UK Introduces New Tax Rules Forcing Non-Domiciled Individuals to Pay Tax On Foreign Income
- PTA
- 5 days ago
- 22 min read
Index:
The End of the Remittance Regime – What UK Taxpayers Need to Know in 2025
Understanding Residence – How the New Tax Rules Redefine UK Tax Liability
Temporary Repatriation Facility – A Limited Window to Save Thousands on Past Foreign Income
Inheritance Tax and Trusts – How Long-Term UK Residence Now Exposes Global Wealth to UK Tax
Practical Steps, Planning Checklists, and Compliance Tips for UK Employers and Taxpayers in 2025
The Audio Summary of the Key Points of the Article:
Listen to our podcast for a comprehensive discussion on:
The Impact of MTD in the Spring Statement 2025 UK
The End of the Remittance Regime – What UK Taxpayers Need to Know in 2025
What’s Changing With Non-Dom Taxation?
Yes, from 6 April 2025, the UK is officially scrapping the remittance basis of taxation for non-domiciled (non-dom) individuals and moving to a residence-based tax system. In plain English? If you're living in the UK—even if your permanent home is elsewhere—you’ll now pay UK tax on your foreign income and gains (FIG), regardless of whether you bring that money into the UK or not.
This is a huge shift for wealthy expats, globally mobile professionals, and even UK employers with international hires. But hey, don’t sweat it—we’ll break it down, simplify the jargon, and give real examples along the way. Let’s start with a full overview of what the UK tax system looks like right now and how this change will shake things up.
UK Tax System in 2025: The Basics Everyone Must Know
Current Income Tax Bands and Personal Allowance
Before we look at how the foreign income rules change, here’s a refresher on the 2025/26 UK income tax rates for England, Wales, and Northern Ireland (Scotland has different bands):
Band | Taxable Income | Tax Rate |
Personal Allowance | Up to £12,570 | 0% |
Basic Rate | £12,571 to £50,270 | 20% |
Higher Rate | £50,271 to £125,140 | 40% |
Additional Rate | Over £125,140 | 45% |
Note: Personal Allowance reduces by £1 for every £2 of income above £100,000, disappearing entirely after £125,140.
Source: GOV.UK income tax rates 2025
Understanding the Old System: What Was the Remittance Basis?
The Key Perks Non-Doms Used to Enjoy
Before the 2025 change, the remittance basis was the holy grail for many high-net-worth individuals. Here’s how it worked:
You paid UK tax only on UK income and gains.
You only paid UK tax on foreign income if you remitted it (brought it) into the UK.
This applied if you were UK resident but non-domiciled (i.e., your permanent home was legally abroad).
Example:
Sophia, a French citizen living in London since 2020, earns £200,000 from her business in Monaco. Under the remittance basis, she didn’t pay UK tax on that £200k unless she transferred it to a UK bank. Sweet deal, right?
The Big Shift: Why the UK is Changing the Game in 2025
Why This Matters Now
From 6 April 2025, the UK is abolishing the concept of taxing foreign income based on whether it’s remitted. Instead, it’s introducing a universal residence-based system.
That means:
If you live in the UK, your worldwide income and gains will be taxed here.
No more dodging UK tax on overseas earnings, even if they stay offshore.
What’s Replacing It?
The remittance basis is dead.
Residence is now the central test.
Newcomers may qualify for temporary relief—but only for 4 years.
📌 Important: This reform is estimated to raise £2.7 billion per year in new tax revenue by 2027, per preliminary HMRC projections.
Who Does This Hit Hardest?
High-Earning Expats & Global Entrepreneurs
Think of tech founders, trust beneficiaries, and hedge fund execs living in Chelsea but banking in the Cayman Islands. Under the old regime, many paid UK tax only on UK earnings. That luxury ends April 2025.
Employers with International Talent
UK companies that lure global hires with tax perks (like non-dom treatment) now face a less attractive recruitment pitch. Some firms may need to gross-up salaries to offset new tax burdens or lose talent.
Trust and Estate Planners
Inheritance tax (IHT) rules are also changing. From 2025:
IHT becomes residence-based, not domicile-based.
Long-term UK residents (10 out of 20 years) are now liable for IHT on their worldwide estate—including foreign trusts.
