Abolishment of Remittance Basis Taxation in the UK

The Chancellor has confirmed a sweeping change for non-domiciled UK residents (non-doms) set to take effect on April 6, 2025. The current remittance basis of taxation will be replaced with a new four-year Foreign Income and Gains (FIG) regime—a shift likely to impact thousands of individuals planning to move to in the UK.

Here’s a breakdown of these changes and how they could affect you.

What Is the New FIG Regime?

Starting in April 2025, individuals who have been non-residents in the UK for ten years before becoming UK tax residents will qualify for a unique four-year grace period. During this time, they won’t pay tax on any foreign income and gains (FIG), and they can bring these funds into the UK tax-free. This means no tax on foreign income or gains as long as these assets remain offshore or meet specific criteria. However, they’ll still pay UK taxes on income and gains arising within the UK.

The new FIG regime provides a valuable window for individuals to settle into the UK without immediately facing high foreign income and assets tax rates.

How It Works

The FIG regime operates on an opt-in basis each year. You’ll use the Statutory Residence Test to confirm UK residency and select which sources of FIG you’d like the regime to apply to. For example, you could apply the exemption to specific foreign income sources but not others. But there’s a trade-off—those who opt for FIG will lose access to personal allowances and the capital gains tax annual exempt amount.

Individuals already in the UK by April 2025 who qualify (i.e., those who became UK residents after a decade abroad and will have been here for less than four years by that date) can also use the FIG regime for the remainder of their four-year period. For instance, someone who became a UK resident in 2022/23 can still claim FIG for the 2025/26 tax year if they meet the conditions.

Domiciled Residents: Included in the FIG Regime

The new FIG regime will also apply to UK nationals or formerly domiciled residents who meet the ten-year non-residency requirement. This is a departure from the previous unfavourable treatment for those born in the UK with a UK domicile of origin, effectively giving them a four-year exemption as well.

Key Transitional Rules

Several transitional arrangements aim to ease the move from the old remittance basis to the new regime:

Capital Gains Tax Rebasing: Non-doms who held assets as of April 5, 2017, and who have never been UK-domiciled or deemed domiciled can rebase these assets to their 2017 value if sold after April 6, 2025.

Temporary Repatriation Facility (TRF): For those who choose to remit FIG to the UK, there’s a limited-time, lower tax rate of 12% on remittances made in 2025/26 and 2026/27, and 15% in 2027/28.

End of Business Investment Relief: Business Investment Relief, which allowed tax-free investment of unremitted foreign income in the UK, will end for new investments after April 2028 when the TRF period closes.

What’s Next?

With this significant tax reform confirmed, now is the time for non-doms to plan ahead. Navigating the complexities of these new rules will require tailored advice, as each individual’s circumstances will be unique. These changes represent a significant overhaul of the tax landscape for non-doms, providing a window of opportunity but with key trade-offs and a limited timeline.

As we approach the 2025 start date, it’s essential for non-doms to stay informed, plan strategically, and seek advice to fully understand the impact of these new rules on their assets and investments.