Until 5 April 2025, individuals that were UK resident but not UK domiciled (“non-doms”) received specific treatment under the UK tax system. There have now been significant changes to the rules, that largely removes the concept of domicile from the UK tax system.

Under the previous rules, non-doms could often claim the “remittance basis” for foreign income and gains. This broadly meant they only paid UK tax if the relevant sums were brought into the UK.  

From the tax year starting on 6 April 2025, it is no longer possible to claim the remittance basis. Instead, a new tax regime applies in the first 4 years of UK residence for your foreign income and gains. However, even if you are not within your first 4 years of residence it is important to note that where remittance basis claims have been made in the past there can still be ongoing tax implications. Given the transitional rules, it is best to review the position as soon as possible, as taking action now may improve the UK tax position in future years. 

The UK Inheritance Tax (IHT) rules have also changed, potentially leading to a larger exposure for those that have been in the UK for 10 or more years.

Foreign income and gains: UK taxes in the first 4 years of residence

The replacement for the remittance basis is the “Foreign Income and Gains” (FIG) regime. This gives an exemption from UK tax for most types of foreign income and capital gains arising in the first four years spent in the UK. A further welcome benefit is that this income can be brought into the UK without resulting in a tax charge - unlike foreign income within the remittance basis it is totally free of UK tax. In addition, the FIG exemption can apply to UK domicilaries – for example, UK nationals that have been abroad for over 10 years.

To qualify it is necessary to have been non-resident for at least 10 consecutive years before the start of the 4 year period. Even if you arrived in the UK well before 6 April 2025 you can still claim FIG treatment for 2025/26 or later tax years – as long as you fall in the first four years of UK residence. Therefore, if you arrived in the UK on or after 6 April 2022 this exemption can potentially apply.

Most types of foreign income and gains are covered - including interest, dividends, property rents, trade profits, pensions and employment income (under specific rules noted below).  

It is necessary to claim the FIG treatment and nominate the income and gains it applies to. This must be done on a Tax Return – normally by 31 January following the end of the tax year, although a claim can still be made on an amended return for the following twelve months (the deadline for the year to 5 April 2026 is therefore 31 January 2028). 

It is important to include all foreign income and gains that you want covered in the claim on a “source by source” basis, including the amount involved. If anything is missed, or undeclared, it will still be subject to UK tax. If HMRC uncover this income it may no longer be possible to make a claim, and penalties and interest charges will likely be applied in addition to the tax due.

A consequence of making a claim is the loss of the personal allowance and capital gains tax annual exemption. This can mean that a claim is not worthwhile in some cases.

If you are continuing to work outside the UK in the first four years of residence, earnings from working while abroad can potentially also be UK tax free under “Overseas Workday Relief” (OWR) rules. This concept existed before the recent rule changes, but is now applicable in more situations, as it doesn’t require the affected earnings to be kept offshore. However, there is now a maximum amount applicable – relief can only apply to the lower of £300,000 or 30% of an individual’s total employment income. Transitional provisions can apply to override this cap in certain circumstances.

Action point – if you are in your first four years of UK residence and think you may qualify for the FIG or OWR exemption it is best to consider making a claim as early as possible. We would always advise getting UK tax advice before coming to the UK, and also before the end of the FIG period, as there are often steps that it best to take to minimise your UK tax exposure.

Those that have claimed the remittance basis

Although the remittance basis can no longer be claimed in the 2025/26 tax year, it can still have a bearing on an individual’s tax position. This is where a claim was made in previous tax years, but amounts are now brought into the UK, either in the form of cash or other assets. Determining whether amounts brought into the UK are regarded as taxable income and gains can be a complex matter - and significant amounts of UK tax can be due where they are.

To alleviate some of these problems, a “Temporary Repatriation Facility” has been introduced by HMRC. This allows for payment of a fixed rate of tax on designated amounts - these amounts can be brought into the UK without a further tax charge.  The rate of the fixed charge is based on the year, as follows:

• 6 April 2025 – 5 April 2026 – 12%
• 6 April 2026 – 5 April 2027 – 12%
• 6 April 2027 – 5 April 2028 – 15%

Given UK income tax rates can be up to 45% (or 48% in Scotland) this can represent a significant tax saving, and so it is important for those with unremitted income to consider making a claim as it may produce a much better tax result, as well as potentially simplifying their UK tax situation longer term. 

