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by | Mar 6, 2024 | Other business, Tax, Technical

New rules

From 6 April 2025 the concept of domicile for tax purposes will be abolished. Instead, individuals that have been non-resident for ten or more consecutive years will enjoy 100% tax relief on their foreign income and gains (FIG) for the first four years of UK tax residency regardless of their domicile status and without a requirement to pay a remittance basis charge.

Unlike the current remittance basis rules, foreign income and gains that have benefited from the relief can be brought into the UK without a further tax charge, so there will be less need to implement complex offshore structuring to keep track of income and gains.

After the fourth year UK resident individuals will be subject to tax on their worldwide income and gains, irrespective of whether the funds are remitted or remain offshore.


Existing UK tax residents

Existing eligible UK tax residents who have been resident for fewer than four tax years when the new rules commence can benefit from the relief until the end of their fourth year.

UK resident non-domiciled individuals that do not qualify for the new relief may benefit from transitional reliefs outlined below.


Inheritance tax

The Government will consult on how to move inheritance tax from a domicile-based to a residence-based regime.

However, non-UK assets settled into a trust by a non-domiciled individual prior to 6 April 2025 will remain “excluded property” and outside the scope of UK inheritance tax.


Protected non-resident trusts

Similarly, pre-April 2025 foreign income and gains in a non-resident “protected” trust will remain outside the scope of UK tax, until distributions or benefits are paid to UK individuals that have been resident for more than four years. A protected trust is broadly one where property has been added only by non-domiciled individuals.

However, foreign income and gains arising in an offshore trust after 5 April 2025 will not qualify for protected status and could, for instance, be taxable on a UK resident settlor if he or she or close family members can benefit from the trust.


Transitional reliefs

To ease the transition from the old to the new regime, the Chancellor has announced a number of reliefs for existing UK resident non-domiciled individuals.

  • For the 2025/26 tax year foreign income will be subject to 50% relief for non-domiciled individuals that can no longer claim the remittance basis, but do not qualify for the new relief;
  • Existing non-domiciled individuals that have claimed the remittance basis can rebase their foreign assets to their 5 April 2019 value where the asset is sold after 5 April 2025; and
  • A Temporary Repatriation Facility (TRF) will enable pre-April 2025 foreign income and gains to be remitted during the 2025/26 and 2026/27 tax years for a flat rate tax of 12%.


The Budget announcement is long on headlines, but short on detail, so it is unclear whether, for instance, these transitional reliefs will be available for non-domiciled individuals that have already become deemed domiciled following the April 2017 changes.

Nonetheless, these reliefs will provide some interesting planning opportunities, including:

  • Deferring foreign income until after 5 April 2025 to take advantage of the 50% relief, particularly where it was unlikely the remittance basis would have been claimed;
  • Deferring sales of foreign assets until after 5 April 2025 if they qualify for rebasing and/or give rise to losses that otherwise could not be claimed; and
  • Accelerating income and/or gains to the 2024/25 tax year; claiming the remittance basis and then remitting after 5 April 2025 to pay 12% tax if that is more beneficial than rebasing or the 50% relief on foreign income.

There will undoubtedly be more planning opportunities once details are released.

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