Since 6 April 2025, the concept of domicile was removed from the UK tax system and replaced with a residence-based regime. An individual’s exposure to UK tax on foreign income and gains is now determined primarily by their residence history rather than their domicile status under common law.
Under the new rules, individuals who become UK tax resident after a period of non-UK residence may qualify for a limited exemption on foreign income and gains for their first four years of UK residence, provided they have been non-UK resident for at least the previous ten consecutive tax years. During this four-year period, qualifying foreign income and gains are not subject to UK tax, whether or not they are brought into the UK.
However, once an individual has been UK resident for more than four tax years, they are taxed on their worldwide income and gains on the arising basis, in the same way as other UK residents.
In addition, long-term UK residence remains highly relevant. Individuals who have been UK resident for a significant period will be fully within the scope of UK tax on their worldwide income and gains, and different rules may apply for inheritance tax purposes based on long-term residence.
Given the scale of these changes and the removal of what was previously a fundamental concept in UK tax planning, it is important that individuals with overseas income, gains or assets review their position carefully. HMRC is paying close attention to internationally mobile individuals and offshore matters.
This can be a complex area, and one HMRC are very interested in, so if ETC Tax can be of any assistance, please do not hesitate to get in touch with us.
Updated 8-8-26 – Original 7-8-22
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