4-Year Foreign Income and Gains (FIG) Regime: A Lifeline for New Arrivals
Good News If You’re Fresh Off the Plane
If you’re moving to the UK and haven’t been a UK tax resident for the past 10 years, you may qualify for:
100% relief on foreign income and gains for your first four tax years.
After that, standard UK tax rules apply.
Example:
Carlos moves from Brazil to London in July 2025. If he meets the criteria, none of his foreign income is taxed in the UK until April 2029.
⚠️ Catch: You can’t have been UK tax resident for any of the previous 10 tax years. One slip = no relief.
Temporary Repatriation Facility: Tax Breaks for Past Earnings
Need to Bring Old Foreign Earnings Into the UK? Do It Now (at 12%)
To help with the transition, HMRC is offering a Temporary Repatriation Facility from 2025–2028:
Tax past foreign income and gains at 12% (2025–26), 12% (2026–27), and 15% (2027–28).
Applies to income earned pre-April 2025 under the remittance basis.
Why it Matters:
If you’ve got cash abroad, this is a golden opportunity to bring it in at a lower tax rate before the door slams shut.
Capital Gains Rebase: A Welcome One-Time Adjustment
Individuals taxed under the remittance basis prior to April 2017 get a break: they can rebase foreign assets held on 5 April 2017 to their market value on that date for Capital Gains Tax (CGT) purposes.
✅ This reduces future CGT liabilities when those assets are sold. Very useful for real estate or shares acquired before 2017.
Emergency Tax and Payroll Implications in 2025
New Rules Mean New Payroll Challenges
With all foreign income now taxable, employers may:
Need to report global earnings via PAYE for certain roles.
Face emergency tax codes on non-UK elements if data isn’t complete.
HMRC has removed the need to wait for PAYE direction approvals, streamlining payroll but raising risk of overtaxing.
Tip: Use HMRC’s tax code checker to avoid falling into the wrong bracket.
As we’ve now entered 2025, the UK tax world is about to look radically different. Non-doms are no longer shielded from UK tax on their global wealth. The shift from “remitted” to “residence” basis is set to:
Transform personal finances,
Hit payroll departments,
Challenge cross-border tax planners.
Non-Domiciled UK Residents: Tax Contributions and Population Trends (2020-2025)
Understanding Residence – How the New Tax Rules Redefine UK Tax Liability
Domicile vs Residence: What’s the Real Difference?
Let’s break down the two key terms in the new rules: domicile and residence.
Domicile (Old System Focus)
This is your permanent home, where your roots are.
You can live in the UK for years and still be non-domiciled if you intend to return elsewhere.
Residence (New System Focus)
This is about where you live right now.
If you spend enough time in the UK, you're a UK resident—and now, your global income and gains are taxable.
Under the Statutory Residence Test (SRT), HMRC looks at:
Days spent in the UK
UK ties (home, job, family)
Previous UK residence history
✅ From April 2025, residence is king. Even if your legal “domicile” is India, the US, or Dubai—if you live in the UK, you’re taxed on everything, worldwide.
Domicile vs Residence
What Is the Statutory Residence Test (SRT)?
HMRC uses the SRT to determine if you're UK tax resident. There are three key parts:
1. Automatic Overseas Test
You're not UK tax resident if:
You were resident in the UK for 1 or more of the past 3 tax years, and spend fewer than 16 days in the UK in the current year.
You were non-resident for the past 3 years and spend fewer than 46 days in the UK.
2. Automatic UK Test
You're definitely UK resident if:
You spend 183+ days in the UK.
Your only home is in the UK for 91+ consecutive days.
3. Sufficient Ties Test
Used if you're in the grey zone (between 46–182 days). HMRC counts your ties:
UK Family
UK Accommodation
UK Work
UK presence in past years
More days in UK than another country
The more ties, the fewer days you can spend in the UK without becoming resident.
➡️ See full guide: Statutory Residence Test – GOV.UK
Real-Life Scenarios Under the New Regime
Scenario 1: Raj, Indian Investor in London
Raj owns a global property portfolio earning £300,000/year in rent outside the UK. Under the old system:
Taxed only on UK rental income.
