Autumn Budget – Summary of the rules: All change for non-doms

The main headline is that, from 6 April 2025, all UK residents will be taxed in the UK on their worldwide income and gains in the year they arise. Furthermore, individuals qualifying as ‘long-term residents’ will be subject to Inheritance Tax (IHT) on their worldwide assets. As with any substantial tax change, there is a lot of complexity within the rules.

We have summarised the new rules impacting these individuals.

Foreign Income and Gains (FIG) regime

From 6 April 2025, where individuals have been non-UK resident for the previous 10 years, they will be eligible for the new Foreign Income and Gains (FIG) regime for the first four consecutive years of UK residence. Where an individual is still within their first four years of UK residence as of 6 April 2025 or leaves the UK and returns within their first four years, they can still be eligible for the regime.

The FIG regime will be available to UK nationals, provided they meet the prior ten-year non-residence condition.

Under the FIG regime, foreign income and/or gains, even where remitted to the UK, will not be subject to UK tax. FIG arising in certain trust structures will also be protected. Certain allowances and relief for foreign losses will no longer be available for offset for the year where a claim is made.

UK nationals and UK domiciled individuals will also be eligible, and individuals do not need to claim for every one of the four years.

When making the claim, the individual will need to disclose all FIG, and then claim a deduction for those FIG that are not taxable. This will not always be straightforward, especially where assets are held within offshore structures. Also, there are certain types of income and gains that do not qualify for FIG treatment and so care must be taken to ensure that relief is only claimed on eligible income and gains.

Overseas Workdays Relief

Overseas Workdays Relief (OWR) will be retained, and from 6 April 2025, the eligible period will be extended to four years but will be subject to an annual limit of the lower of either 30% of the qualifying income or £300,000.

There are transitional rules where an individual is claiming OWR in the current tax year where this is not their third year. As for the FIG regime, certain allowances and relief for foreign losses will no longer be available for offset for the year where a claim is made.

Rebasing of capital assets

Individuals who are not deemed domiciled on 5 April 2025 are able to rebase their assets to their value as of 5 April 2017 (asset by asset, claim). This aligns with the rebasing date introduced with the previous overhaul of the non-dom regime in 2017.

Temporary Repatriation Facility (TRF)

The Temporary Repatriation Facility (TRF) will allow individuals to designate untaxed foreign income and gains and be taxed at a 12% rate (2025/26 and 2026/27), or 15% (2027/28). They can then remit those funds in the year of designation or a later year. The TRF can also apply to funds that have been used to acquire assets, i.e. not held in cash.

There are specific rules around the interaction of the TRF with foreign tax credits, and the mixed fund rules. Also, there is an extension of the TRF to settlors and beneficiaries of trusts.

Business Investment Relief (BIR)

From 6 April 2025, non-designated FIG that arose when in the remittance basis can be eligible for Business Investment Relief (BIR) claims, however BIR will then be abolished for new investments in April 2028. Existing investments at that date will continue to benefit until the investment is sold or there is a breach of the BIR conditions. Funds used to make a BIR investment can be designated under the TRF which will mean that those funds are no longer subject to the BIR conditions.

Inheritance Tax

For Inheritance Tax (IHT) purposes, the concept of domicile will be replaced with a residence-based test from 6 April 2025. If an individual is considered a ‘long-term resident’ they will be subject to IHT on their worldwide assets. An individual will be considered a long-term resident if they have been UK resident in 10 of the 20 tax years immediately preceding the tax year in which the relevant event occurs.

Non-UK assets in a trust where the settlor is a long-term resident will also be within the relevant IHT charges. There are transitional rules where certain individuals are not resident in 2025/26.

Would you like to know more?

If you would like to discuss any of the above, please speak to your usual Blick Rothenberg contact or Alex Foster using the form below.