End of the Remittance Basis Update

In March 2024, during the Budget process for the new year, the UK government announced plans to end the remittance basis. This preferential tax treatment for non-domiciled residents will no longer be available starting the next tax year which begins on 6 April 2025.

In its place, a new treatment on foreign income and gains is expected to be developed. The details of the tax reform have not been announced. But it is known that the new treatment will be based on the concept of tax residency, for the determination of which will be used the already existing test. It is preliminary known that the reform will exempt new tax residents from paying tax on income earned outside the UK and not brought into the country for the first 4 years. After 4 years, residents will be obliged to pay tax on all income regardless of its origin.

On 31 July 2024, the new government confirmed its intention to continue this reform proposed by the previous government.

What is Remittance Basis?

The remittance basis is a UK tax treatment for foreign nationals who reside in the UK but have income outside of the country. Under this treatment, such individuals, referred to as non-domiciled residents, could only pay tax on income remitted to the UK. This regime was beneficial to many foreign investors and entrepreneurs who could minimise their tax liability by not remitting all their overseas income into the UK.