However, if you do not intend to remain in the UK long term and do not need to bring the unremitted income/gains to the UK to fund spending, then it may not make sense to use the Temporary Repatriation Facility. As such, each individual’s position would need to be considered based on their circumstances and future plans.

It is necessary to make a formal claim for the facility to apply – it will usually be made on a tax return by the 31 January following the end of the tax year in question. A claim can still be made in the following 12 months following that date (and so the deadline for the year to 5 April 2026 is 31 January 2028).  No claim will be possible after 31 January 2031.

It is also possible for certain non-doms to claim to rebase foreign assets for capital gains tax purposes to the value on 5 April 2017 – this can be made by those that have claimed the remittance basis in the past. This can significantly reduce the amount of capital gains tax payable on the sale of these assets in the future and so also needs careful consideration. 

Action point – if you have claimed the remittance basis in previous years, it is highly recommended carrying out a full review the position and consider a claim under the Temporary Repatriation Facility and/or making a rebasing election.

UK Inheritance Tax for foreign assets

IHT can be a factor for any individual that has assets in the UK. The rules on whether IHT applies to foreign assets are more complex.

Until 5 April 2025, those that were UK domiciled paid UK IHT on their assets throughout the world. Non-doms were charged IHT only on their UK assets, unless the individual was deemed to be domiciled by virtue of being UK resident for 15 out of 20 years or was classed as a formerly domiciled resident. In addition, trusts set up by a non-dom individual holding foreign assets usually escaped UK IHT charges.

This has now changed, so that the IHT status of individuals is determined by whether they are a “Long Term Resident”. This is where a person has been UK tax resident for at least 10 out of the last 20 years. In addition, if a person has been non-resident for 10 consecutive tax years they will not be Long Term Resident.

The rules are relaxed for those leaving the UK, depending on the number of years of UK residence as follows:

The rules mean that the worldwide basis will apply after a shorter period than the old regime. However, it applies to all individuals, regardless of domicile status – this means the new rules can benefit those that have left the UK but have retained their UK domicile as a result of retaining ties to the UK.

There are certain transitional rules for non-doms that are caught by the new rules – giving them the opportunity to escape the new rules where they are non-resident in the 2025/26 tax year. 

Action point – if you have assets caught by UK Inheritance Tax or are likely to become Long Term Resident, it is worthwhile reviewing the position and whether it is best to take steps now to reduce your exposure, bearing in mind that you will be liable to UK IHT on your worldwide estate once you become Long Term Resident.

UK Inheritance Tax for UK assets

Assets in the UK – such as land and property in the UK, shares in UK companies and money held in UK bank accounts – remain subject to UK IHT regardless of the owner’s residence status. 

Since 6 April 2017, rules have applied that bring UK residential properties owned via offshore companies into the UK IHT charge in certain situations. From 6 April 2026, these rules were extended to included UK agricultural land owned by companies. This, combined with significant changes to the Agricultural Property Relief rules, will mean many non-residents that have an interest in UK farmland will now need to consider their UK IHT exposure.

Action point – if you hold UK assets, particularly those over the nil rate band of £325,000, you should consider getting advice on your potential exposure.

Impact on trusts

For trusts, there have also been significant changes to the rules applying from 6 April 2025. 

From an income and capital gains perspective, a non-dom settlor (the person who created the trust) can now be assessed on income and gains where they can benefit from the trust assets, unless they fall within the FIG rules. 

There is also the possibility of benefitting from the Temporary Repatriation Facility for gains arising within non-resident trusts, but the rules on this are complex.

In addition, the trust’s IHT position is now determined by the settlor’s Long Term Residence position at the date of any potential IHT charge (usually on 10-year anniversaries and on assets leaving the trusts.)  Further IHT charges can arise if a Settlor ceases to be UK long term resident (such that foreign assets are no longer exposed to UK IHT.)  For Qualifying Interest in Possession Trusts, the beneficiary’s long term residence status is also applicable.  The rules are complicated and will affect a wide variety of trusts set up by those that were non-doms, or by those that become non-long term resident, in a variety of ways.  The way the rules operate will be dependent on the particular situation for the trust involved.

Action point - it is important that the impact of the changes to the rules applying to trusts is fully considered.  It is important to note that changes to a Settlor’s residence status can have implications on the tax position and advice should be obtained on the implications beforehand.

Get in touch

If you have any questions or would like to discuss this topic further, please reach out to me here, or to your usual Johnston Carmichael contact.