From 6 April 2025, the UK government will introduce significant reforms to how non-UK domiciled individuals (non-doms) are taxed. The long-standing remittance basis will be abolished and replaced by a residence-based system.

The new residence-based regime will bring the UK closer to international norms, ensuring that UK resident individuals are taxed on their worldwide income and foreign gains. However, a four-year FIG regime (Foreign Income and Gains) will offer generous tax reliefs to those newly arriving in the UK.

Here’s what’s changing and how it may affect your tax position.

End of the Remittance Basis

From April 2025, the remittance basis regime will no longer apply. Under the new rules, non-UK domiciled individuals will move to the arising basis, meaning they must pay UK tax on their worldwide income and capital gains, not just funds remitted to the UK.

This marks a shift to a residence-based regime, meaning tax treatment will depend on UK residence rather than non-domicile status.

The change will affect both long-term UK residents and those who are deemed domiciled under existing rules. Individuals will need to review their foreign assets, overseas assets, and mixed fund ordering rules to assess their exposure.

Introduction of the Four-Year FIG Regime

To support newcomers, the government will introduce a 4-year Foreign Income and Gains (FIG) regime.

Under the FIG regime, individuals who become UK tax resident on or after 6 April 2025, and who have not been UK resident in the previous 10 consecutive tax years, may claim full relief (100%) from UK tax on foreign income and foreign gains for their first four tax years of UK residence.

During this period, eligible individuals will not need to pay UK tax on non-UK assets, foreign capital assets, or foreign income and gains. However, UK source income will remain taxable.

This relief will help attract global talent and investors while ensuring that UK domiciled and non-UK domiciled individuals are treated consistently after the initial four years.

Transitional Provisions

To ease the shift, several transitional provisions will apply:

• Rebasing of Foreign Assets:
  Individuals who have previously used the remittance basis may rebase foreign assets (such as non-UK property or foreign capital assets) to their market value as of 5 April 2017, reducing potential capital gains tax (CGT) exposure on disposal.
• Temporary Repatriation Facility (TRF):
  A new Temporary Repatriation Facility will operate from April 2025 for three years. It will allow remittance basis users to repatriate foreign income and gains that arose prior to the reform at reduced rates—12% for the first two years and 15% in the third. The new temporary repatriation facility will extend to settlor-interested trust structures, excluded property trusts, and foreign gains held offshore.

These transitional measures are designed to encourage compliance and simplify the move to the new residence-based system.

Overseas Workday Relief Extended

The popular Overseas Workday Relief (OWR) will be retained but reformed to align with the four-year FIG regime.

From 6 April 2025, UK resident individuals performing employment duties overseas can claim OWR for up to four years, without needing to keep income offshore.

The maximum relief will be capped at the lower of £300,000 or 30% of net employment income per tax year, offering certainty to non-UK residents transitioning to UK tax residence.

Inheritance Tax and Trusts

Although the Finance Act introducing these reforms is still pending, the government has indicated that UK inheritance tax (IHT) treatment will also shift to a residence-based system.

In future, UK inheritance tax may apply to worldwide assets of individuals with long-term UK residence, rather than just UK situs assets or UK assets held through excluded property trusts.

Business Investment Relief (BIR) and other tax reliefs may continue to apply to encourage investment in UK businesses, though further tax details will be confirmed in the Finance Act 2025.

What This Means for Non-Doms

These non-dom changes represent a major shift in the non-dom regime, affecting how foreign income, capital gains, and overseas assets are taxed.

Non-doms should:

• Review non-UK assets and foreign income streams
• Consider using the Temporary Repatriation Facility
• Reassess trust structures and estate tax treaties
• Seek professional advice on how the new residence-based system impacts their tax position

Planning ahead before April 2025 will be essential to manage exposure to UK income tax, capital gains tax, and UK inheritance tax under the new rules.

How HLWA Can Help

At Herbert Lewis Williams & Associates, we help clients with non-domicile status navigate the transition from the remittance basis to the residence-based system.

Whether you need guidance on the four-year FIG regime, business investment relief, or managing foreign income and gains, our specialist advisors can help you stay compliant and minimise your UK tax exposure.

Contact us today for professional advice on how to prepare for the non-dom changes 2025.