On 6 March 2024, chancellor Jeremy Hunt delivered his budget speech and secured his place in the tax history books by announcing the government would end the non-domicile tax regime.
The government’s published budget statement says that the non-domicile tax regime will be abolished and replaced with a fairer system from April 2025, where new arrivals to the UK pay the same tax as everyone else after four years.
Here is a breakdown of the changes depending on the date the individual moved to the UK, there are 3 relevant possibilities:
- Moved to the UK from April 6, 2025
If an individual moves to the UK from April 6, 2025, after not being a UK resident for 10 years, the following options apply –
- Elect to claim FIG relief and can even remit foreign income tax free into the UK for the first 4 years of UK residency.
- If claim FIG relief on general income, dividends, capital gains, the individual loses their personal tax allowance for that particular type of income.
- Once 4 years end, all foreign income is fully UK taxable.
- Moved to the UK between April 6, 2022, and April 5, 2024
If an individual moved to the UK between April 6, 2022, and April 5, 2024, after not being a UK resident for 10 years, the above options apply within the first 4 years of UK residency.
- Moved to the UK before April 5, 2022
If an individual moved to the UK before April 5, 2022, and has been claiming remittance basis on their tax return based on the previous remittance rules and has NOT remitted these funds to the UK and paid any UK tax (i.e. individual within their first 7 years of UK residency). They can now remit these funds and claim Temporary Repatriation Facility (TRF) which will be available for 2025/26 and 2026/27 tax years and pay a flat tax rate of 12% on the amounts remitted. This measure includes a “relaxation” of the mixed funds ordering rules with the objective of simplifying the process, but no detail on this is available yet.
The TRF will not apply to pre-6 April 2025 foreign income and gains generated within trusts or trust structures.
Foreign income earnt in 2025/26 tax year, for individuals moving from the remittance basis to the arising basis of taxation will only be subject to UK tax on 50% of their non-UK source income.