No UK tax on global rents unless remitted.
From April 2025:
Raj becomes UK resident (spends 190 days).
Now pays UK tax on all £300,000, even if it stays offshore.
Scenario 2: Maria, Tech Executive from Spain
Maria works part-time in Spain but lives in the UK with her children. Her Spanish salary is paid into a local bank.
Old rules:
Not taxed on Spanish income if unremitted.
New rules:
If Maria is UK resident (likely, given her home and family), her Spanish salary is taxable in the UK, whether she touches it or not.
Employer Implications: What Payroll Teams Must Prepare For
PAYE and Emergency Tax
Now that foreign income is taxable:
Employers must capture global pay if it’s part of UK-resident employment.
Emergency tax codes may apply if overseas income isn’t declared promptly.
No More HMRC Approval Delays
Previously, employers had to wait for HMRC approval before operating PAYE directions on international income.
Now:
No need to wait.
Reduces compliance risk but increases need for accurate, timely payroll disclosure.
4-Year Foreign Income and Gains (FIG) Regime: Who Qualifies
Here’s the HMRC-confirmed eligibility for the 4-year exemption on foreign income and gains (FIG):
Criteria | Requirement |
UK residence starting in 2025 | Must begin from 6 April 2025 or later |
UK tax non-resident for 10 previous years | Strict 10-year clean slate |
Applies to all newly arising FIG | 100% exempt for 4 years |
After 4 years | Standard UK tax applies |
📝 Tip: Make sure your tax adviser documents when you became UK tax resident, especially if you've moved in and out of the UK before.
Graphical Presentation of 4-Year Foreign Income and Gains (FIG) Regime
Inheritance Tax Reform: Now Based on Residence, Not Domicile
Previously, non-doms paid IHT only on UK assets. From 2025, it’s about how long you've lived in the UK:
Status | IHT Scope |
Resident 10 out of 20 years | Worldwide assets subject to IHT |
Leave UK after 10 years | Still liable for 3–10 years after leaving |
Trusts created by long-term residents | Subject to IHT on non-UK assets |
Example:
Helen has a $5M trust in Jersey set up 15 years ago. She’s been UK resident 12 of the last 20 years. From April 2025, her Jersey assets may now fall within UK IHT scope.
Overseas Workday Relief: Still Available, but Limited
What’s Staying?
If you're eligible under the 4-year regime:
You can claim Overseas Workday Relief (OWR).
This allows you to exclude income earned overseas from UK tax.
What’s Changing?
Financial cap introduced: You can now only exclude £300,000 or 30% of total income, whichever is lower.
Must no longer keep employment income offshore to benefit.
✅ Employers no longer need to set up special offshore accounts.
How Businesses Should Prepare: Immediate Action Plan
For Employers:
Update onboarding procedures to track residency status.
Revise employment contracts to account for global tax liabilities.
Educate staff on payroll changes to prevent surprise emergency tax deductions.
For Employees:
Review your UK days to determine residence status.
Declare foreign income early to avoid penalties or higher-rate emergency tax.
Consider remitting old FIG via the Temporary Repatriation Facility (12%–15% rates).
Bridging the Gap: What’s Still Remitted?
Even under the new system, pre-April 2025 foreign income remains taxable only when remitted. This gives you options:
Keep old earnings offshore for now (unless needed).
Remit during 2025–2028 at lower Temporary Repatriation Rates (12%/15%).
Temporary Repatriation Facility – A Limited Window to Save Thousands on Past Foreign Income
The Temporary Repatriation Facility (TRF): What Is It?
Starting 6 April 2025, the UK government will offer a one-off opportunity for those who used the remittance basis before the tax regime change to bring past foreign earnings into the UK at reduced tax rates.
This scheme, dubbed the Temporary Repatriation Facility (TRF), is essentially a tax holiday window. It allows eligible individuals to remit previously untaxed foreign income and gains (FIG) at rates far below normal income or capital gains tax levels.
TRF Timeline and Rates
Tax Year | Applicable TRF Rate |
2025–26 | 12% |
2026–27 | 12% |
2027–28 | 15% |
🔁 After 2028, remittances of pre-2025 income will be taxed at full income tax or CGT rates—up to 45% for individuals in the highest band.
