If you’re a Brit planning to return to the UK after years of living abroad, a major tax shake-up is coming your way.
From 6 April 2025, the UK is switching to a residence-based tax system, moving away from centuries of domicile-based rules.
That means your tax status will depend entirely on whether you’re considered a UK resident, not where your parents are from or where your wealth is held.
If you’re a former expat returning to live in the UK, whether for family, work, or retirement, this change could significantly impact how your income, investments, and estate are taxed.
Let’s break it down.
Why Is the Tax System Changing?
Out with the old: Domicile-based taxation
Under the current system, if you’re a “non-dom” (non-domiciled individual), you can choose the remittance basis – meaning you only pay UK tax on foreign income and gains if you bring them into the UK.
In with the new: Residence-based taxation
From April 2025, it’s all about where you live.
If you’re UK resident, you’ll be taxed on your worldwide income and gains, regardless of where your assets are or how long you’ve lived overseas.
This brings the UK in line with many other countries (and removes the long-standing perks for internationally mobile individuals).
Who Will This Affect?
This change will impact:
- Brits returning to the UK after years abroad
- Long-term non-doms living in the UK
- Non-residents with UK property or business interests
- Anyone with offshore income, trusts, or foreign investments
If you’re coming back to the UK, especially after many years away, you need to understand how residency is defined and how your global wealth will be taxed.
How Does HMRC Decide If You’re a UK Tax Resident?
HMRC uses the Statutory Residence Test (SRT).
Here’s the simplified version:
1. How many days are you in the UK?
- 183 days or more in a tax year → You’re automatically UK resident.
- Fewer than 183 days? → You’ll be assessed based on your UK “ties”.
2. What counts as a UK tie?
✔️ Family tie – A spouse/partner or minor children live in the UK
✔️ Accommodation tie – You have a UK home that you use
✔️ Work tie – You work in the UK for 40+ days in the tax year
✔️ 90-day tie – You’ve spent 90+ days in the UK in either of the last two tax years
✔️ Country tie – The UK is where you spend the most time that year
The more ties you have, the easier it is to be classed as UK resident — even if you’re under 183 days.
The UK uses the Statutory Residence Test (SRT) to determine whether you are a UK resident for tax purposes. Check your status now . . .
What Happens Once You Become UK Resident Again?
If you’re UK resident from April 2025 onward, here’s what changes:
🔹 You’ll be taxed on your worldwide income and gains
Offshore income, dividends, interest, rental income, business profits – these will all be taxable in the UK.
🔹 The remittance basis is abolished
You can’t keep offshore income tax-free anymore – even if you don’t bring it to the UK.
🔹 Offshore trusts lose their protection
Offshore trusts used to be a popular tool to shield assets.
From April 2025, if you’re UK resident, income and gains inside offshore trusts will be taxable.
Special Rules for Returning Expats
If you’ve been a non-resident for at least 10 years, you may qualify for transitional relief.
You get:
- Four years of tax relief on foreign income and gains — as long as they remain offshore
- The ability to rebase certain assets to their April 2019 value, reducing future capital gains tax
- The option in some cases to only pay tax on 50% of foreign income during the transition
This creates a valuable window to restructure your finances before full UK taxation kicks in.
Case Study: A Retired Expat Returning to the UK
Meet Sarah
Sarah is a 62-year-old British citizen who has lived and worked in Saudi Arabia since 2015.
She’s enjoyed a high tax-free salary and has built up significant offshore savings and investments, including an offshore investment bond and a rental property portfolio held outside the UK.
Now, she’s planning to return to the UK in early 2026 to retire and be closer to her children and grandchildren.
What Happens When She Returns?
Because she will spend more than 183 days in the UK in the 2025/26 tax year, Sarah will be automatically classed as UK tax resident under the Statutory Residence Test.
But here’s where it gets interesting:
- Sarah has been non-UK resident for more than 10 consecutive years.
- That makes her eligible for the four-year “FIG” (Foreign Income and Gains) relief starting in the year of her return.
How FIG Relief Works for Sarah
From 2025/26 to 2028/29, Sarah will not be taxed on her foreign income or gains as long as she keeps them offshore and does not bring them into the UK.
This creates a valuable window for tax-efficient planning and restructuring.
But from 2029/30 onward, she’ll be taxed on all worldwide income and gains, just like any other UK resident.
Sarah’s To-Do List Before Returning
✔️ Segregate her offshore income and capital – She should keep her pre-arrival income and gains in a separate account to avoid accidental “remittance” to the UK.
✔️ Review her offshore investment bond – Offshore bonds can be a useful tool in retirement as gains can be deferred and withdrawals structured to be tax-efficient.
