01 Dec Remmitance basis abolishement and new non-dom scheme explained

The abolishment of remittance basis scheme for UK individuals from year  25/26 and on created a confusion for a lot of taxpayers who are not UK domiciled and were not tax/ed for their non UK income provided they did not remit it into the country.

There is a new 4-year FIG regime introduced which still is not followed up with detailed information and leaves a lot to speculation for those having overseas income and especially arising from capital gains or property.

Below we will try to explain the things we know so far and how the new system will work.

New 4-year FIG regime

Who is it for?

The new regime concerns people who:

• have not been tax residents of the United Kingdom for 10 consecutive tax years, and
• become UK tax residents again from 6 April 2025 onwards.

It is aimed at individuals who already live in the UK as non-domiciled or intend to move there.

Key changes as of April 6, 2025

As of April 6, 2025:

• The current remittance basis for UK resident non-domiciled persons is abolished.
• The new 4-year FIG scheme is introduced for individuals who meet the 10-year non-UK tax year requirement.
• The Overseas Workday Relief (OWR) is maintained for the first 3 tax years of residence in the UK, with simpler rules and a link to the option for the new 4-year FIG regime.
• For individuals who do not meet the requirements of the 4-year FIG regime, protection from taxation of future income and profits through trust structures is abolished.
• For the 2025-2026 tax year only, those who move from remittance basis to arising basis and are not entitled to 4-year FIG, will pay tax on 50% of their foreign income (not on foreign capital gains).

From 2026-27 onwards, all global income is taxed.

• A Temporary Repatriation Facility (TRF) is introduced for the years 2025-26 and 2026-27, with the possibility of taxation at 12% for remittances pre-6 April 2025 FIG, subject to conditions.

What does the new 4-year FIG regime offer?

For individuals who qualify (10 tax years of non-domicile and new tax residency in the UK):

• No tax is payable on foreign income and gains (FIG) arising in the first 4 tax years of residence in the United Kingdom, provided that a relevant declaration is made.
• These amounts can be transferred to the UK without additional tax charges.
• No tax is levied on distributions from non-resident trusts during the 4 years.
• UK income and gains continue to be taxed normally, as is currently the case for non-domiciled persons.

The scheme is based on the Statutory Residence Test to determine tax residency. Treaty residence, non-residence and split years are not taken into account.

Key Limitations and Options

Those who choose the new 4-year FIG regime:

• They will not be entitled to personal allowances.
• They will not be entitled to capital gains tax annual exempt amount.
• They must submit a claim for each tax year they want to apply the 4-year FIG regime, without it being mandatory to use it for all the years of the 4-year regime.

If the person temporarily leaves the UK during the 4-year period, they can use the scheme in the remaining years when they return, as long as they are still within the 4-year period.

Transitional arrangements and trusts

For people who do not qualify for the 4-year FIG regime:

• From 6 April 2025 onwards, FIG arising in non-resident trusts will be taxed on the settlor or transferor (if they have been UK resident for more than 4 tax years) on an arising basis, as is already the case for UK domiciled settlors or transferors.
• FIG that arose in a trust before April 6, 2025 will be taxed to settlors or beneficiaries when matched with trust distributions worldwide.

Individuals who had a remittance basis will be able, for assets they personally held on April 5, 2019, to choose to rebase on their value as of that date when a disposal is made after April 6, 2025.