Foreign Income Regime (FIG) - a Tax Guide for Non-Domiciled UK residents.

Background

Domicile refers to an individual’s permanent home. There’s not a fixed calculation for this, like the Statutory Residence Tests for Tax Residence. Domicile is based on factors such as where parents lived, where one grew up, where they have more family ties, etc.

An individual’s tax residence may change year on year based on their days, workdays, and ties, however domicile is generally more ‘fixed’. UK tax residents are taxed on worldwide income, so if you live and work in the UK, HMRC will want you to declare your income from around the globe.

Previously, declaring non-domicile status enabled individuals to elect the remittance basis of taxation. This is a tax treatment option available in the UK to individuals who are resident but not domiciled (non-dom) in the UK. Under the remittance basis, you are taxed on your UK income and gains, and on any foreign income and gains that you bring into the UK. Check out our Remittance Basis calculator and guide here explaining how it works in detail.

Example:

Mick is a non-domiciled UK resident originally from Spain. He has a job in the UK, earning £70,000 per year. Additionally, he receives £120,000 per year from investments in Spain.

Under the Remittance Basis, Mick only pays UK tax on his UK income (£70,000). He does not pay UK tax on his Spanish investment income unless he brings that money into the UK. If Mick keeps his Spanish income in Spain or uses it abroad, there will not be any UK tax on it.

It’s worth noting here, that if income is taxed in the UK there will generally be a foreign tax credit that can be applied against the income if tax was already paid in the country the income/gain originated from. This depends on the tax agreement with the UK and how much tax had already been paid.

What has changed? Foreign Income and Gains (FIG) Regime.

Okay, that’s how it used to work. What’s changed?

New 4-year rule for individuals arriving to the UK, for recent and new arrivals. Affecting those who move to the UK for the first four tax years of tax residence after a period of at least 10 years of non-UK residence. Those claiming to be taxed under the new Foreign Income and Gains (FIG) regime will be fully exempt from UK tax on their foreign earned income and gains. Even if this is remitted to the UK.

Those arriving prior to April 2025 may still be able to benefit from this provided the 2025-26 tax year falls within their first 4 years of tax residency. So if you had moved to the UK during, or after the 2022-23 tax year.

Example:

Let’s take a look at if Mick moved to the UK in the current tax year (2024-25). He would be eligible to claim the remittance basis in the usual way as he is not UK domiciled.

For the following tax year, 2025-26 the new proposed rules kick off. So exempts UK tax on his foreign earned income, similar to the RB. Mick can continue through the FIG regime for another 2 tax years: 2026-27 and 2027-28. From 2028-29 onwards, he will be taxed on his worldwide income similar to other UK tax residents.

Our opinion?

Whilst this is attractive for individuals moving to the UK we also see a number of British expats who had moved in the early 2010s or prior be able to take advantage of this. This also brings the UK into line with other countries such as Italy or Portugal who had similar residency-based tax incentive regimes.

What about if you moved to the UK prior to the 2022/23 tax year? You don’t need to escape the UK just yet. Planned transitional rules aim to minimize any initial disruption.

For the 2025/26 tax year, individuals who were non-domiciled (and not deemed domiciled after 14 years in the UK) will only be subject to 50% UK tax on foreign earned income. Gains will still be taxed at 100% of the UK tax rate.

Foreign assets held in an individual’s name that are now subject to UK Capital Gains Tax can be rebased to their value at April 2019. Providing the individual is not deemed domicile and has claimed the Remittance Basis previously.

The Government also announced an attractive lower 12% tax rate on certain remittances into the UK. This deserves its own section…

Temporary Repatriation Facility (12% tax rate)

If you previously claimed the Remittance Basis and did not declare income that you kept abroad, you would need to keep this income abroad. Bringing in funds that you previously claimed the remittance basis on means you could be subject to a 45% tax.

The Temporary Repatriation Facility changes this. Any individual who has previously claimed the Remittance Basis, can remit their foreign income and gains to the UK between April 2025 and April 2027 and be subject to a flat rate of 12% on remittances.

This is a significant, one-off opportunity for non-doms living in the UK. This lower tax rate is very attractive.

From April 2027 onwards, bringing historic ‘remittance basis’ income will just be taxed at the normal rates.

Example:

Mick has been a UK resident for the last 15 years, and is therefore deemed UK domiciled. Previously has been claiming Remittance Basis, and has built up income & gains over the years of around £2 million.

Remitting this into the UK would generally create a 45% tax bill of £900K, however the temporary repatriation facility reduces this to 12% if remitted during the 2025/26 tax year. Therefore a tax bill of approximately £240K. That’s a saving of £660K.

Our thoughts

This fundamentally changes how non-domiciled individuals will look to plan their tax affairs. The new changes will make things significantly easier for those moving into the UK, the remittance basis was often complicated and without the necessary advice it could lead to errors.

We’re looking forward to diving into any further changes as details are presented. If you’re a non-domiciled client of ours, we’ll ensure you’re kept up to date with the changes as they come up.