Skip to content

Autumn Budget 2024: Changes to the non-dom regime

The Chancellor confirmed in the Autumn Budget that the Labour P

Things to consider

as we know it and replace this with a residence-based regime from 6 April 2025.

The concept of domicile, which has long been a contentious and ‘grey’ area for a number of years will no longer be determinative of the scope of liability to Income Tax, Capital Gains Tax (CGT) and Inheritance Tax (IHT). There will be an impact on non-resident trusts and reforms to the IHT regime.

For those individuals who have previously accessed the remittance basis, the last year they will be able to claim it will be the 2024/25 tax year and a new regime will apply from 6 April 2025. Their UK tax position will be determined by the length of time they have been resident in the UK prior to 6 April 2025.

The Government has published a technical note and draft legislation but this is subject to change as it passes through Parliament. Further guidance is due to be made available in the lead up to 6 April 2025 and a summary of the current key points is set out below.

The “FIG (Foreign Income and Gains) Regime”

  • From 6 April 2025, individuals who have been UK resident for 4 consecutive tax years will be subject to Income Tax and CGT on their worldwide income and gains.
  • However, for those who are within their first 4 tax years of UK residence (but who have not been UK resident in any of the prior 10 years), there is no tax on FIG arising in the period, even if remitted to the UK. This also applies to distributions/benefits from non-resident trusts.
  • Those who have been UK resident for less than 3 years at 6 April 2025, are eligible to use the FIG regime for the remainder of the 4-year period.
  • UK source income and gains will continue to remain taxable, as per the current regime.
  • Once the 4-year period is over, individuals will be taxed on their worldwide income and gains in accordance with the usual tax rules for UK residents.
  • An election needs to be made by 31 January of the second tax year following the relevant year and it will be necessary to nominate all sources of FIG that the rules are to apply to.
  • Those electing into the FIG regime will lose their personal Income Tax allowance and CGT annual exemption.
  • Residence for the purpose of the FIG regime will be determined under UK domestic law, ignoring treaty residence, and any split years of residence will count as a full year of residence for this purpose.

Overseas Workday Relief (OWR)

  • From 6 April 2025, employees eligible for OWR will be based on their residence status. Where an employee is eligible for the 4-year FIG regime they can make an election to allow them to claim OWR.
  • OWR will be available for up to 4 years and employees will be able to benefit from it regardless of whether their income is paid into a UK or overseas bank account. If it is paid into an overseas bank account this money may be brought to the UK without a tax charge.
  • OWR will be subject to an annual financial limit for each qualifying year being the lower of 30% of the total employment income or £300,000.
  • Transitional arrangements will be available for those that are ineligible for the 4-year FIG regime and those who are part way through their 3-year claim (under the current rules)
  • The foreign earnings will continue to attract National Insurance Contributions, as per the current rules.

Existing UK Resident Non-Doms – Temporary Repatriation Facility (‘TRF’)

  • The last year to claim the remittance basis will be 2024/25.
  • Those who have previously claimed the remittance basis and have unremitted FIG arising can elect to designate all or part of the FIG as effectively remitted and pay tax at a reduced rate to bring these amounts to the UK. The TRF applies to liquid assets ad also unremitted FIG invested in assets. For 2025/26 and 2026/27 the rate of tax is 12% and for 2027/28 the rate is 15%. It is not necessary to move the funds to the UK during this time period. Record keeping will be extremely important to be able to comply with HMRC compliance checks.
  • The TRF is available to UK resident individuals who receive a benefit from an offshore trust structure during the same time period where the benefit is matched to pre-6 April 2025 FIG. The individual can be a settlor or beneficiary in this context. This should hopefully create a more favourable access to trust income and gains which may have been subject to higher rates of UK tax under the previous regime.
  • For Business Investment Relief (BIR), the TRF will apply to FIG used to make such investments. However, from 6 April 2028 it will no longer be possible to claim BIR on any new investments or reinvestments.

