Author:
Eugenia Campbell
Partner
bright grahame murray, Chartered Accountants
E: [email protected]
Integra International Grant Gilmour, CPA (Canada, BC) CPA (USA, Arizona)
Integra Tax World Newsletter Editor
E: [email protected]
Reform of the UK Non-Dom tax regime. What has changed?
From 6 April 2025 the UK non-dom regime was abolished and replaced by a 4-year foreign income and gains (FIG) regime, which is tax residence based. The concept of long-term tax resident (“LTR”) was introduced, and domicile was removed for tax purposes, although it remains relevant for pre-April 2025 tax considerations.
Taxpayers who do not qualify for the FIG regime will be taxed on their worldwide income and gains as they arise.
The new foreign income and gains (FIG) regime
The FIG regime will apply to taxpayers who become UK tax resident after a period of 10 consecutive years of non-UK residence. The new regime will enable qualifying individuals to pay no tax on most types of foreign income and gains which arise in the first 4 years of being UK tax resident. There is no requirement to keep the funds outside the UK and in this aspect is more generous than the old remittance basis. UK domiciled individuals who have been non-UK resident for at least ten years can also access the FIG regime.
As with the remittance basis, the taxpayer loses their entitlement to personal allowances and chargeable gains exemption if they make a FIG claim.
The remittance basis will continue to apply to pre-6 April 2025 overseas income and gains which have benefitted from a remittance basis claim.
Overseas workday relief (“OWR”) provides tax relief for employment income from work carried out abroad. From 6 April 2025, the relief will instead apply to those who qualify for the FIG regime. They will be able to bring the remuneration into the UK without creating a tax charge. However, OWR will be capped at the lower of 30% of the individual’s worldwide earnings or £300,000.
The temporary repatriation facility (“TRF”)
A new temporary repatriation facility (“TRF”) will be available for individuals who have previously claimed the remittance basis any time before 6 April 2025. It is designed to encourage non-doms to bring their unremitted overseas income and gains to the UK. The facility enables the taxpayer to designate the amount of unremitted foreign income and gains which will be taxed at reduced rates of 12% for the 2025/26 and 2026/27 tax year and 15% for the 2027/28 tax year. The designated funds can be subsequently remitted to the UK at no extra charge. The designation process involves making an election and can apply to cash and illiquid assets.
A TRF claim can also apply to funds held in a trust as explained below (see ‘Offshore trusts’).
Capital gains tax rebasing
There is an opportunity to claim a more limited relief to rebase certain assets to their market value as at 5 April 2017. Only non-doms who have claimed the remittance basis for at least one tax year between 2017/18 and 2024/25 and have not become deemed or UK domiciledat any time before 6 April 2025, can benefit from an election to rebase their assets. They must have held the asset at 5 April 2017 to qualify for rebasing.
Inheritance tax (“IHT”)
The scope of IHT has moved from a domicile basis to a tax residence regime. Individuals who are long-term UK resident (“LTR”) will be subject to IHT on their worldwide estate. An LTR is defined as someone who has been UK resident for 10 or more of the previous 20 years. A significant change is that UK domiciled individuals who have been non-resident for at least 10 years will only be subject to IHT on their UK assets. Their non-UK assets will not be subject to IHT.
Offshore trusts
From 6 April 2025 the income, capital gains tax and IHT protections are lost if the settlor (the person who created the trust) continues to benefit from the trust. The settlor will be taxed on all of the trust’s income and gains (UK and non-UK sources) as they arise, unless they qualify for the 4-year FIG regime.
However, the TRF will be available for UK resident settlors and beneficiaries who receive a distribution from an offshore trust within the three years leading up to 5 April 2028. This is provided that the distribution can be matched to untaxed foreign income and gains which arose in the trust before 6 April 2025. The recipients must be a previous remittance basis users.
If the settlor is alive on 6 April 2025, their LTR status will determine the trust’s exposure to IHT when property is transferred into or distributed from the trust, or at its ten-year anniversary. For example, if the settlor is LTR on the tenth anniversaries of the trust, it will be subject to IHT on its worldwide assets. The periodic charge will not be restricted to the value of UK assets only.
For trusts created after 30 October 2024, for IHT purposes, the trust’s assets will be included in a LTR settlor’s death estate if they retain an interest in the trust.
The new rules are complex, and the above provides a broad summary only. It is important that non-dom individuals, and trustees of trusts with UK resident settlors and beneficiaries, consider their specific circumstances and what mitigating actions can be taken.
© 2025 bright grahame murray and Integra International. All rights reserved. This Article is not intended to provide legal or other advice, and you should not take, or refrain from taking, action based on its content. Prior results do not guarantee a similar outcome.
About the Author:
Eugenia Campbell
Eugenia provides advice to a broad range of individual, private clients, particularly those with an international aspect to their financial affairs. She has a wealth of experience in supporting clients with their inheritance tax (IHT) and estate planning and led the specialist IHT group at a top 6 accountancy firm where she spent 10 years building her expertise. She qualified as a chartered tax adviser over 20 years ago. Away from work Eugenia enjoys volunteering with her local church, running and travelling extensively.
Integra International Bio:
https://integra-international.net/find-an-integra-firm/find-firm-profile/name/grant-gilmour/
