Non-dom regime set to be replaced by the FIG regime – figuring it out

During the Autumn Budget, Chancellor Rachel Reeves announced she would abolish the non-domicile regime, aiming to raise £12.7b ($16.47 b) over the next five years.

Reeves said she will introduce a new, residence-based scheme with “internationally competitive arrangements” for those coming to the UK on a temporary basis.

“I have always said that if you make Britain your home, you should pay your tax here,” she told Parliament.

Those individuals who have not been UK resident in any of the 10 consecutive years prior to their arrival will, for their first 4 years of UK residency, not be taxable on any foreign income and gains (FIG) within that initial four-year term in the UK – the new 4 Year FIG rule.

This means those planning to come to the UK may benefit in the short term from the new announcements. However, they must carefully check their residency position to confirm if they can benefit from these rules.

Non-domiciled individuals currently using the remittance basis should review their tax affairs and seek professional advice to determine if they qualify for the new Temporary Repatriation Facility (TRF). This facility allows remittances of pre-6 April 2025 foreign income or gains brought into the UK after 6 April 2025 to be taxed at a reduced rate for a limited three-year period only.

Not all bad news for non-doms

Those individuals who previously were able to claim the remittance basis will now be subject to the arising basis from 6 April 2025 and taxed on their worldwide income and gains (where the 4-year FIG rule does not apply).

What is the four-year FIG regime?

From 6 April 2025, individuals will determine if they are subject to UK taxation based on their residency status alone.

From 6 April 2025 a four-year grace period will be given to all individuals (irrespective of their domicile) if they wish to claim it, who have not been UK resident in the 10 tax years immediately prior to becoming UK resident, meaning they will only be assessable on UK income and gains and not foreign income and gains. This is called the four-year FIG (foreign income and gains) regime.

Individuals (both UK-domiciled and non-domiciled) who on 6 April 2025 have been tax resident in the UK for less than four years (after a period of 10 consecutive tax years non-UK tax residence) will be able to use this new regime for any tax year of UK residency in the remainder of those four years.

Furthermore, individuals will now not be required to operate segregated accounts (i.e. income and gains) or trace the movement of the foreign funds and can remit/enjoy the funds produced during this 4-year period in the UK without scrutiny.

Similar to remittance basis claims, the new residency four-year regime will need to be claimed each year for it to apply and can be claimed in one year and not the next.

Less than four years UK resident

Individuals (both UK-domiciled and non-domiciled) who on 6 April 2025 have been tax resident in the UK for less than 4 years (after a period of 10 consecutive tax years non-UK tax residence) will be able to use this new regime for any tax year of UK residency in the remainder of those four years.

For example, if you arrived in 2023/2024 (before 5 April 2024) and were non-UK resident for 10 years before this date. You can claim FIG for the following 2 years for 2025/2026, 2026/2027 (being years 3 and 4 of UK residency).

What about past foreign income and gains?

A new Temporary Repatriation Facility (TRF) will be available for individuals who have previously claimed the remittance basis (before 6 April 2025) and are UK resident from 6 April 2025.

Those former non-UK domiciled individual will be able to decide on remitting funds to the UK (i.e. from a period when they claimed the remittance basis) at a new reduced rate on their foreign income and gains that arose prior to the changes.

The TRF regime will be available for a limited period of 3 tax years, from 6 April 2025:

6 April 2025 – 5 April 2026 12% tax charge on designated foreign income and gains
6 April 2026 – 5 April 2027 12% tax charge on designated foreign income and gains
6 April 2027 – 5 April 2028 15% tax charge on designated foreign income and gains

The TRF will be payable on the designation of the foreign income and gains, but once a designation has been made no further UK tax will be payable regardless of the tax year of the remittance.

Capital gains realised after 6 April 2025 – rebasing

There are transitional measures for current and past remittance basis users for disposals on or after 6 April 2025 where they will be entitled to rebase a personally held foreign asset for Capital Gains Tax (CGT) purposes to its market value as at 5 April 2017 if certain conditions are met. The main conditions are:

The individual must not have been UK domiciled or deemed UK domiciled at any time before 6 April 2025.
They must have made a remittance basis claim for any one of the tax years between 2017/18 to 2024/25. Note this does not include years where the person has automatic use of the remittance basis without a claim.
They must hold the relevant foreign asset on 5 April 2017 and dispose of it on or after 6 April 2025.
The asset must have been situated outside the UK from 6 March 2024 to 5 April 2025. This is subject to exemptions for temporary importations and low value assets etc.

This effectively rebases the gain element before this date and uplifts it to the value as at 5 April 2017 when computing the gain on disposal.

What about Business Investment Relief (BIR)?

Business Investment Relief will be available for qualifying investments of non-designated pre-6 April 2025 foreign income and gains made on or after 6 April 2025. In addition, the TRF facility can be used for designated funds within the 3 year period (to 5 April 2028) if needed at the new reduced TRF rates.

From 6 April 2028, it won’t be possible to claim BIR on any new investments or reinvestments. However, those investments already made before then will continue to benefit from the BIR rules, unless a potentially chargeable event (PCE) occurs. If a PCE occurs the only mitigation step available, to prevent a taxable remittance, would be to take the funds offshore.

What about Overseas Workday Relief (OWR)?

Currently, UK-resident, non-UK domiciled individuals who claim the remittance basis and perform some employment duties outside of the UK are taxed on remittance basis on these earnings if not brought to the UK for their first 3 years of residency.

This has now changed to align with the 4 year FIG rule and OWR will be available from 6 April 2025 for the first 4 years of residency. The overseas proportion of earnings will not be taxable during this time and can be used in the UK, if required, without incurring any further tax charges.

Inheritance tax (IHT)

Inheritance tax (IHT) has for years in the UK been based on a concept of domicile however we are now moving towards a residency-based system for IHT from 6 April 2025.

IHT is assessable on UK situs assets if you are UK resident or non-UK resident (subject to any double tax treaties).

For non-UK assets, those who have lived in the UK for 10 out of the last 20 tax years will be assessable to UK IHT.

If an individual is then to leave the UK (after being resident for 10 out of 20 years) they have an amount of time they will need to leave the UK to lose their UK domicile position, and this is on a sliding scale:

How many years resident in the prior 10 out of 20 years		How many years post departure will you remain within the UK IHT scope
10 – 13 years		3
14 years		4
15 years		5
16 years		6
17 years		7
18 years		8
19 years		9
20 years		10

In summary, the IHT test is reset after 10 consecutive years of non-UK residency, then you can return to the UK and benefit from both the 4-year FIG rules as well as not being assessable to IHT on non UK assets for your first 10 years of residency.

Non-UK resident trusts

Another impact of the four-year FIG regime is that from 6 April 2025, the protection from taxation on future income and gains as it arises within trust structures (whenever established) will be removed for all individuals who do not qualify for the new UK four-year residency regime.

Foreign income/gains arising in non-resident trust structures from 6 April 2025 will be taxed on the settlor or transferor (if they have been UK resident for more than 4 tax years) on the arising basis. This is the same basis on which trust income and gains are taxed on UK domiciled settlers or transferors under the current regime.

There are some complex transitional rules in this area, and if you believe this could apply to you please seek professional help.

What should you do now?

As a non-UK-domiciled individual you should seek professional tax advice as these rules are likely to impact you. If you have recently returned to the UK, please also seek professional tax advice as these new rules could also apply to you.

We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.

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