Who Is Eligible for the TRF?
The TRF applies only to individuals who:
Claimed the remittance basis before April 2025.
Have foreign income or gains that arose on or before 5 April 2025.
Are still UK tax residents when remitting the funds.
Includes:
Unremitted employment income held overseas.
Investment returns like dividends or rental income from foreign property.
Capital gains from selling overseas assets.
Trust assets, including unattributed gains in settlor-interested trusts.
Excludes:
Any new foreign income/gains after 6 April 2025.
Individuals not previously taxed under the remittance basis.
Why Use the TRF? Strategic Tax Planning Benefits
The savings can be massive—especially for high-net-worth individuals and business owners who have kept earnings offshore under the old system.
Let’s compare:
Income Type | Full Tax (Post-TRF) | TRF Rate (2025–26) | Savings |
£500,000 | 45% = £225,000 | 12% = £60,000 | £165,000 |
£1,000,000 | 45% = £450,000 | 12% = £120,000 | £330,000 |
💡 Tip: If you're sitting on offshore income, this could be the cheapest time in decades to bring it home.
Case Study: The Business Owner with Offshore Dividends
Background:
Jules is a French entrepreneur who’s been UK tax resident since 2015. He took advantage of the remittance basis and built a £1.2 million offshore investment pot (dividends and capital gains) in Singapore.
New Rules:
From April 2025, he must declare all new foreign income. But his existing Singapore earnings are still outside UK tax unless remitted—unless he acts during the TRF window.
His Move:
Jules plans to remit the full £1.2M in two tranches:
£800,000 in 2025–26 (taxed at 12%)
£400,000 in 2026–27 (taxed at 12%)
Tax Outcome:
Without TRF: He'd pay up to £540,000 (45% tax).
With TRF: Pays £144,000.
Total tax savings: £396,000.
How to Access the TRF: What HMRC Requires
To benefit from the TRF, taxpayers must:
Declare full details of the foreign income/gains being remitted.
Ensure the income qualifies under pre-April 2025 remittance rules.
Use designated remittance accounts or provide clear fund tracing.
File the correct disclosures using the self-assessment system.
💼 Advisory Tip: It’s highly recommended to work with a tax adviser or chartered accountant to:
Review remittance history
Distinguish clean capital vs FIG
Maximise reliefs and avoid triggering higher rates
Trusts Under TRF: The Complex Part Made Simple
Foreign income/gains within trust structures can also be repatriated via TRF—but with caveats:
Qualifying Trusts:
Settlor-interested offshore trusts created before April 2025.
Income not previously distributed or taxed.
Key Conditions:
Trustee or settlor must initiate remittance.
Must be attributable to the settlor or beneficiaries who were remittance users.
⚠️ Warning: If you have a complex trust structure, now is the time to do a full remittance mapping exercise with your tax team.
Remittance Tracing: A Potential Headache (Unless You’re Prepared)
The success of TRF claims often hinges on clean documentation. HMRC will not accept rough estimates or unverified foreign accounts.
Here’s what to prepare:
Bank statements showing original earnings dates.
Contracts or property sale records for capital gains.
Dividend declarations for investment income.
Evidence of offshore account separation (clean capital vs mixed funds).
🛑 Mixed funds (e.g. income + capital + gains) require complex tracing. Tax relief could be lost if you can't prove which portion is being remitted.
Comparison: TRF vs. Waiting It Out
Option | Pros | Cons |
Use TRF Now | Save 30–70% in tax, HMRC-approved | Must remit during 3-year window |
Wait and Remit Later | More flexibility | Full income/capital gains tax (up to 45%) applies |
Never Remit | Avoid UK tax on foreign FIG | Funds remain trapped offshore; no UK use |
Expert Tips: How to Get It Right
Act early: Avoid the rush in 2027 when the TRF window nears closing.
Segment accounts: Separate clean capital from mixed or FIG pools now.
Disclose proactively: HMRC is far more lenient on those who declare honestly and early.
Check your residence every year: If you leave the UK mid-way, TRF eligibility might change.
