The UK government is making big changes to how foreign income and gains are taxed. These changes mainly affect people who were previously classed as “non-domiciled” (non-doms). Here’s what you need to know:

What’s Changing?

1. End of the Remittance Basis

• The old “remittance basis” is being scrapped.
• A new system called the Foreign Income and Gains (FIG) regime will take its place.
• This changes how foreign income and gains are taxed for many UK residents.

2. New 4-Year Tax Exemption

• If you’re new to the UK and haven’t lived here for the last 10 tax years, you may qualify for a 4-year exemption.
• During your first 4 years of UK tax residence, you won’t pay UK tax on your foreign income and gains.

3. Inheritance Tax (IHT) Based on Residence

• The UK is moving from a domicile-based to a residence-based IHT system.
• If you’ve lived in the UK for 10 out of the last 20 years, your worldwide assets may now be subject to UK IHT.

4. Temporary Repatriation Facility

• If you’ve used the remittance basis before, you can now bring foreign income and gains into the UK at a reduced tax rate.
• This facility is available for 3 years starting from April 2025.
• The special tax rate will be 12% for the first 2 years, and 15% in the third year.

5. Domicile No Longer Relevant

• The concept of “domicile” will no longer be used for income tax, capital gains tax, or inheritance tax purposes

6. FIG regime – admin and consequences

  Claim or election must be made in a return
  Within 12m of 31 January following the end of the tax year

Effect of making a foreign income claim, foreign employment election OR foreign gain claim for a tax year:

• Not entitled to personal allowance
• No tax reduction for dwelling related loan costs of an overseas property business
• No relief for losses of a relevant business
• Not entitled to CGT annual exempt amount
• No relief for capital losses accruing on the disposal of foreign assets
•  Relief for pension contributions reduced by relief obtained under foreign income claim

What Should You Do?

• Review your tax position: If you’ve relied on the remittance basis or have offshore assets, it’s important to understand how these changes affect you.
• Check your eligibility: You may qualify for the 4-year exemption or the repatriation facility.
• Seek advice: These changes are complex. Speak to a qualified tax adviser to plan ahead and avoid unexpected tax penalties.

In short, the UK is shifting to a system where residency, not domicile, determines your tax obligations. If you’re affected, now is the time to act.

Would you like help reviewing your situation or preparing for these changes?

Feel free to get in touch by emailing us Hello@pro-taxman.co.uk