By Jennie Brown, Tax Partner
The UK has replaced the long standing domicile-based tax system with a residence-based framework from 6 April 2025, representing the most significant overhaul of internationally focused UK personal tax rules in decades.
Below is a practical summary designed to help advisers outside the UK understand the system and its implications for globally mobile clients.
What Is Changing?
Domicile abolished for tax purposes
- Domicile will no longer determine UK tax exposure from 6 April 2025 for Income Tax, Capital Gains Tax (CGT) and Inheritance Tax (IHT).
Remittance basis scrapped
- The remittance basis (where non UK individuals were taxed only on UK income and gains and on foreign income/gains if brought to the UK) ends after 5 April 2025.
New “Foreign Income & Gains” (FIG) regime
- Introduces a 4 year tax free period on foreign income and gains for new arrivals who have been non UK resident for the previous 10 consecutive tax years.
- After the 4 years, individuals become fully taxable on worldwide income and gains on the arising basis.
Introduction of “Long Term Residence” (LTR)
- For IHT, individuals become within scope on worldwide assets once they have been UK resident for 10 out of the previous 20 tax years.
- If you leave the UK, you don’t immediately drop out of the UK IHT exposure, a tail period continues to follow you before you fall fully outside the system.
Transitional Rules & Planning Opportunities
Temporary Repatriation Facility (TRF) – New & important for ex remittance users
- Allows individuals who previously used the remittance basis to remit historic foreign income and gains at a reduced rate:
• 12% in 2025/26 and 2026/27
• 15% in 2027/28 - Applies for three tax years only.
CGT “Rebasing”
- Former and current remittance basis users can rebase foreign assets to their 5 April 2017 value for future disposals.
Pre 2025 FIG still taxed on remittance
- Pre 6 April 2025 foreign income/gains remain taxable if remitted under the old rules — even after the reform.
Statutory Residence Test (SRT) still applies
- Even with the move to long‑term residence rules, the SRT remains the test for determining UK tax residence each year for income tax and capital gains tax, so individuals must still assess their UK residency annually under the existing SRT framework.
Practical International Implications
For non UK advisers working with clients moving to/from the UK:
New inbound clients
- Individuals returning to or newly relocating to the UK after 10 years abroad may benefit from 4 years of foreign income/gain exemption.
- Useful for:
o High earning executives on global assignments
o Returning UK expatriates
o Individuals with substantial offshore portfolios
Offshore Trusts
- Existing “protected trust” regimes for non doms fall away.
- Trust income/gains may now be taxed on UK resident settlors unless they qualify for the 4 year FIG regime.
Inheritance Tax
- Worldwide assets become in scope once clients meet the 10/20-year long term residence condition.
- Trusts can enter and exit IHT exposure depending on the settlor’s residence status.
Cross border planning
- The shift to residence aligns the UK more closely with other countries that tax on worldwide income based on residence alone.
- Removes complexity around determining and proving domicile.
Key Messages for International Firms
- Domicile-based taxation is now abolished the UK has fully transitioned to a residence-based system for income tax, CGT and IHT.
- The new FIG regime is now in operation, offering a 4-year exemption on foreign income and gains for individuals who return or move to the UK after 10 consecutive years of non-residence.
- Proactive planning is essential especially for individuals moving into or out of the UK, those with offshore structures, and those previously relying on the remittance basis.
- The Temporary Repatriation Facility (TRF) is available now, allowing former remittance-basis users to bring historic unremitted foreign income and gains into the UK at 12% in 2025/26 and 2026/27 and 15% in 2027/28. This window is limited and will not be extended.
- There is a “tail” to long-term residence leaving the UK does not immediately remove an individual from IHT exposure; a follow‑on period continues after departure.
- The Statutory Residence Test (SRT) continues to apply annually to determine UK residence for income tax and CGT, while long-term residence is relevant only for IHT.
We are here to help
The team at Streets are here to help with any of the areas covered within this update, please feel free to contact us by emailing info@streets.uk