Existing UK Resident Non-Doms – Capital Gains Tax Rebasing

  • For those who have previously claimed the remittance basis from 2017/18 and have not become domiciled or deemed domiciled prior to 6 April 2025, a rebasing of non-UK sited assets will be available.
  • Assets will be rebased to their market value at 5 April 2017.
  • Those individuals who became deemed domiciled at some point between 6 April 2017 and 6 April 2025 will not benefit from any new rebasing.
  • Rebasing will not be available to assets held in trusts or companies.

Inheritance Tax (IHT)

  • From 6 April 2025 there will be a residence-based system so that anyone who has been UK resident in 10 out of the last 20 tax years (‘long term resident’) will be subject to IHT on worldwide assets.
  • Long term resident individuals will remain within the scope of UK IHT for up to 10 years following their departure from the UK and the IHT tail will depend on how long they were resident in the UK. As an example, someone who has been UK resident for 13 years will be within the scope of UK IHT for 3 tax years after becoming non-UK resident. This is increased by one year for each additional year of residence and those who have been UK resident for 20 years will be within the scope of UK IHT for 10 years post departure.
  • UK assets and UK residential property (however owned) will remain within the scope of UK IHT regardless of residence status.
  • These rules will apply to individuals who are non-UK resident for 2025/26. They will be treated as long term resident if on the 6 April 2025 they are deemed UK domiciled under the 15/20 year rule and are UK resident for one of the four years following their departure from the UK.

Non-Resident Trusts

  • Any trusts created by a non-UK domiciled individual prior to 30 October 2024 (and who was not deemed domiciled when the trust was created) will be subject to Inheritance Tax 10-yearly periodic and exit charges at a rate of 6% if the settlor is a long-term resident.
  • The settlors of such trusts, if they are long term residents, will not be subject to the IHT reservation of benefit rules in relation to non-UK sited assets. However, from 6 April 2025 this protection will not be available for new trusts created after 30 October 2024 by long term residents.
  • Where the settlor leaves the UK and ceases to be a long-term resident, the trust will be subject to an exit charge to the extent that the trust would fall outside the scope of UK IHT.
  • Trust ‘protections’ (which were introduced following the last major overhaul of the non-dom regime in April 2017) will be removed for all non-resident trusts for new FIG arising after 6 April 2025. This means that UK resident settlors who are not within the 4-year FIG regime (or do not claim it), will be taxable on all income and gains arising within trust structure on an arising basis from the 2025/26 tax year. It will no longer be relevant whether they receive any distributions or benefits from the post-6 April 2025 FIG or whether the income or gains within the trust structure are remitted to the UK.
  • The motive defence against the anti-avoidance provisions which attribute income and gains arising in structures to UK resident settlors will become more pertinent.
  • Pre-6 April 2025 FIG in a protected trust will not be taxed unless matched with distributions/benefits to individuals resident in the UK. UK resident beneficiaries will no longer have the protection of the remittance basis so distributions/benefits to them, wherever received in the world, will be taxable if they have been resident in the UK for more than 4 years.
  • UK resident settlors or beneficiaries within the 4-year FIG regime will be able to enjoy distributions or benefits in the UK free of tax after 6 April 2025. Any such distributions/benefits will not reduce the pools of unmatched FIG and will be subject to a modified onward gifts (anti-avoidance) rule.

Things to consider

Further guidance will be released as and when we know more. However, some potential action points you could consider prior to 5 April 2025 include:

  • Accelerating income and gains prior to 5 April 2025 and making a claim for the remittance basis.
  • Carefully considering the timing of remitting income and gains to the UK so as to take advantage of the TRF rules when they are introduced after 5 April 2025.
  • Reviewing trust arrangements and whether they will remain effective after 5 April 2025 and taking any necessary action prior to 5 April 2025.
  • Considering your options for leaving the UK and becoming non-UK resident.

How can we help?

If you wish to discuss your options, please do not hesitate to contact us.