A New Chapter in UK Tax: Non-Doms Out, New Residents Welcome
After months of uncertainty, we now better understand the final proposals' to the tax rules for UK-resident non-domiciled individuals (“nom-doms”)
Tailored advice will be necessary for everyone's unique circumstances, as these changes significantly alter already complex legislation.
The government has released a 34 page technical note with further changes expected to take place during the legislation process. Below is a summary of the expected changes that will impact the nom-dom community in the UK.
Remittance Basis replaced with the Four-Year Regime for Income and Capital Gains (“FIG”) Scheme
The Chancellor announced the end of the remittance basis for non-doms starting 6th April 2025. It will be replaced by a new four-year foreign income and gains (FIG) regime for individuals who become UK tax residents after ten years of living abroad.
Qualifying individuals will not owe tax on FIG during their first four years as UK tax residents and can remit these funds to the UK without additional charges. Tax will apply to UK income and gains as usual.
Individuals using the new regime will forfeit personal allowances and the capital gains tax annual exempt amount, similar to current remittance basis users.
Individuals resident for less than four years as of 5th April 2025 (and non-resident for ten years before) can use the new regime while UK residents for the rest of the four-year term.
Working example:
Markus became a UK resident in 2022/23 after ten years abroad. He will have been a UK resident for three tax years as of 6 April 2025, allowing him to use the new four-year FIG regime for 2025/26, his fourth year of UK residence following ten years abroad.
Once the FIG regime no longer applies, individuals will be taxed like any other UK resident, including income and gains from trusts and foreign income and gains potentially taxed too.
Transitional Arrangements
The previous government suggested a one-year 50% tax reduction on foreign income for individuals shifting from the remittance to the arising basis from 6 April 2025, not eligible for the new FIG regime. This will not be implemented, and such individuals will owe tax on all foreign income from 6 April 2025 (subject to reliefs like double tax treaty relief).
Capital Gains Tax Rebasing
From 6 April 2025, individuals who claimed the remittance basis and were never UK domiciled or deemed domiciled before 5 April 2025, can rebase foreign assets to their 5 April 2017 value upon disposal. The original rebasing date was April 5, 2019.
Temporary Repatriation Facility (TRF)
To attract non-doms to bring overseas wealth to the UK for spending and investment, a new 12% tax rate will apply to remittances of FIG in 2025/26 and 2026/27. An extension will see a 15% tax rate in 2027/28.
This applies if the FIG arose to the individual while taxed on the remittance basis and they are UK residents in the relevant tax year.
The TRF will also apply to settlors or individuals benefiting from offshore trust structures during these three years, with some qualifications.
From 2028/29, pre 6th April 2025, FIG remittances will face normal tax rates.
Overseas Workday Relief (OWR)
Currently, non-doms can claim income tax relief on earnings from work outside the UK if paid and retained offshore for up to three years.
From 6 April 2025, OWR eligibility will depend on residence rather than domicile. Those eligible for the FIG regime can make an OWR election for relief claims. OWR will be available for four years from 6 April 2025.
OWR will have an annual financial limit, the lower of 30% of qualifying employment income or £300,000 per tax year.
The new OWR provides income tax relief whether income is received in a UK or overseas bank account; if offshore, it can be remitted to the UK without charge.
Inheritance Tax
Inheritance tax (IHT) will shift to a residence-based system from 6 April 2025. 'Long-term residents' will owe IHT on their personally owned non-UK assets.
An individual is typically a long-term resident if they have lived in the UK for at least 10 of the 20 tax years before the chargeable event (including death). Transitional rules apply to non-domiciled or deemed domiciled individuals non-resident in 2025/2026.
For these individuals, long-term residency depends on the existing deemed domicile test:
at least 15 of the 20 tax years before the charge year, and
at least one of the four tax years ending with the relevant tax year.
If they return to the UK, the new rules apply.
This means individuals non-UK resident from 6 April 2025, will not be affected by the longer 'tail' provisions below.
Individuals who are a UK resident for 20+ years remain in the UK IHT net for ten years post-departure, extending the current system which lasts three years. They will therefore owe IHT on their worldwide estate until their fourth non-UK residence year.
For those who are UK resident for 10-19 years, post-departure worldwide IHT scope shortens. The test resets after 10 consecutive non-residence years.
Working example:
Residents for 10-13 years remain in scope for three tax years, increasing by one year for each additional residence year. If resident for 15 of 20 years upon leaving, they remain in scope for five years; if 17 of 20, seven years.
