On 30 October 2024, the Chancellor, Rachel Reeves, announced major changes to the tax rules for UK-resident, non-UK domiciled individuals, often known as “non-doms”.
These changes will affect how non-doms are taxed on foreign income and gains, marking a shift in the way the UK handles cross-border income.
Here, I’ll break down these new tax rules in straightforward terms, with a focus on the Foreign Income and Gains (FIG) Regime and what it means for you.
In tax year 2022/203 there were 83,300 non-doms resident in the UK.
Many of these individuals claimed the remittance basis to manage their tax liability on foreign income.
Despite this, they paid a total of £8.49 billion in UK income tax, capital gains tax and national insurance.
What Are the Current Non-Dom Tax Rules?
Currently, most people living in the UK are taxed on their global income and gains, which means the UK expects tax on earnings from all over the world.
However, if you’re a UK resident but not domiciled in the UK (non-dom), you have the option to claim the remittance basis.
This means you only pay UK tax on income and gains from UK sources, plus any foreign income and gains you bring into the UK.
To use the remittance basis:
- You’ll lose certain allowances like the personal income tax and annual capital gains tax allowances.
- There’s a levy after you’ve lived in the UK for over 7 years (£30,000 per year), rising after 12 years (£60,000 per year).
- After 15 years of UK residency, you’re considered “deemed domiciled,” which means you’ll be taxed on worldwide income as it arises, regardless of where it is.
But under the new FIG regime, this is set to change.
What Is the FIG Regime?
Starting from 6 April 2025, the new Foreign Income and Gains (FIG) regime will come into play.
It will apply not only to non-doms but also to UK citizens who have spent at least 10 years living outside the UK before returning, known as “qualifying new residents.”
How Does the FIG Regime Work?
If you qualify, here’s how the FIG regime will impact you:
- For four tax years from the time you become a UK resident again, you won’t pay UK tax on foreign income and gains—whether or not you bring these funds into the UK.
- After the four years have elapsed, you will be subject to UK tax on your worldwide income and gains.
- For individuals who, on 6 April 2025, have been UK tax resident for less than four tax years (following 10 consecutive years of non-residence, you will be able to utilise the FIG regime for any tax year of UK tax residence which falls within the remainder of the four-year period commencing when you became UK tax resident.
How the FIG Regime Compares to Current Non-Dom Tax Rules
How the FIG Regime Could Impact Non-Doms and Returning UK Expats
To illustrate how the FIG regime affects different expat scenarios, let’s look at two examples.
Case Study 1: Juan, a Non-Dom Senior Executive Working in London
Juan is a senior executive working for a global FMCG firm in London.
Originally from Argentina, he has been living in the UK since the 6th of April 2022 and currently uses the remittance basis of taxation to manage his UK tax exposure.
Under the remittance basis, he pays UK tax only on his UK income and any foreign income he brings into the UK, but he loses personal allowances and would face an annual fee starting in 2029 to continue using it.
When the FIG regime takes effect in 2025, Juan will be eligible for it, but not for the full 4 years.
This is because he would already have been resident in the UK for 3 years prior to the FIG rules kicking in
As a result, Juan can only enjoy his foreign income and gains tax-free in the UK for one additional year (2025-2026).
Juan’s Alternative Scenario
Had he moved to the UK on 6th April 2025 instead, Juan could benefit from the FIG regime for 4 full years.
Over that time, he would be able to avoid UK tax on his worldwide income and gains without needing to keep them offshore.
However, he would need to prepare for the end of this relief period in 2029 when UK tax would apply to his worldwide income and gains.
Global sea change?
It is not just the UK that is changing the rules with regards to overseas income.
Portugal has recently announced dramatic changes to its popular Non-Habitual Resident (NHR) program and Italy has increased its lump-sum tax to €200,000 per year for new applicants.
Case Study 2: Mike and Jules, Returning To the UK After 15 Years Abroad
Mike and Jules, a married couple originally from the UK, have been working in Dubai for 15 years and plan to retire in the UK in 2025.
Under the current rules, as UK-domiciled expats, they wouldn’t have been able to claim the remittance basis and would face immediate UK tax on worldwide income upon their return.
However, the new FIG regime offers them a valuable transition period for tax-free foreign income and gains, making the move back to the UK much more tax-efficient.
From April 2025, they would pay no UK tax on foreign income or gains for four years, regardless of remittance.
FIG would allow them to use foreign income as needed without complex remittance tracking, making their financial transition to the UK smoother.
However, they will need to plan ahead to ensure tax efficiency beyond the FIG period.
Practical Considerations for Non-Doms and Returning Expats
The FIG regime brings benefits to both non-doms and UK domiciles returning after extended periods abroad.
Here are a few things to consider:
1. Time Limit on Relief: The FIG regime offers a valuable but temporary exemption. After four years, all worldwide income and gains will be taxable in the UK, so long-term planning is essential.
2. Simplified Reporting: Without the need to keep foreign income offshore, FIG reduces administrative burden and helps avoid potential tax traps tied to remittances.
3. Tax-Efficient Retirement Planning: For retirees like Mike and Jules, FIG provides a unique opportunity to bring foreign income into the UK tax-free during the initial years of retirement.
The Bottom Line
The FIG regime represents a major shift in how foreign income is taxed in the UK, opening up new planning opportunities for both non-doms and UK-domiciled individuals returning after long-term residence abroad.
For expat professionals in the UK, like Juan, it simplifies compliance and allows potential tax savings in the short term.
For retirees like Mike and Jules, it offers a financially smooth transition back to the UK.
If you’re a non-dom or a UK expat returning after time abroad, the FIG regime could make a significant difference to your financial plans.
For tailored advice on managing cross-border income under the new rules, get in touch —I’m here to help you make the most of this new opportunity.
