Big Changes Ahead for Foreign-Domiciled Individuals in the UK: Here’s What You Need to Know
The Autumn Budget 2024 confirmed substantial changes for foreign-domiciled (non-dom) individuals in the UK, especially those who have previously benefited from tax advantages under the remittance basis. Effective April 2025, the new tax rules will bring major implications. Here’s an overview of the key updates and what they mean for affected individuals.
End of the Remittance Basis for Non-Doms
Starting April 6, 2025, foreign-domiciled individuals who are UK residents will no longer have access to the remittance basis of taxation, which previously allowed non-doms to keep foreign income and gains outside the scope of UK tax if not brought into the UK. This change means that all UK residents will be taxed on their global income and gains, regardless of where those funds are held.
Introducing the FIG (Foreign Income and Gains) Regime
Under the new FIG regime, worldwide income and gains of UK residents will be subject to UK tax. However, for those newly arriving in the UK who haven’t been residents in the previous 10 years, foreign income and gains will be exempt from UK tax for their first four years of residence. This exception provides a window for new arrivals but underscores the need for careful financial planning.
Transitional Provisions and Reduced Tax Rate on Unremitted Gains
For those who relied on the remittance basis before April 2025, there are transitional rules to ease the shift. During the first three years of the FIG regime, a reduced tax rate will apply to previously unremitted foreign income and gains brought into the UK, allowing affected individuals to access these funds while paying a lower tax rate.
Additionally, protections associated with trusts used by non-doms will be modified, meaning some previously protected assets may now face tax charges.
Capital Gains Tax (CGT) Rebasing
To further ease the transition, foreign-domiciled individuals who have used the remittance basis in the past will have the option to rebase the CGT cost of foreign assets owned as of April 5, 2017, to their value on that date. This could significantly reduce the CGT due on future disposals, helping to lower tax liabilities under the new rules.
Inheritance Tax (IHT) and Overseas Workday Relief Updates
Other adjustments include changes to IHT rules, meaning previously exempt assets of non-doms may now fall within the UK’s tax reach. Additionally, updates to Overseas Workday Relief will impact non-doms who were previously exempt from UK tax on income derived from non-UK work duties.
Take Action – Plan Ahead for 2025 and Beyond
These changes mark a dramatic shift for foreign-domiciled individuals in the UK. Navigating the FIG regime and understanding transitional provisions will require careful planning to minimize potential tax impacts. We strongly advise anyone affected to seek professional guidance.
Need assistance? Contact us at Merranti Accounting for personalized advice on managing the transition to the FIG regime, understanding CGT rebasing, and optimizing your tax strategy for the new regulations.
Merranti Accounting – Helping You Stay Ahead of Tax Changes.
