The Foreign Income and Gains (FIG) regime will replace the current non-dom scheme, which was axed in the Spring Budget earlier this year by the Chancellor.
If you are an individual coming to the UK, specifically if you are a high-wealth individual and are looking to bring your business here, it is important you understand your new tax requirements and how you can reduce your liabilities through tax breaks and domestic allowances.
Failure to adapt to the new regime may lead to significant implications for your obligations as a UK tax resident.
Here’s the new rules
From 6 April 2025, the new regime will apply to individuals who have, or will, become a UK tax resident after a period of at least 10 consecutive years of non-residence.
For a period of four tax years commencing when the individual first becomes a UK tax resident, the individual will not (subject to making a claim) pay UK tax on their foreign income and gains arising in a tax year.
This is regardless of whether these funds are brought to the UK or not.
The new FIG regime aims to be simpler than the existing remittance basis rules.
This is because individuals will no longer be required to track their foreign income and gains or keep these funds offshore.
After the four-year period has elapsed, it will no longer be possible to claim tax relief under this regime and the individual will be subject to UK tax on their worldwide income and gains.
This is a major change from the existing rules and should be properly understood.
Here’s what it means for you
The new regime should apply equally to individuals who are UK-domiciled and non-UK-domiciled.
Potentially, suppose you are a UK domiciled individual and are returning to the UK after an extended period of at least 10 tax years of non-UK residence. In that case, you will benefit from the introduction of the regime (as long as you are currently not eligible to claim the remittance basis of taxation).
Your residence status (for the purpose of the FIG regime) will be determined using the Statutory Residence Test (SRT).
This test can provide individuals with certainty in relation to their UK residence status.
Although straightforward, it is important not to underestimate the complexity of the rules.
There are three parts to the test, which must be followed in this order:
- Automatic Overseas Tests
- Automatic UK Tests
- Sufficient Ties Tests
More information about the SRT can be found here: RDR3: Statutory Residence Test (SRT) notes – GOV.UK (www.gov.uk)
If you leave the UK temporarily within the four-year period in which you are eligible for the FIG regime, you will still be able to make a claim if you return to the UK in respect of the years that remain within the four-year period.
Your claim must be made within your Self-Assessment tax return each year in which you wish to rely on this relief.
You should know that if you elect to be taxed under the new FIG regime, you will lose your entitlement to the Income Tax Personal Allowance and Capital Gains Tax Annual Exempt Amount.
Here’s how to further reduce your liabilities through domestic allowances and exemptions
It is paramount you make full use of domestic allowances and exemptions if you wish to reduce your tax liabilities.
For example, you can rebase your Capital Gains Tax if the transitional provisions apply and you:
- Have previously claimed the remittance basis, and
- Are neither UK domiciled nor deemed domiciled by 5 April 2025
The transitional provisions for the end of the non-dom scheme apply to individuals who, on 6 April 2025, will have been tax resident for less than four years (following 10 consecutive years of non-residence).
If this applies to you, then you will be able to utilise the FIG regime for any tax year of UK residence which falls within the remainder of the four years period commencing when you became a UK tax resident.
A number of other transitional provisions have also been announced.
If on, or after 5 April 2025, you dispose of foreign assets held personally, you can choose to rebase that asset to its value as it was on 5 April 2019.
Any individual who is not eligible to claim relief under the new four-year regime will be liable to pay UK tax on any uplift in the value of the asset from 5 April 2019.
You can also reduce your foreign income by one year if you meet the following criteria:
- You move from a remittance basis to the arising basis from 6 April 2025, and
- You are not eligible for the new four-year FIG regime
If you qualify, only 50 per cent of the foreign income arising in 2025-26 will be subject to tax.
It is likely we will see significant changes in 2025 that will affect non-domiciled individuals if not understood and implemented properly – we recommend you seek the advice of Reanda’s international tax advisers today.
Reanda UK is a subsidiary of leading independent accountancy firm Grunberg & Co Limited. Our aim is to help businesses and individuals to navigate the UK’s world-renowned business and tax infrastructure, and to support them with their international ambitions. To find out how we can help you, please contact us.