As we enter a new tax year, it’s important to take stock and review your tax and financial affairs. With new rules taking effect from 6 April 2025, the start of the new tax year provides you with an opportunity to consider your position and the impact that the changes will have on you. In this article we set out some of the main changes to the “non-dom” rules and the key issues that you should be aware of.

Introduction

From 6 April 2025, those who are tax resident in the UK but domiciled overseas will no longer be able to benefit from the ‘remittance basis’ of taxation. However, a number of new transitionary rules have been brought into effect from 6 April 2025 to ease the tax burden for some non-domiciled individuals. For those affected, they should review their UK tax position to determine whether they would qualify for any of these transitionary provisions and whether it would be beneficial for them to utilise them. See below further details:

Foreign income and gains (“FIG”) Regime for New Arrivals

Individuals who became UK tax resident in the 2022-23 tax year or later (after 10 consecutive tax years of absence from the UK) will qualify for the FIG regime. Therefore, anyone who arrived in the UK prior to the 2022-23 tax year will not be eligible for the FIG regime.

Under the FIG regime, for qualifying individuals (and trusts), no UK tax would fall due on their overseas income and gains for up to the first four years of UK residency. However, for those who arrived in the UK between 6 April 2022 and 5 April 2025, the four-year window will apply from the date of arrival and not 6 April 2025.

In essence, the FIG regime is a simpler version of the old remittance basis without the requirement to track FIG arising during the period of claim.

Temporary Repatriation Facility (TRF)

Individuals who have claimed the remittance basis can designate and remit previously unremitted FIG that arose prior to the changes at a reduced rate. The TRF will be available for three tax years, with rates set at 12% for the first two years and 15% in the final year.

Therefore, non-doms may wish to review their historic position in respect of previously unremitted FIG and consider whether they wish to take advantage of the TRF by bringing funds into the UK.

Rebasing for Capital Gains Tax (CGT)

Subject to specific conditions applying, from 6 April 2025, certain individuals who have previously claimed the remittance basis will be able to rebase their foreign capital assets to market value on 5 April 2017.

Those affected may wish to review their investment portfolio and consider the impact that the rebasing will have on their potential UK CGT exposure should they wish to trigger a disposal and realise a gain on their overseas investments and assets. Where applicable, consideration will also need to be given to impact of the FIG and TRF in respect of any disposals which may be realised.

Inheritance Tax Changes

Long-term UK tax residents will now be liable for IHT on their worldwide assets if they have been UK tax residents for 10 or more of the previous 20 years. Transitional rules will apply for those who are non-UK resident from 6 April 2025 onwards. 

Those who may be impacted may wish to review their potential UK IHT exposure should they be caught by these new changes, taking into account the restrictions to the availability of Agricultural Property Relief (APR) and Business Property Relief (BPR), where applicable. Consideration should also be given to the relevant overseas tax jurisdiction where relevant.

Offshore Trusts

Those with offshore trust structures should liaise with trustees regarding the impact of these changes, particularly regarding the abolition of the remittance basis and the introduction of the FIG regime and especially when it comes to the timings of any future trust distributions.

Consideration will need to be given to the longer term IHT position of the trust and the potential IHT charges which may arise in the future and how best to manage any potential future IHT exposure.