The non-dom regime in its current format will be abolished from 6 April 2025 and replaced with a new Foreign Income and Gains (FIG) regime. New arrivals to the UK will benefit from 100% tax relief on foreign income and gains for the first four years they are tax-resident, regardless of their domicile.

Only individuals who had ten consecutive years of non-residence before their arrival can qualify for the FIG regime. Non-residence is determined under the statutory residence test, and treaty non-residence under a double tax agreement or split years will not count. However, British citizens and others considered UK-domiciled will be able to use the FIG regime if they have had ten consecutive years of non-residence before returning to the UK.

Claiming the FIG regime will result in the loss of the tax-free personal allowance (currently £12,570) and the tax-free CGT exemption (currently £3,000). Claims can be made annually, allowing individuals to opt for specific years (e.g., years one and four, but not years two and three). The regime also provides flexibility for partial claims on either income or gains, though it prohibits access to foreign losses in the year of a claim.

Under the FIG regime, there is no requirement to keep foreign income or gains outside of the UK, which simplifies the current remittance basis rules. The FIG regime will be easier to understand and will benefit more people, although it will only be available for four years instead of the current 15.

Individuals will be required to report the amount of foreign income and gains on which relief is being claimed in their tax returns, increasing the administrative burden.

From 6 April 2025, those who have been UK resident for at least four years will be subject to income tax and CGT on their foreign income and gains in full.

Existing UK tax residents who have been resident for fewer than four tax years as of 6 April 2025 are eligible for the FIG regime for their remaining time.

Currently, non-domiciles who work partly in the UK and partly overseas can claim the remittance basis on the proportion of their earnings that is earned overseas. This three-year relief will be extended to four years to align with the new FIG regime, eliminating the need to keep those earnings in an offshore bank account or apply for HMRC direction for PAYE, making it significantly simpler to claim.

However, there will be an annual financial limit of £300,000 or 30% of an individual’s total employment income (whichever is lower). As with the FIG regime, claiming overseas workday relief will result in the loss of the £12,570 tax-free personal allowance, the £3,000 CGT annual exempt amount, and the ability to access any foreign losses.

Unlike the old rules, UK-doms who qualify for the FIG regime can now access this valuable relief.

Current non-doms will be able to rebase foreign assets they held on 5 April 2017 to their value on that date, meaning only the increase in value since then will be subject to UK tax. This is a significant benefit and comes with specific conditions:

• The asset must have been held on 5 April 2017 and disposed of after 6 April 2025.
• The asset must not have been in the UK at any time between 6 March 2024 and 5 April 2025.
• The individual must be non-dom at all times up to 5 April 2025.
• The individual must have claimed the remittance basis at some point between 2017/18 and 2024/25, and not have been automatically entitled to the remittance basis.

Care should be taken if the asset was originally bought using funds that were not clean capital, as this element will still be taxable if remitted.

Any foreign income and gains that arose before 5 April 2025, which remain untaxed in the UK (because the remittance basis was claimed in the year that income or gain arose), will be taxed when remitted to the UK, regardless of when that remittance occurs.

There will be a temporary repatriation facility allowing unremitted income or gains to be taxed during 2025/26 or 2026/27 at a reduced flat rate of 12%, with no relief for foreign taxes. Unremitted income or gains can be taxed during 2027/28 at a reduced flat rate of 15%.

Once taxed, these amounts can be brought to the UK at any time without further charge. After 2027/28, income or gains will be taxed at the prevailing rates of income tax or CGT when remitted. Tax charged under the temporary repatriation facility must be paid from UK-taxed funds, including funds subject to this facility.

IHT will now be based on tax residency rather than domicile.  IHT will be payable on an individual’s worldwide assets if they have been a UK resident for at least 10 out of the last 20 years immediately preceding the tax year of death. If an individual has been UK tax resident for 9 or fewer of the last 20 years, IHT will only be payable on their UK assets.

Expats leaving the UK will have a ‘tail’ period during which they remain subject to worldwide IHT based on how long they were previously UK resident.  The tail period will be a sliding scale as follows:

Previously UK resident / Tail

• 13 years or less / 3 years
• 14 years / 4 years
• 15 years / 5 years
• 16 years / 6 years
• 17 years / 7 years
• 18 years / 8 years
• 19 years / 9 years
• 20 years / 10 years

If an expat returns to the UK after an absence of 10 consecutive years, the clock is reset, However, care should be taken if the 10 years of non-residence are not consecutive.  Different rules will also apply for those who are already non-resident by 5 April 2025.

A split year is counted as a full year of tax residence for IHT purposes and therefore long-term residents leaving the UK should try and time their departure for the start of the tax year to reduce their IHT tail quicker.

From 6 April 2025, income and gains within settlor-interested non-resident trusts will be taxed on an arising basis on the settlor or transferor if they have been UK resident for more than four years. This aligns the taxation of non-resident trusts with that of trusts for UK-domiciled settlors or transferors.

Foreign income and gains arising within a non-resident trust before 6 April 2025 will be taxed when they are matched to distributions, benefits and capital payments as they are now. Beneficiaries within the four-year FIG regime can receive distributions/benefits free of UK tax. (This also applies to foreign income arising in a UK life interest trust).

Beneficiaries who have been UK resident for more than four years may be able to use the temporary repatriation facility to reduce the rate of tax to 12% or 15%.

Non-UK assets settled into an excluded property trust will be subject to UK Inheritance Tax (IHT) if the settlor is a long-term resident (i.e., UK resident for at least ten of the last 20 years or within the expat tail). IHT will be assessed at the usual trigger points for trusts: upon transferring assets to the trust, every ten years, and when assets exit the trust.

Conversely, assets held in a relevant property trust, which are currently subject to IHT charges, will leave the IHT net if the settlor ceases to be a long-term resident. This could apply to a UK-domiciled settlor who leaves the UK for at least ten years, and IHT exit charges will arise.

If the settlor died before 6 April 2025, the determination of whether non-UK assets are excluded property will be based on the previous test; that is, whether the settlor was non-domiciled at the time the assets were settled into the trust.

There are also transitional rules for excluded property trusts already in existence as of 30 October 2024.