From 6 April 2025, the UK tax system will move away from domicile-based taxation and instead apply a residence-based approach.
If you are a non-dom (non-domiciled individual) or a British expatriate planning to return to the UK, these changes will likely have a major impact on your tax position.
The changes mean that:
- All UK resident individuals will pay tax on their worldwide income and gains arising after 5 April 2025.
- The remittance basis of taxation will be abolished.
- A new four-year foreign income and gains (FIG) regime will be introduced for individuals returning to or moving to the UK after a ten-year period of non-residence.
- There will be a Temporary Repatriation Facility (TRF) allowing individuals to bring offshore funds into the UK at reduced tax rates for a limited time.
- Capital gains tax (CGT) rebasing will apply to certain personally held assets for remittance basis users.
- Inheritance Tax (IHT) will shift to a residence-based system, meaning domicile status will become largely irrelevant.
As you can imagine, the changes will necessitate a significant rethink of your tax and financial position if you are currently relying on the non-dom regime for support.
Who qualifies for the new four-year FIG regime?
One of the few transitional reliefs being introduced is the four-year FIG regime.
This will allow individuals who become UK tax residents after ten consecutive years of non-UK residence to claim relief from UK tax on their non-UK income and gains for the first four years of residence.
Importantly, this regime applies to British expatriates (‘Brits abroad’) returning after ten years overseas, as well as foreign nationals moving to the UK.
However, those using this regime will lose entitlement to the personal allowance for Income Tax and the CGT annual exemption.
CGT rebasing: A window of opportunity?
Individuals who have previously claimed the remittance basis between 2017/18 and 2024/25 may benefit from CGT rebasing.
This means assets will be rebased to their market value as of 5 April 2017, rather than their original acquisition cost, reducing taxable gains when those assets are disposed of.
However, trusts that have already benefitted from previous rebasing (to 5 April 2008 values) will not receive any further relief.
This could have significant implications for those with trust structures holding appreciating assets.
The Temporary Repatriation Facility (TRF)
The TRF will allow individuals to remit unremitted foreign income and gains to the UK at a reduced tax rate:
- 12 per cent for remittances in the 2025/26 and 2026/27 tax years.
- 15 per cent for remittances in the 2027/28 tax year.
This facility will be particularly useful for those with mixed offshore accounts or assets, as it provides an opportunity to bring funds into the UK at lower tax rates.
What should you do now?
With these changes coming into effect in just a few months, there are several key things for you to do:
- Assess your tax position – Work out how these changes will affect your personal tax liabilities.
- Review offshore assets – Consider the impact of CGT rebasing and whether to restructure assets before April 2025.
- Plan for repatriation – If you have unremitted income and gains, evaluate whether using the TRF makes financial sense.
The rules are complex, and expert tax advice is essential if you are going to manage the transition effectively.
Whether you are currently a non-dom or a UK expatriate planning to return, these changes could dramatically affect your tax planning.
The window to act is closing fast – now is the time to take stock and prepare.