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In a number of measures announced by the Chancellor Rachel Reeves in the October UK Budget, one of the most significant changes affecting those moving to or from the UK was the confirmation of the previously announced decision to abolish Non-Domicile status and replace this with a new residence-based test known as the “Foreign Income and Gains” regime (or “FIG”, for short) from 6 April 2025.

Now that the detail has been published, what does that mean in practice and how will this affect your tax position?

The current rules allow anyone that is non domiciled in the UK (principally if your father considered their home to be outside of the UK at the date of your birth, or if you leave the UK with no intention to return) to typically enjoy tax free overseas income and gains for the first 7 years of residency (subject to keeping this outside of the UK), with an option to extend this to 15 years by paying an annual charge. Global assets could also be exempt from Inheritance Tax until you became deemed domiciled – which would apply where a non-domiciled individual had been resident in the UK for at least 15 of the past 20 years.

The key changes with the introduction of the new FIG regime (applicable from 6 April 2025) will be:

1. A UK tax exemption will apply to foreign income and gains for the first 4 tax years of residency (effectively reducing this from the current 7 years, with no option to extend). An individual will be eligible for the FIG regime provided that they have been non-resident in the UK for 10 or more years prior to their arrival.
   1. If eligible and you arrived in the UK during or after the 2022/23 tax year, you will still get the balance of any 4-year period remaining.
   2. If you are currently utilising the remittance basis but arrived in the UK during or after the 2021/22 tax year, you will be required to declare worldwide income and gains from 2025/26 tax year onwards (if you continue to remain UK tax resident).
   3. The overseas income claimed as exempt in the 4-year FIG period from 2025/26 tax year onwards can be transferred to the UK without a tax charge – unlike the current regime which requires individuals to keep the funds outside of the UK.
   4. The regime will apply equally to UK and non-UK nationals, so can now be used by UK nationals who move back to the UK having been absent for 10 or more years – this was generally limited to non-UK nationals previously.
   5. Any overseas income and gains claimed as exempt under the FIG rules will need to be reported on a UK tax return – this differs from the current regime where only taxable remittances need to be declared, where eligible for the claim
2. Overseas assets will be within the scope of Inheritance Tax (IHT) where an individual has been a resident of the UK for at least 10 out of the previous 20 years before a chargeable event.

1. 1. If you are claiming non domicile status and have been resident in the UK for more than 10 years, overseas assets will be within the scope of IHT from the 2025/26 tax year onwards, reducing the current exemption by 5 years.
   2. If you are a UK national that moves overseas on a permanent basis, you can now benefit from an exemption from IHT on non-UK assets once you have been non-resident for 10 years – previously these assets continued to be caught in most cases.

1. An opportunity for those that have claimed non domicile status in a prior year to benefit from a Temporary Repatriation Facility (or TRF) allowing remittance of overseas income and gains with a reduced tax rate for three years from the 2025/26 tax year.

1. 1. This is a very attractive planning opportunity for those that had previously kept overseas income and gains offshore when claiming the remittance basis to now transfer this to the UK.
   2. The TRF reduced tax rates will be 12% in 2025/26 and 2026/27, rising to 15% in the 2027/28 tax year.

1. Overseas Workday Relief will be maintained but extended from 3 to 4 years.

1. 1. There will be a new financial cap on any claims made from 2025/26 which will be the lower £300,000 or 30% of qualifying employment income per tax year.
   2. There will be no requirement to keep earnings relating to overseas workdays outside of the UK or have salary paid to a qualifying overseas account from the 2025/26 tax year onwards – however, trailing payments relating back to 2024/25 (like an annual bonus) will be caught by the old rules even if paid in 2025/26 and may still need to be paid and kept outside of the UK to be eligible for OWR.

1. Rebasing of assets for capital gains tax purposes.

1. 1. If you have claimed remittance basis as a non-domicile but will be over the 4-year time period from the 2025/26 tax year and therefore ineligible for the new FIG regime, you will be able to rebase overseas assets back to their value on 5 April 2017 for capital gains tax purposes.

A full Budget analysis with details of all other changes arising can be viewed on our website here