The Foreign Income and Gains (FIG) Regime

From 6 April 2025, the UK will change its long-standing rules around the taxation of foreign income and gains for individuals moving to or living in the UK. This change marks the end of the remittance basis and the introduction of a residence-based system called the Foreign Income and Gains (FIG) regime. While the policy is designed to simplify and modernise the UK tax code, it brings with it a number of important decisions and potential complexities.

Let’s walk through what the new rules mean, who they affect, and how they differ from the system they’re replacing.

Understanding the FIG Regime

The FIG regime will offer relief from UK tax on foreign income and gains for new or returning residents, provided they meet specific conditions. To qualify, an individual must have been non-UK resident for at least 10 consecutive tax years before returning to the UK. The regime is then available for up to four tax years, starting from the first year the person becomes a UK resident again.

During this four-year window, any foreign income and gains will effectively be exempt from UK tax, regardless of whether the money is brought into the UK. This is a key shift from the old rules, where bringing money into the UK (known as “remittance”) could trigger a tax liability even if the income or gain arose years earlier. However, individuals will be required to report all foreign income on their self assessment tax return, regardless of whether they are claiming relief.

Once the four years are up, individuals will be taxed on their worldwide income and gains in the same way as other UK residents.

Individuals who claim relief under the FIG regime will lose their entitlement to the tax free personal allowance and their capital gains annual exemption.

Changes from the Remittance Basis

The current remittance basis is being abolished altogether from April 2025. Under the remittance basis, individuals who were UK tax resident but not UK domiciled could opt to pay UK tax only on their UK income and any foreign income or gains they brought into the UK. It allowed some individuals to live in the UK for long periods without paying tax on foreign HMRC so long as they carefully managed how and when they remitted funds.

There were also costs associated with long term use of the remittance basis. A Remittance Basis Charge (RBC) applied for those who had been UK resident for more than 7 out of the last 9 years, ranging from £30,000 to £90,000 annually depending on how long they had been resident.

The FIG regime is intended to be simpler. It has no annual charges, doesn’t require a claim for each type of income or gain, and doesn’t penalise remittances. But the option to claim relief on foreign income is limited to a much shorter period of 4 years, with no concessions.

Transitional Rules and Temporary Reliefs

To help with the transition to the new system, the government is introducing two key measures:

• Capital gains rebasing: Individuals who have used the remittance basis and remain UK resident in April 2025 may elect to rebase certain foreign assets to their value as of 5 April 2017. This means only the increase in value since that date will be taxed when the asset is eventually sold.

• Temporary Repatriation Facility (TRF): Between 2025 and 2028, eligible individuals will be able to bring foreign income and gains that arose before 6 April 2025 into the UK at a flat tax rate of 12% (rising to 15% in the final year). This is designed to encourage repatriation of income that would otherwise be subject to full UK tax rates.

Trusts, Employment, and Inheritance Tax

The changes also impact offshore trusts. Under the old rules, UK-resident settlers who claimed the remittance basis could sometimes defer or avoid tax on trust income or gains. From 2025, most of these protections will fall away unless the settlor qualifies for and is using the FIG regime during the relevant year. Once the four-year window closes, trust income and gains may be taxed on the settler or UK beneficiaries as they arise, potentially removing the benefit of long-standing trust arrangements.

For employment income, the FIG regime aligns with a modified version of Overseas Workday Relief. Individuals qualifying for FIG can still claim relief on income earned from non-UK duties during their first four years, and won’t need to keep that income outside the UK to benefit. However, a financial cap may apply depending on the specific arrangement. For most new users, overseas workday relief will be capped at the lower of 30% of income, or £300,000.

Another significant shift is planned for Inheritance Tax (IHT). Instead of relying on domicile status, IHT will begin to apply once a person has been a UK resident for 10 out of the previous 20 years. This means people returning to the UK after long periods abroad may still face IHT exposure sooner than expected. Planning will be critical for anyone with significant foreign-held assets.

Things to Watch Out For

While the FIG regime appears straightforward at first glance, there are several items you need to consider:

• Counting your years: Determining whether you’ve been non-resident for 10 consecutive tax years is not always simple. Split-year treatment, treaty tie-breakers, and the Statutory Residence Test can all influence the outcome.

• Interaction with foreign tax systems: Some countries may not recognise the UK’s FIG relief. If your foreign income is taxed abroad, you may not receive credit in that country for the UK’s exemption. This can lead to double taxation in certain cases.

• Data and disclosure: Even though foreign income is exempt under FIG, you still have to declare it. HMRC may require records of what income and gains were earned abroad (even if they don’t tax it) so keeping detailed records remains essential.

Individuals planning a move to the UK, or with existing interests such as offshore trusts or non-UK investments, should review their tax position before the rules come into effect in April 2025. Early planning can help mitigate adverse tax outcomes and ensure that any available reliefs are maximised under the new regime. Please feel free to book a call with our specialist tax advisors for further consultation.