Key Updates from April 2025

 

Sweeping tax reforms affecting non-domiciled individuals in the UK came into effect on 6 April 2025. These new measures replace the long-standing system that allowed certain residents to benefit from favourable treatment on foreign income and assets. The shift aligns the UK more closely with a residency-based approach, with significant implications for those with international financial ties, including expatriates returning to the UK and UK nationals looking to emigrate permanently.

 

A Look Back: The Old System

 

Under previous rules, individuals not considered domiciled in the UK were able to use the remittance basis, a tax arrangement allowing foreign income and gains to remain outside the scope of UK tax, provided they weren’t brought into the country. In addition, non-UK assets were often excluded from Inheritance Tax (IHT) liability.

 

UK nationals, however, frequently struggled to qualify as non-domiciled for tax purposes, especially if they maintained strong ties to the UK, even after moving abroad.

 

What’s New?

 

The 2025 reform introduces a fundamental change: residency, not domicile, now determines tax status. The remittance basis is effectively abolished. Individuals who have been UK tax residents for more than four of the past ten tax years will now be taxed on their worldwide income and gains, regardless of whether they bring funds into the UK.

 

This change signals the end of domicile-based tax exemptions for long-term UK residents and moves toward a uniform system in which all taxpayers, regardless of origin, are treated similarly.

 

The Four-Year FIG Exemption

 

One key transitional measure is the Foreign Income and Gains (FIG) regime. It offers a four-year period of tax relief on overseas income and gains to individuals returning to the UK after at least ten consecutive years abroad. This exemption only applies if funds are kept offshore, any remittance into the UK during this period may trigger tax charges.

 

After the four-year window expires, global income and gains become fully taxable under standard UK tax rules.

 

Temporary Repatriation Offer

 

As part of the reform, a limited-time opportunity, the Temporary Repatriation Facility (TRF), allows individuals to bring historic offshore income and gains into the UK at reduced tax rates:

• 12% for the 2025/26 and 2026/27 tax years
• 15% for the 2027/28 tax year

 

This facility applies only to income and gains generated before 6 April 2025 that have not yet been taxed in the UK. It offers a strategic chance to “cleanse” offshore wealth at lower tax costs before standard rates apply.

 

Inheritance Tax Adjustments

 

Changes also extend to the UK’s inheritance tax framework. From 6 April 2025:

 

• Those who have been UK tax resident for 10 of the past 20 years are now liable for IHT on their global assets.
• IHT liability may continue for a number of years after someone leaves the UK, depending on their residence history.

 

UK-based assets remain subject to IHT for all individuals, regardless of where they live or claim domicile.

 

What It Means for You

 

These reforms represent one of the most significant shake-ups of the UK’s international tax landscape in recent memory. Individuals who previously benefited from non-dom status will find that many of those advantages have now disappeared — particularly those who have spent significant time in the UK.

 

Nonetheless, planning opportunities still exist, especially under the TRF and FIG provisions. Anyone with substantial foreign income or assets, or those considering a move to or from the UK, should act now to review their tax position.

 

Take Action

 

Given the complexity and long-term impact of these reforms, professional advice is crucial. Understanding how these changes apply to your situation can help you avoid unexpected liabilities and optimise available reliefs.

Next Steps

If you’re unsure how the new rules might affect your financial plans, please reach out to us and we can support you. Email us by clicking here.