On 6 April 2025 the United Kingdom stopped taxing individuals by reference to domicile. The remittance basis, which allowed long-term foreign residents to pay UK tax only on what they brought into the country, has been abolished and replaced by a regime tied to the length of tax residence. For some people that means four years of complete relief on foreign income; for others it means worldwide taxation and foreign assets falling within the scope of inheritance tax.
What changed in the taxation of foreign income from 6 April 2025
In short: domicile no longer determines the extent of an individual’s UK tax liability. According to the government’s official policy paper, the remittance basis was replaced from 6 April 2025 by a regime based on residence. Only one thing now matters: how many tax years you have been UK resident, and how many years you were non-resident before arriving.
The old arrangement worked like this. An individual whose domicile of origin lay outside the UK could claim the remittance basis each year and pay no UK tax on foreign income and gains as long as those amounts stayed offshore. In exchange they lost their personal allowance and, from the seventh and twelfth year of residence, paid an annual remittance basis charge. After fifteen years of residence they became deemed domiciled and lost the relief automatically.
The new structure is built on an entirely different principle. It does not ask where you are from or where the centre of your life lies. It asks whether you were non-UK resident for ten consecutive tax years before arriving — and if so, grants four years of complete relief on foreign income and gains. Once those four years end, you pay UK tax on your worldwide income like any other resident, regardless of domicile and regardless of whether the money ever reaches the UK.
Key dates of the reform
- 6 April 2025 — the remittance basis was abolished, the four-year relief on foreign income and gains was introduced, and inheritance tax moved to a long-term residence test.
- 2025-26 and 2026-27 tax years — the reduced rate under the temporary repatriation facility is 12%.
- 2027-28 tax year — the final year of the facility, with the rate rising to 15%.
- 26 November 2025 — additional anti-avoidance rules for trusts, announced at the Autumn Budget 2025, took effect.
The difference between the old and the new order is not simply a matter of rates. Planning used to revolve around where money was held and how it entered the UK. It now revolves around the calendar: how many years you have already been here, how many remain before the inheritance tax threshold, and in which tax year it makes sense to sell an asset or take a dividend.
Who is affected by the abolition of non-dom status
The reform hit four distinct groups, and the consequences differ so much between them that general advice is of little use here.
Recent arrivals. If you became UK resident in 2022-23 or later and were non-resident for the ten preceding years, you most likely fall within the four-year regime and will pay UK tax only on UK sources for the time being. This is the most favourable position of the four.
Long-term residents with foreign income. Anyone who has lived in the country for more than four years and previously used the remittance basis now reports worldwide income from 6 April 2025. For this group the transitional reliefs are the central question: the reduced rate on pre-reform funds brought into the UK, and the rebasing of assets for capital gains tax.
Those approaching the inheritance tax threshold. The tenth year of residence now carries independent significance: after it, foreign assets fall within the scope of UK inheritance tax. This applies to people who never claimed the remittance basis and never thought of themselves as “non-doms” at all.
Settlors of offshore trusts. The protection that once kept income arising inside settlor-interested structures outside the settlor’s current taxation no longer applies to anyone outside the four-year regime. Many structures built for the old rules now work against their owners.
What a review of your personal position under the new rules covers
- Eligibility check for the four-year regime based on residence history
- Calculation of the year the inheritance tax threshold is reached
- Assessment of foreign income and gains accumulated before the reform
- Analysis of mixed funds and the order in which they are separated
- Review of the conditions for rebasing assets to 5 April 2017
- Examination of trust structures and their tax consequences
- Action plan mapped across tax years through to 2028
The four-year FIG regime: who can use it
The four-year foreign income and gains (FIG) regime gives complete relief from UK tax on foreign income and capital gains during the first four tax years of residence. The conditions are set out in the GOV.UK guidance and come down to two points: you are UK resident under the statutory residence test, and you are within your first four years of UK residence following at least ten consecutive years of non-residence.
An important detail for those who arrived before the reform: if your four-year period began before 6 April 2025, you can use the regime only from 2025-26 onwards and only until the end of your original four-year window. Unused years are not carried forward and the window is not extended.
Amounts relieved under the regime can be brought into the UK freely — no further tax arises on remittance. That is the fundamental difference from the remittance basis, where bringing money into the country was precisely what created the tax event.
| Feature | Remittance basis (to 5 April 2025) | FIG regime (from 6 April 2025) |
|---|---|---|
| Basis of the relief | Domicile outside the UK | Length of residence and 10 years of prior non-residence |
| Duration | Up to 15 years of residence | 4 tax years |
| Tax on bringing funds in | Arose on remittance to the UK | Does not arise |
| Annual charge | Applied from the 7th and 12th year | None |
| Personal allowance | Lost when the relief was claimed | Lost when the relief is claimed |
| How it is claimed | Annually on the tax return | Annually on the tax return |
Key takeaways on the FIG regime
- The regime is claimed separately for each tax year on the Self Assessment tax return; it does not apply automatically.
