In the Autumn Budget, Chancellor Rachel Reeves unveiled a series of significant reforms aimed at overhauling the current tax regime for UK-resident, non-UK domiciled individuals ("non-doms"). These changes mark a major shift in how new arrivals to the UK will be taxed, and a summary of the key implications is provided below.
From 6 April 2025, individuals who have been non-UK resident for 10 consecutive tax years will be eligible for the new Foreign Income and Gains (FIG) regime. This will replace the previous remittance basis of taxation, which allowed non-UK domiciled individuals to limit their UK tax liability on foreign income and gains to the extent these funds were brought into the UK.
Under the new rules, qualifying new arrivals will be exempt from UK tax on income and gains from worldwide sources for the first four years of UK residency. Notably, individuals born in the UK may also qualify for the FIG exemption, provided they have been non-UK resident for 10 consecutive years.
The UK’s statutory residence test will continue to determine an individual's UK tax residency status, which is essential for assessing eligibility for the four-year FIG regime. If an individual is UK resident for only part of that four-year period, it won't be possible to extend their exempt period beyond four years (eg by carrying forward any ‘unused’ years to future tax years).
Importantly, after the first four years of UK residency (exemption period) individuals will be subject to UK taxation on their overseas sources of worldwide income and gains. For new arrivers who wish to stay in the UK for the longer term, the first four years could present an opportunity to restructure and shelter overseas assets from UK taxation whilst benefiting from the relief available.
These reforms are expected to have far-reaching effects, impacting both non-doms and UK-domiciled individuals who have spent time living abroad.
Those affected should review their current arrangements and begin discussions with their advisers as early as possible.
Author, Drupen Patel - Personal Tax Manager