Helping you prosper
New rules – Foreign Income and Gains (FIG)
From 6 April 2025, the current non dom rules will be replaced with a new residence-based test. The new regime will be available for four years starting from 6 April 2025 or the first tax year in which the individual becomes UK resident if later. The rules will apply to non doms who have been non-UK resident for at least the previous ten tax years. During the four years, new arrivals to the UK will not be subject to tax on their foreign income and gains (FIG). These can be brought into the UK without attracting a tax charge. Those accessing the FIG regime will lose entitlement to personal allowances and annual exempt amount for capital gains tax.
Individuals who on 6 April 2025 have been tax resident in the UK for less than 4 years (after a period of 10 years non-UK tax residence) will be able to use the new regime for any tax year of UK residence in the remainder of those 4 years. As an example, an individual who became UK resident in 2023-24 (after a 10-year period of non-residence), will have been resident in the UK for up to two tax years on 6 April 2025. They will be able to claim under the new 4-year FIG regime for 2025-26 because this is their third year following a period of 10 years non-UK tax residence.
After the initial four years, individuals will be taxed on their worldwide income and gains in accordance with the normal tax rules for UK residents.
Transitional provisions for existing non-doms
Existing non-doms moving from the remittance basis to the arising basis on 6 April 2025, who do not qualify for the four-year FIG regime, will be taxed on 50% of their foreign income for that year. The reduction will not apply to foreign chargeable gains. From 2026/27 foreign income will be taxed in the normal way.
For the tax years 2025/26 and 2026/27 only, a reduced rate (of 12%) will apply to remittances of pre-6 April 2025 personal FIG. This does not apply to foreign income arising within offshore trust structures.
Those who have historically claimed the remittance basis and remain neither UK domiciled nor deemed domiciled by 5 April 2025, will have the ability to rebase non-UK sited assets (held on 5 April 2019). The conditions of this have not yet been published.
Non-resident trusts
From 6 April 2025, the protection from taxation on income and gains within settlor-interested trust structures will be removed for those who do not qualify for the four-year FIG regime. Instead, FIG arising in such settlements will be taxed on the UK resident settlor/transferor on an arising basis. FIG arising pre-6 April 2025 will continue to be matched on a worldwide distribution basis.
Non-dom inheritance tax
The government has indicated it intends to move IHT from a domicile-based system to a residence-based system. There will be period of consultation with new rules expected to apply from 6 April 2025.
Although nothing has been confirmed, it is understood that IHT will be charged on individuals who have been UK resident for ten years. Those leaving the UK, may stay be within the scope of IHT for ten years after they have left. UK sited assets will always remain within the scope of UK IHT.
Non-UK assets held by non-UK trusts which benefit from ‘excluded property’ status are currently expected to remain outside the scope of IHT.
The next step
If you have any questions regarding the above, please contact Tom Annat on t.annat@uhy-rossbrooke.com or your usual UHY adviser.