- Claims can be made selectively, on particular sources of foreign income rather than on all of them.
- The four years run from the start of residence, not from the date of the first claim.
- UK sources of income remain taxable in the ordinary way and fall outside the regime.
- A detailed breakdown of the conditions is set out on the page about the UK FIG regime.
What a claimant gives up by moving to the four-year FIG regime
- Personal allowance for income tax purposes
- Annual exempt amount for capital gains tax
- Married couple’s allowance and transfer of allowance to a spouse
- Blind person’s allowance for individuals with impaired sight
- Requirement to claim the regime on the tax return every year
- Inclusion of claimed amounts in the adjusted net income calculation
- Inability to carry unused years forward to a later period
The personal allowance and the capital gains annual exempt amount are lost on any claim — even where relief is claimed on a single source of foreign income. In years with modest foreign income, the arithmetic therefore often shows that keeping the standard allowances is worth more than the relief itself.
How the FIG regime interacts with the statutory residence test
Eligibility for the four-year regime is determined not by the date of your move or the stamp in your passport, but by the outcome of the statutory residence test for each individual tax year. The UK tax year begins on 6 April, so someone arriving in March may already be resident for the year that is ending — with all that follows for the four-year count.
The same test applies in reverse. To accumulate ten years of non-residence, each of those years must pass the test on days spent in the UK, work ties, accommodation and family. A single year that unexpectedly turns out to be a resident year, because of a long secondment or an illness, removes eligibility for the regime. The official material on determining residence is collected in the GOV.UK tax residence guidance, and practical scenarios are set out on the page about UK tax residency.
Transitional reliefs for former remittance basis users
For those who spent years accumulating foreign income offshore and could not bring it into the UK without a tax charge, the reform provides two temporary reliefs. Both run for a limited period and both require the taxpayer to act — they rarely apply of their own accord.
The temporary repatriation facility (TRF)
The facility allows you to designate on your tax return foreign income and gains accumulated before 6 April 2025 and pay a fixed reduced rate on them. Designated amounts can then be brought into the UK with no further tax, regardless of when they were originally earned. The rates are set out in HMRC’s manual and rise in the final year of the facility.
| Tax year | Rate on designated capital | Comment |
|---|---|---|
| 2025-26 | 12% | First year of the facility |
| 2026-27 | 12% | Reduced rate maintained |
| 2027-28 | 15% | Final year, rate increased |
The facility is open to an individual who is UK resident in the year of designation, has been subject to the remittance basis for at least one tax year, and holds funds falling within the definition of qualifying overseas capital. Designating someone else’s funds is not possible: the right belongs to the person who would be chargeable were the amounts remitted.
Rebasing for capital gains tax
The second relief concerns foreign assets held personally. On a disposal made on or after 6 April 2025, the gain may be measured not from the historic acquisition cost but from the value of the asset on 5 April 2017. For assets bought in the early 2010s that have appreciated substantially, the difference in the tax base can be considerable.
The relief is not available to everyone. In practice the conditions are these: you were neither UK domiciled nor deemed domiciled before 6 April 2025; you claimed the remittance basis for at least one tax year between 2017-18 and 2024-25; and the asset was situated outside the UK and remained so throughout the period from 6 March 2024 to 5 April 2025. Rebasing applies by default, but it can be disapplied by election — which is sometimes preferable where the 2017 value was higher than the current one.
Both reliefs are time-limited and both interact with each other and with the mixed fund rules. The practical order of work is usually the same: first establish what is actually held in the offshore accounts, and only then decide which amounts to designate and in which year.
Support under the new rules
Tax support when your UK status changes
Diagnosis of the tax position
Residence history, eligibility for the four-year regime and the year the inheritance tax threshold is reached.
Work on mixed funds
Separating clean capital, income and gains in offshore accounts and preparing amounts for designation.
Modelling of transitional reliefs
Comparing options year by year: designating capital, rebasing assets or electing to disapply rebasing.
Tax returns and HMRC correspondence
Preparing Self Assessment, making the relevant claims and responding to enquiries from HMRC.
Inheritance tax: the move to a long-term residence test
The longest-running consequence of the reform concerns inheritance tax rather than income tax. From 6 April 2025 domicile no longer defines the scope of the charge. Under HMRC’s inheritance tax manual, an individual is a long-term UK resident once they have been UK resident for at least ten of the previous twenty tax years. From that point their worldwide assets, not merely their UK ones, fall within the charge.