Non-Domiciled UK Residents and Their Tax Contributions (2020-2024)
Inheritance Tax and Trusts – How Long-Term UK Residence Now Exposes Global Wealth to UK Tax
From Domicile to Residence: A Game-Changer for IHT in 2025
Up until now, UK Inheritance Tax (IHT) only applied to:
UK-domiciled individuals, or
Non-doms with UK assets (e.g., UK property or shares).
But from 6 April 2025, the entire playing field shifts. The UK is scrapping the domicile basis and switching to a residence-based IHT model. That means:
If you’ve lived in the UK for 10 out of the last 20 tax years, you’ll now be taxed on your global estate.
This includes non-UK assets like offshore trusts, foreign property, and overseas bank accounts.
⚠️ Even if you leave the UK, you remain within IHT scope for 3–10 years, depending on the duration of prior residence.
The New IHT Exposure: Who’s at Risk?
UK-Resident HNW Families
Wealthy families who moved to the UK for schooling, business, or lifestyle—but retained offshore structures—are most exposed.
Mobile Executives and Long-Term Expats
If you've been in the UK for more than a decade—even if you maintain an overseas domicile—you’ll now face full IHT on global wealth.
IHT Scope Comparison: Old vs. New System
Taxpayer Profile | Pre-2025 IHT Exposure | Post-2025 IHT Exposure |
Non-dom, <15 years in UK | UK assets only | Global assets if 10/20 test met |
Non-dom, >15 years in UK | Deemed domiciled = global assets | Same, via residence test |
UK-domiciled | Global assets | No change |
Recently emigrated non-dom | UK assets only | Global assets for up to 10 years |
What Counts as ‘Long-Term Resident’?
You’re within full IHT scope if:
You were UK resident for at least 10 out of the last 20 tax years, and
You remain UK resident, or
You’ve left, but the IHT tail follows you for up to 10 years.
📌 The government is aligning this with Income Tax residence definitions, simplifying rules but widening the net dramatically.
Trust Planning Under the New Rules: Major Shifts Ahead
Trusts created by non-doms used to enjoy significant IHT protection—especially for excluded property trusts holding foreign assets. From April 2025:
✅ Still Protected:
Trusts created before an individual becomes long-term resident (i.e., before the 10/20 rule is met).
Provided settlor is still non-resident when settled.
❌ No Longer Protected:
Trusts settled by long-term residents (10/20 test) now fall fully into the UK IHT net.
Non-UK assets in the trust may now be chargeable at 20% entry, 6% periodic, and exit charges.
Case Study: Offshore Trust Impact Under New IHT Regime
Profile:
Alex, a Singapore-born entrepreneur, moved to London in 2010.
He created a Jersey trust in 2013 with $8M in global assets.
He's now been UK-resident 14 of the last 20 years.
Pre-2025:
As a non-dom, Alex’s offshore trust was excluded from IHT.
No UK tax on growth, income, or distributions held offshore.
Post-2025:
Alex is now long-term UK resident under the 10/20 test.
His Jersey trust now falls within UK IHT scope:
20% entry charge (if not paid earlier).
6% ten-year anniversary charge on growth.
Potential 40% IHT on distributions or settlor’s death.
What Estate Planners Must Now Rethink
✅ Pre-April 2025 Action Items
Settle offshore trusts now if you’re under the 10/20 limit.
Reorganise structures to shift assets out of UK IHT scope.
Review gifting strategies and potential PETs (potentially exempt transfers) while still outside full IHT exposure.
✅ Post-April 2025 Options
If long-term resident, explore:
Business Property Relief (BPR) for qualifying business assets.
Agricultural Relief, if applicable.
Life insurance policies written in trust to fund IHT liability.
Potential relocation and IHT exit planning.
The 3–10 Year ‘Tail’ After Leaving the UK
Even if you leave the UK in 2026 to escape the new rules, you don’t immediately shake the taxman off your back.
After 10/20-year residence is met:
You're within IHT scope for at least 3 years after departure.
Possibly up to 10 years, depending on asset type and trust arrangements.
Implication:
Long-term residents must build in IHT exit plans years in advance, especially before retirement or expatriation.
Non-Domiciled UK Residents and Their Tax Contributions (2020-2024)ffice Strategy Adjustments
Scenario:
A Middle Eastern family with a UK-based heir and £50M in global assets faces:
Full UK IHT exposure after 10 years.
