Rachel Reeves confirmed in the Autumn Budget 2024 that tax changes for non-doms, first announced in the spring, will be implemented from 6 April 2025. Following the release of detailed guidance and draft legislation, finally we have some much-needed clarity. We can now help our clients to navigate these new rules and identify any windows of opportunity.
The new Foreign Income and Gaines (FIG) regime
As expected, a new residence-based regime will be introduced from 6 April 2025, known as the Foreign Income and Gains (FIG) regime. This will mark the end of the remittance basis, currently available for non-doms.
Under the FIG regime individuals will only pay tax on UK source income and capital gains. Foreign income and gains will escape UK tax, regardless of whether these are remitted to the UK.
William Welch has explored in his article how the FIG regime will apply to UK resident beneficiaries and settlors of offshore trusts.
Whos is Eligible?
The FIG regime will be available to individuals:
- For their first four years of UK tax residence
- After a period of 10 consecutive years of non-UK residence
Key points:
- The regime is not just available to non-doms but also UK nationals and domiciled individuals, who are currently unable to benefit from the remittance basis. This opens up tax planning opportunities for some UK domiciled individuals who live abroad and are considering a return to the UK.
- The four-year FIG window includes any tax year where you are treated as UK resident under the Statutory Residence Test. A split year, or a year where you are treaty resident elsewhere, will still count as a full year of UK residence. As a result, in some cases, the FIG window will be much shorter than four years (it could be just over 24 months). In order to maximise the benefits of the FIG regime, the timing of your arrival in the UK will be key.
- Existing tax residents who have been in the UK for fewer than four years on 6 April 2025 can still benefit from this new regime until the end of their 4th year of residence. For example, an individual who became resident in the UK for the first time in 2022/23 will have been resident in the UK for up to three tax years on 6 April 2025. They will be able to benefit from the new regime for 2025/26 (their 4th year).
- If an individual leaves the UK during the 4-year period, they can claim the FIG regime for any of the qualifying tax years remaining on their return to the UK. For example, if you are non-UK tax resident for years 2 and 3 but resume residence in the UK in year 4, then the FIG regime can be claimed for this 4th
- Previous remittance basis users who return to the UK after a period of 10 consecutive years of non-UK residence, can access the FIG regime for any foreign income and gains that arise in the following four-year period. Any foreign income and gains previously sheltered from UK tax via a claim for the remittance basis will remain taxable upon remittance. Although they may be able to use the Temporary Repatriation Facility (TRF) to reduce the tax payable (further details in Alison Palmer’s article).
- Not all foreign income and gains will qualify for relief. For example, chargeable event gains on offshore investment bonds will not be relievable under the FIG regime.
- Eligibility for overseas workday relief (‘OWR’) will largely be aligned with the FIG regime from 6 April 2025. This is a relief currently available to non-doms on their earnings relating to overseas workdays that are paid and retained overseas. Helen Davis has covered these changes in more detail.