The standard rate of inheritance tax is 40% and the threshold is £325,000; where a home is passed to children or grandchildren the threshold can rise to £500,000. Current figures are published on the GOV.UK inheritance tax page. For a family holding foreign property and an investment portfolio, crossing the ten-year mark means reassessing the entire ownership structure.
Equally important is the other side of the rule — the so-called tail. Leaving the UK does not end long-term resident status immediately: it continues for a number of further tax years, and how many depends on how long you lived in the country.
| Years of residence out of the last 20 | Years of non-residence before status ends |
|---|---|
| 10–13 | 3 years |
| 14 | 4 years |
| 15 | 5 years |
| 16 | 6 years |
| 17 | 7 years |
| 18 | 8 years |
| 19 | 9 years |
| 20 or more | 10 years |
A separate rule closes the structure off completely: after ten consecutive tax years of non-residence an individual ceases to be a long-term UK resident whatever their earlier history. That is the same ten-year period that opens access to the four-year regime on a return, which makes it convenient to plan departure and possible return on a single timeline. Wills and the transfer of assets to the next generation are covered on the page about wills and inheritance in the UK.
Offshore trusts after the removal of protections
Before the reform, settlor-interested trusts holding foreign assets worked as a reliable perimeter: income and gains arising within the structure were not taxed on the settlor until distributed. The reform removed that protection for everyone outside the four-year regime. In practice, income arising within the trust may now be attributed to the settlor on a current-year basis — even where not a single pound has been distributed.
The inheritance tax perimeter changed as well. The scope of the charge on trust property is now determined by the settlor’s long-term residence status rather than their domicile. The Autumn Budget 2025 added an anti-avoidance rule: where trust assets move from UK to non-UK situs after the settlor ceases to be a long-term UK resident, a charge arises. The rule applies from 26 November 2025 and closes off attempts to manage the perimeter by relocating assets.
For owners of existing structures this is not a reason for hasty unwinding. A trust set up before the reform may remain a sound instrument for management and asset protection, but its tax efficiency needs to be recalculated. In practice the answer is almost always specific to the case: sometimes it is enough to change the pattern of distributions, sometimes restructuring is worth considering, and sometimes the structure is best left as it is. Related questions are covered on the page about international tax and estate planning.
What the work costs and how long it takes
There is no single figure for work on a tax position: it depends on the number of jurisdictions, the number of accounts, whether trusts are involved and how many tax years have to be reconstructed. The table below sets out the indicative structure of the work and what drives its scope. A precise quote follows the initial consultation, once the asset base and residence history are clear.
| Stage of work | What drives the scope | Indicative timeframe |
|---|---|---|
| Initial consultation and assessment | Completeness of the data supplied on residence and assets | 1–2 weeks |
| Mixed fund analysis | Number of accounts and jurisdictions, depth of transaction history | 3–8 weeks |
| Modelling of transitional reliefs | Number of assets considered for rebasing | 2–6 weeks |
| Preparation of the tax return | Number of income sources and claims to be made | 2–4 weeks |
| Review of trust structures | Number of structures and volume of constitutional documents | 4–10 weeks |
Return deadlines are driven by HMRC’s calendar rather than by the pace of the adviser: an online return for a tax year is due by 31 January following the end of that year, and the tax is payable by the same date. Current deadlines are published on the GOV.UK page on Self Assessment deadlines. The practical conclusion is straightforward: complex multi-jurisdiction cases are better started in the summer or early autumn than in December.
Five stages of work on your tax status after the reform
The sequence is much the same in almost every case and differs only in the depth of each step. Below is the client journey from the first conversation to a stable tax position several years ahead. Select a stage to see the detail.
Initial consultation and assessment of the tax position
Analysis of offshore accounts and accumulated amounts
Choice of transitional reliefs and supporting calculations
Filing the return and making the relevant claims
Managing the status up to the inheritance tax threshold
Documents you will need
The completeness of the source material affects timescales more than the complexity of the case itself. The following package is usually required — some of it gathered by the client, some requested from banks and trust administrators.
- Passports and records of days spent in the UK and elsewhere for every year since arrival.
- UK tax returns for previous years and evidence of the claims made in them.
- Bank statements for offshore accounts showing the history of receipts and transfers.
- Acquisition documents for foreign assets: contracts, valuations and broker reports.
- Constitutional documents for trusts and companies, together with administrators’ accounts.
- Title documents for foreign and UK property, including tenancy agreements.
- Details of tax obligations in other jurisdictions and of tax already paid there.