Offshore trusts now liable under UK trust rules.
New Strategy:
Distribute trust income pre-2025.
Create new non-UK company wrappers for non-UK property.
Fund life insurance trust to cover projected IHT.
Adviser Warning: More Audits, More Complexity
HMRC is expected to:
Increase scrutiny of trust distributions and foreign transfers.
Require proof of trust creation timing, settlor location, and residence tests.
Challenge excluded property status where structuring appears abusive.
🔍 HMRC’s Trust Registration Service (TRS) will be a key surveillance tool—ensure all trust data is fully disclosed.
Practical Steps, Planning Checklists, and Compliance Tips for UK Employers and Taxpayers in 2025
How to Navigate the 2025 Non-Dom Tax Changes Like a Pro
By now, it’s clear that the UK’s move from a domicile-based to a residence-based tax system is one of the most significant reforms in decades. It doesn’t just affect foreign income—it reshapes how inheritance, payroll, employment benefits, and even long-term estate planning are handled.
So let’s roll up our sleeves and dive into practical guidance for those who need to adapt fast—whether you're a taxpayer, business owner, payroll manager, or tax adviser.
For Individuals: Actionable To-Dos Before and After April 2025
✅ Pre-April 2025 Checklist
Task | Why It Matters |
Re-assess your UK residence days | Determine if you meet the 10/20 test for IHT |
Evaluate eligibility for 4-year FIG regime | Potential 100% tax-free window on foreign income |
Segregate clean capital from foreign income | Makes remittance easier and avoids higher tax rates |
Review offshore trust structures | Reclassify or restructure before exposure kicks in |
Plan strategic remittances using TRF | Save up to 70% on past unremitted earnings |
Consult with a UK tax adviser | Essential for high-net-worth individuals with complex portfolios |
After April 2025: Staying Compliant Without Overpaying
✅ Post-Reform Best Practices
File full self-assessment returns including new foreign income lines.
Use the Temporary Repatriation Facility (TRF) to remit old earnings before 2028.
Review life insurance policies for IHT exposure planning.
Keep up-to-date logs of UK residency, income streams, and remittances.
Watch out for emergency tax codes—especially if you receive overseas income via UK payroll.
For UK Employers: How to Prepare for a New Tax Normal
Employers—especially those recruiting global talent or working with international assignees—must rethink payroll, HR contracts, and tax support in light of the 2025 reforms.
🏢 Key Employer Considerations:
Area | What Changes |
PAYE | No HMRC approval needed to split UK/non-UK income—act proactively |
Payroll systems | Must account for global income for UK residents |
Emergency tax codes | Risk increases if foreign income isn’t properly declared |
Overseas Workday Relief (OWR) | Still available but capped at £300,000 or 30% of total income |
Expat tax briefings | Essential to inform inbound employees of their changing obligations |
Employee trust benefits | Foreign-based employee benefits may now be taxable in the UK |
Managing Global Income and Tax Obligations
Example: Employer Strategy in Practice
Scenario: An investment bank recruits a senior trader from Hong Kong. Under the old rules, her Hong Kong bonus (kept offshore) was tax-exempt. From April 2025:
Bonus is now taxable in full in the UK.
The company must either gross up the bonus or re-negotiate compensation terms.
HR arranges tax equalisation support and self-assessment briefings.
Payroll Pitfalls to Avoid (With Real Fixes)
🚩 Emergency Tax Due to Global Income Inclusion
Fix: File Starter Checklist promptly and ensure accurate declaration of worldwide income.
🚩 Overseas Workday Relief Denied for Missing Documentation
Fix: Maintain travel logs, foreign payslips, and contractual proof of duties performed abroad.
🚩 HMRC Challenges on Remittance Sourcing
Fix: Use segregated bank accounts and avoid mixing foreign income with capital.
What If You’re Over-Taxed? Reclaim Process Explained
It’s not uncommon for taxpayers to overpay during the transition—especially if foreign income is mischaracterized under PAYE.
🛠️ Steps to Reclaim Tax:
Submit a Self Assessment tax return with accurate global income details.