✔️ Rebase or dispose of foreign assets – Sarah owns shares purchased before April 2019. By taking advantage of rebasing relief, she can reset the acquisition value of those shares to their April 2019 market value, potentially reducing future UK capital gains tax.
✔️ Consider whether to sell foreign property now or later – If she’s thinking about selling her overseas rental property, doing so before she becomes UK resident could save thousands in capital gains tax.
✔️ Update her estate plan – Returning to the UK for retirement could expose her entire estate to UK inheritance tax from 2029/30.
✔️ Track her UK days and ties – If she delays her return, she must avoid triggering UK tax residency prematurely, especially in the 2024/25 tax year, which is the last year under the old regime.
✔️ Get advice on pension access – Sarah has a SIPP and an old defined benefit scheme. Drawing pension income in a way that aligns with her tax residency and income needs will be crucial.
💡 Key Insight
For someone like Sarah, returning to the UK for retirement brings emotional rewards but also potential tax traps.
With careful planning, she can use the four-year relief window to clean up, simplify, and optimise her finances, ensuring a smoother transition into retirement and long-term UK tax residency.
Inheritance Tax (IHT) — Another Big Change
Historically, UK IHT has been based on domicile.
But under the new rules, IHT has also shifted to a residency-based model, meaning:
- If you’ve been UK resident for 10 of the last 20 years, your entire estate (including overseas assets) could be subject to IHT.
- Expats returning to the UK for retirement or family reasons could be caught out if they stay too long.
Still abroad? You’ll continue to face UK IHT only on UK assets like property or pensions (from April 2027).
What About Non-Residents?
If you’re not UK resident, the rules haven’t changed much:
- You’ll still be taxed on UK-sourced income (like rent or pensions).
- You won’t be taxed on foreign income or gains unless you return to the UK.
- You’ll still be subject to UK IHT on UK property and pensions (from April 2027).
Returning to the UK? What Should You Do Right Now?
- Track your UK days
- Organise proof of residency or non-residency
- Review non-UK investments and trusts
- Plan your return strategically
- Get advice on estate planning
I’m Moving Back to the UK, How Does the UK’s Move to a Residence-Based Tax System Affect Me?
FAQs
Not quite — but it’s changing.
From April 2025, if you’re classed as UK resident, you’ll be taxed on your worldwide income and gains going forward.
However, if you’ve been away for 10+ years, you could get 4 years of tax relief on foreign income and gains, as long as you don’t bring them into the UK.
If you’ve been abroad for over a decade, you’ll likely qualify for the four-year FIG relief, which gives you time to get your offshore finances in order before the UK taxman starts knocking.
If you’ve been abroad for less than 5 years, you’ll want to make sure you don’t fall foul of the Temporary Non-Residence rules.
Yes, and it can actually be a smart move.
Offshore bonds offer tax deferral, meaning you can control when and how much income you draw.
During your relief period, you might even be able to withdraw without triggering UK tax, but timing is everything, so get professional advice.
Possibly! Once you’re UK resident, any gains on selling foreign property are potentially taxable.
If that property has gone up in value while you were abroad, selling before returning could save a lot in capital gains tax.
Timing here is crucial.
Not anymore.
From 6th April 2025, UK residents will be taxed on any income or gains arising within offshore trusts.
They’ll no longer be a shelter from UK tax, so if you’re relying on one, it’s time for a rethink.
Yes.
You might still be classed as UK tax resident if you spend enough days here or have strong UK ties (like a home or close family).
The Statutory Residence Test can sneak up on you, so it’s worth keeping an eye on it.
Almost certainly.
Once you’ve been UK resident for 10 of the last 20 years, your entire estate, even overseas assets, could be caught by UK inheritance tax.
For returning retirees, this is one of the biggest long-term planning concerns.
Track your days, review your financial structure, and speak to a qualified cross-border financial adviser well before your return.
Not really.
Non-residents will still be taxed only on UK income, not foreign income.
That’s a big red flag.
If you remit foreign income to the UK during the four-year FIG relief window, it becomes taxable, even if it was meant to stay offshore.
To avoid this, make sure your offshore income and capital are held in separate, clearly labelled accounts, and get help setting this up properly.
Final Thoughts
The UK’s switch to a residence-based tax system is a big deal, especially if you’ve been living abroad and are thinking about returning.
It’s not just about income tax.
It affects your estate, your trusts, your investments, and even how long you can spend in the UK without triggering unexpected tax bills.
The sooner you start planning, the more options you’ll have.
Talk About It
Schedule a call today if you are planning your return to the UK and want to discuss your options.