Common mistakes when moving to the new regime
Most problems arise not from aggressive planning but from inertia: people carry on acting under the logic of a remittance basis that no longer exists. The mistakes below are the ones that come up most often.
Assuming the four-year regime applies automatically. It is claimed on the return for each year separately. A year that is missed is not carried forward and cannot be recovered later.
Claiming the regime in a year with modest foreign income. Losing the personal allowance and the capital gains annual exempt amount can cost more than the tax on a small amount of foreign income.
Ignoring the ten-year inheritance tax threshold. It is reached regardless of whether you ever used non-dom reliefs, and regardless of nationality.
Remitting funds from a mixed account without prior analysis. The order in which transfers are treated as capital, income or gains is set by statute rather than by the taxpayer’s intention, and an ill-timed transfer creates a tax event where none was necessary.
Leaving decisions on the transitional reliefs until the last year. The reduced rate on designated capital rises in 2027-28, and reconstructing several years of account history takes weeks and sometimes months.
Leaving trust structures unreviewed. An arrangement that was efficient before 2025 may now attribute income to the settlor and sit within the inheritance tax perimeter at the same time.
Advantages of taking professional advice on the reform
- Reconstruction of residence history against the official tests
- Modelling of options across tax years rather than a single transaction
- Analysis of mixed funds before the first remittance to the UK
- Comparison of the transitional reliefs against each other
- Preparation of the return with foreign income supplementary pages
- Handling of HMRC correspondence when enquiries are received
- Coordination with trust and estate planning specialists
Practical examples
Three situations occur more often than others. The figures are illustrative and are given to show the logic of the calculation, not as a promise of any particular outcome.
An entrepreneur who arrived in 2023. Lived outside the UK for twelve years before the move. Main income is dividends from a foreign company. Claims the four-year regime and, until 2026-27, pays UK tax only on UK sources while transferring dividends into the country freely. In parallel, preparation begins for 2027-28, when the regime ends and the way income is drawn will need to be revisited.
A resident of eight years with savings in an offshore account. Previously used the remittance basis; the account mixes clean capital, interest and gains from share disposals. The four-year regime is unavailable. The work centres on analysing the account and designating the accumulated amounts at the reduced rate before the end of 2026-27, while it still applies.
A family that has lived in the country for eleven years. The inheritance tax threshold has already been crossed: foreign property and an investment portfolio now sit within the charge. The key question is not income tax but the ownership structure and the will, together with a calculation of the tail should the family move to another jurisdiction.
Imperial & Legal has worked through comparable situations in real client stories — with the starting facts, the calculations and the outcome.
Client stories on tax planning
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One of those clients explained why he addressed the tax question straight after his move rather than several years later.
As an experienced businessman, I believe that if there is an opportunity to optimise your expenses, you should take it! When I moved to the UK, I immediately became interested in legal ways to reduce my tax burden, but I decided to entrust the solution to this issue to professionals, so I turned to Imperial & Legal again. The specialists of the company did everything at the highest level!
Staying in the UK or changing residence: how to compare
Since the reform this question has stopped being emotional and become arithmetical. What needs comparing is not the headline rates in two countries but the total burden over several years, taking account of the inheritance tax tail and the cost of the move itself. The table below sets out the parameters worth placing side by side.
| Comparison point | Staying in the UK | Changing tax residence |
|---|---|---|
| Foreign income | Fully taxable after four years of residence | Depends on the rules of the new jurisdiction |
| Inheritance tax | Worldwide assets in scope after 10 of 20 years | Status continues for 3 to 10 years after departure |
| Transitional reliefs | Available until the end of 2027-28 | Designation requires UK residence in the year of the claim |
| Returning later | No waiting period involved | Four-year regime available after 10 years of non-residence |
| Cost of the decision | Tax advice and restructuring | Moving the family, changing schools, selling or keeping the home |
In practice the choice is rarely binary. A middle path often works best: use the transitional reliefs while they are available, put the ownership structure in order, and only then decide on residence — without the pressure of a deadline.
What is worth doing in the near term
The reform removed the old logic of planning, but in exchange it gave a predictable calendar. The key dates are known well in advance: the end of the four-year window for new residents, the rate increase on designated capital in 2027-28, the tenth year of residence for inheritance tax. All of this can be worked out today and spread across tax years instead of being decided in a rush in January.
The minimum set of steps looks like this: reconstruct the precise residence history, establish the date the ten-year threshold is reached, analyse the structure of offshore accounts, assess the potential effect of rebasing, and check how the reform has affected any existing trusts. That is enough to know where you stand and which decisions cannot wait.
This material is provided for information only and does not constitute individual tax or legal advice. The rules apply according to particular circumstances, double taxation agreements and any subsequent changes in legislation.