Include TRF election (if applicable) and explain any mixed-fund scenarios.
If emergency tax applied, request an overpayment refund from HMRC.
Use GOV.UK Tax Refund Tool to track progress.
Special Cases: Less-Talked-About Taxpayer Scenarios
🎓 International Students Becoming Residents
Students from abroad who stay post-graduation could suddenly fall under UK tax if they:
Take a UK-based job
Breach the 183-day test
Open UK accounts that receive foreign transfers
Tip: Claim the 4-year FIG exemption if eligible and track all financial inflows.
👨👩👧👦 Stay-at-Home Spouses with Offshore Trusts
Even if not earning, spouses who are beneficiaries of trusts may be liable:
UK-resident spouses must declare benefit distributions
Use TRF to remit historic income at reduced rates
✈️ Digital Nomads and Remote Workers
If you're working for a non-UK employer while living in the UK:
You may still owe UK tax on your salary.
If your employment qualifies, Overseas Workday Relief may help—just watch the cap!
Final Thoughts: Mastering the Reform With the Right Plan
The abolition of the remittance basis and switch to a residence-based system is a radical overhaul, but also an opportunity:
For many, the 4-year FIG regime offers breathing room.
The TRF opens a tax-saving window that may never return.
Smart use of trust planning, offshore asset segregation, and residency awareness can prevent unnecessary tax shocks.
But all this requires action—now.
Ready-to-Use Tax Survival Toolkit
Here’s a condensed version of everything we’ve covered, perfect for your desktop or as a quick reference guide:
✅ Taxpayer Essentials:
☐ Determine residence status annually (SRT)
☐ Identify all sources of foreign income
☐ Segregate clean capital from FIG
☐ Use TRF for old income before 2028
☐ Explore 4-year FIG relief if newly arrived
☐ Plan IHT exposure with long-term view
✅ Employer Essentials:
☐ Revise international onboarding packs
☐ Check PAYE for offshore income
☐ Update tax equalisation policies
☐ Provide training on OWR and emergency tax
☐ Work with advisers on trust-linked benefits
Summary of All the Most Important Points Mentioned In the Above Article
From 6 April 2025, the UK will tax all residents on their worldwide income and gains, ending the remittance basis for non-domiciled individuals.
A new 4-year FIG exemption offers 100% relief on foreign income and gains to new UK residents not tax-resident in the previous 10 years.
The Temporary Repatriation Facility (TRF) allows past foreign income (earned pre-2025) to be remitted at reduced tax rates—12% for two years, 15% in the third.
Inheritance Tax (IHT) will switch to a residence-based regime, bringing global assets into scope for those resident in the UK for 10 of the last 20 years.
Offshore trust protections for non-doms are ending, exposing foreign trusts to UK IHT if the settlor is deemed a long-term UK resident.
Employers must now include global income in PAYE calculations for resident employees, with emergency tax risks if income isn’t declared properly.
Overseas Workday Relief (OWR) remains available for new arrivals but is now capped at £300,000 or 30% of employment income.
HMRC will scrutinise remittance tracing and mixed funds, requiring clean documentation to qualify for TRF rates.
Individuals leaving the UK after meeting the 10/20 test may still face IHT exposure for up to 10 years after departure.
Immediate tax planning and compliance reviews are essential to avoid over-taxation, especially for globally mobile professionals, trustees, and business owners.
Visual Summary of New Tax Rules Forcing Non-Domiciled Individuals to Pay Tax On Foreign Income
FAQs
Q1. Can you still be treated as non-domiciled for UK tax purposes if you are not a UK resident?
A: Yes, if you are not resident in the UK under the Statutory Residence Test (SRT), your domicile status is still considered for other tax purposes like Inheritance Tax, even though income tax is now based on residence.
Q2. Will offshore bonds held by non-doms be taxed under the new UK rules?
A: Yes, from April 2025, gains from offshore bonds will be subject to UK tax if you are UK resident, regardless of whether the bond was cashed in or remains offshore.
Q3. Can you elect to be taxed on the arising basis even if you qualify for the 4-year foreign income regime?
A: Yes, you may opt out of the 4-year exemption and choose to be taxed on the arising basis if that results in a better tax outcome, especially when foreign tax credits apply.
