regime and removes the relevance of common law domicile tests.
Non-Resident Trusts
Another significant change affects non-UK trusts established by individuals who previously claimed the remittance basis.
From 6 April 2025:
- The protections previously afforded to settlor-interested non-resident trusts are removed, unless the settlor qualifies for and elects into the FIG regime.
- For settlors who do not qualify (or do not elect), all trust income and gains become immediately chargeable on the settlor if they are UK resident.
- Existing trust structures are not “grandfathered” — protections will only continue if the settlor is within the four-year FIG window.
This has significant implications for clients with offshore trust arrangements, as it may trigger UK tax charges on previously protected trust income and gains.
Planning Considerations
The abolition of the non-dom regime represents the most significant overhaul of UK personal taxation in a generation. Individuals who previously relied on the remittance basis or offshore trust protections will need to urgently review their structures and plans.
Key points to consider:
- Eligibility for the FIG exemption – does the client meet the 10-year non-residence condition?
- Timing of asset disposals – will rebasing relieve latent gains?
- Use of the TRF – is it worth remitting income or gains now at a 12% flat rate?
- Estate planning – does the client face exposure to IHT post-2025 or during the 10-year “tail” period?
- Offshore trusts – will protections still apply, and if not, what are the tax and reporting consequences?
HMRC is expected to publish further guidance. Whether you are a private client, a business owner, or a professional adviser, you should review your position, understand your exposure, and take advice on restructuring where appropriate.
If you would like to discuss any of the above in more detail, or need help navigating the new system, please don’t hesitate to get in touch.