Q4. Will foreign pension income now be taxed in the UK under the new rules?
A: Yes, if you are UK resident, foreign pension income will be subject to UK tax unless covered by a double tax treaty offering an exemption or credit.
Q5. Can your non-UK spouse claim the 4-year FIG regime independently of your status?
A: Yes, each individual's eligibility for the 4-year FIG regime is assessed separately based on their own UK residence history and tax status.
Q6. Will the remittance basis charge (RBC) still apply for long-term residents?
A: No, the remittance basis charge will be abolished entirely from 6 April 2025 as the remittance basis itself is being removed.
Q7. Will non-domiciled children studying in the UK be taxed under the new residence-based rules?
A: Children who spend sufficient days in the UK or who meet other SRT criteria may become UK tax residents and would then be subject to the new rules on worldwide income.
Q8. Does the new UK tax rule affect remittances made from corporate accounts owned by non-doms?
A: Yes, if the individual is UK resident and the company is closely held, then remittances or distributions may be deemed income or gains and taxed accordingly.
Q9. Are there transitional reporting requirements for trusts affected by the IHT changes?
A: Yes, trusts now within the scope of IHT must be registered or updated via HMRC’s Trust Registration Service (TRS) and may need to disclose historic data as part of compliance.
Q10. Can you lose eligibility for the 4-year FIG regime if your residence status changes during the period?
A: Yes, if you become non-resident during the 4-year term and return later, the exemption does not restart—you must remain resident continuously to retain the benefit.
Q11. Will foreign capital losses be allowable against UK gains under the new rules?
A: Only if the foreign asset was disposed of while UK resident and capital losses are appropriately reported via Self Assessment; however, loss relief rules remain complex.
Q12. Can you offset foreign tax paid on income against UK tax liability after April 2025?
A: Yes, under the UK's double taxation agreements, you may claim Foreign Tax Credit Relief to prevent double taxation on the same income.
Q13. Are non-UK employer stock options now taxable in the UK for non-doms?
A: Yes, from April 2025, if you're UK resident and receive stock options from a foreign employer, those will generally be taxable in the UK regardless of remittance.
Q14. Do you need to report foreign bank interest if the money stays outside the UK?
A: Yes, under the new rules, foreign bank interest is taxable even if the funds are never brought into the UK, provided you are UK resident.
Q15. Will beneficiaries of offshore trusts be taxed when they receive distributions post-2025?
A: Yes, distributions from offshore trusts to UK residents may trigger UK income tax, especially if the trust holds FIG that arose after April 2025.
Q16. Can you still use nominee accounts abroad to hold investments tax-efficiently?
A: No, using nominee or offshore structures will no longer shield income or gains from UK tax if you are UK resident, and HMRC may apply look-through rules.
Q17. Are there any exemptions for diplomats or embassy staff under the new tax rules?
A: Yes, diplomatic exemptions still apply under the Vienna Convention, but they must not be engaged in UK trade or business beyond official duties.
Q18. Can non-doms donate to UK charities without triggering tax under the new rules?
A: Yes, qualifying charitable donations made to UK-registered charities may still receive Gift Aid and may not be taxed if structured properly.
Q19. Will HMRC consider foreign social security payments as taxable income in the UK?
A: Yes, unless covered by a double tax agreement, foreign social security pensions may be taxable in the UK from April 2025 for residents.
Q20. Can you restructure existing offshore trusts to avoid UK IHT after 2025?
A: You can, but any changes made after becoming a long-term UK resident may still fall within the IHT scope; professional advice is essential before restructuring.
Disclaimer:
The information provided in our articles is for general informational purposes only and is not intended as professional advice. While we strive to keep the information up-to-date and correct, Pro Tax Accountant makes no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the website or the information, products, services, or related graphics contained in the articles for any purpose. Any reliance you place on such information is therefore strictly at your own risk.
We encourage all readers to consult with a qualified professional before making any decisions based on the information provided. The tax and accounting rules in the UK are subject to change and can vary depending on individual circumstances. Therefore, Pro Tax Accountant cannot be held liable for any errors, omissions, or inaccuracies published. The firm is not responsible for any losses, injuries, or damages arising from the display or use of this information.
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