The New Non-Domicile Tax Regime from April 2025: A Practical Guide

The taxation of non-UK domiciled individuals ("non-doms") in the UK underwent the most significant structural reform in decades from 6 April 2025. The remittance basis — a regime that had existed in some form for over a century, allowing non-doms to shelter foreign income and gains from UK tax provided they did not bring them to the UK — was abolished. In its place, a new framework applies that is based on residence rather than domicile, with a time-limited exemption for new arrivals and transitional measures for those already in the UK.

This guide explains the new rules in practical terms for internationally mobile individuals considering UK residence, those already resident, and those who were using the remittance basis before April 2025.

The Abolition of the Remittance Basis

From 6 April 2025, UK-resident individuals are taxed on their worldwide income and gains on an arising basis, regardless of domicile. There is no longer a mechanism to shelter offshore income by leaving it offshore. This applies from the first day of UK residence for most individuals, unless they qualify for the new FIG exemption (described below).

The concept of domicile retains relevance for Inheritance Tax (IHT) purposes: non-domiciled individuals remain outside UK IHT on overseas assets until they become "long-term UK residents" (more than 10 years of UK residence in the previous 20 years — the successor to "deemed domicile"). For income and CGT purposes, domicile is no longer the dividing line.

The 4-Year Foreign Income and Gains (FIG) Exemption

To mitigate the deterrent effect of the abolition of the remittance basis on inward migration, a 4-year FIG exemption was introduced from April 2025. Under this exemption, individuals who have not been UK tax resident in any of the 10 tax years immediately preceding their arrival in the UK are entitled to pay no UK tax on:

• Foreign income: income arising outside the UK (dividends, interest, rental income on overseas properties, business profits from overseas sources).
• Foreign capital gains: gains on the disposal of overseas assets.

The exemption lasts for the individual's first four tax years of UK residence (subject to meeting the qualifying conditions in each year). Income and gains sheltered by the FIG exemption can also be brought into the UK without triggering any additional tax charge — there is no remittance restriction.

Claiming the FIG Exemption

The FIG exemption does not apply automatically. It must be claimed in the self-assessment tax return for each relevant tax year. By claiming, the individual gives up the personal allowance for income tax purposes and the annual CGT exempt amount for that year. This means individuals with modest foreign income and gains may be better served not claiming — losing these allowances costs more than the FIG benefit.

Who Qualifies?

The key condition is 10 years of prior non-residence. This mirrors the statutory residence test framework. An individual who was UK tax resident in any of the 10 years before their UK arrival does not qualify. This strict prior-non-residence test means that:

• Returning UK expats will typically not qualify (they were UK resident in recent prior years).
• Foreign nationals arriving for the first time with no prior UK residence history will qualify.
• Individuals who left the UK more than 10 complete tax years before returning may qualify, depending on exact timing.

Years 5 Onwards: Taxed on Worldwide Basis

From the fifth tax year of UK residence onwards, individuals who used the FIG exemption (and those who did not qualify for it) are taxed on their worldwide income and gains in the same way as UK-domiciled UK residents. There is no ongoing shelter mechanism and no long-term non-dom status for income and CGT purposes.

This is a fundamental change for the long-term resident non-dom community. Individuals who had used the remittance basis for 5, 10, or 20 years now face paying UK tax on all foreign income as it arises, from April 2025 onwards (or from the end of their FIG exemption period). Many long-term residents have reassessed their UK residential status in light of this change.

Overseas Workday Relief (OWR)

Overseas Workday Relief continues under the new regime, providing relief from UK income tax on employment income attributable to workdays spent outside the UK. However, it is restructured:

• OWR is available for the first three tax years of UK residence (previously, OWR was available to remittance basis claimants for up to three years regardless of their arrival date).
• The relief applies automatically where the employee's contract is with an overseas employer, or where the employment duties are performed partly overseas, and the individual has not been UK resident in any of the prior 10 tax years (the same qualifying condition as the FIG exemption).
• The relief is calculated using the standard employment income sourcing rules: UK tax applies only to the proportion of employment income attributable to UK working days.
• Unlike under the remittance basis, the relieved income does not need to be kept offshore — there is no remittance element to OWR under the new regime. The relief is applied to the UK self-assessment calculation directly.

OWR is particularly valuable for internationally mobile executives who split their working time between the UK and overseas jurisdictions, generating employment income from both sets of duties.

The Temporary Repatriation Facility (TRF)

For individuals who had used the remittance basis before April 2025 and therefore had offshore income and gains that had never been taxed in the UK (because they were never remitted), the Temporary Repatriation Facility (TRF) was introduced for the transitional period.

The TRF allows qualifying individuals to elect to pay a reduced flat rate of tax on pre-April 2025 offshore income and gains that are designated for TRF treatment. The rates are:

• 12% for the 2025–26 and 2026–27 tax years.
• 15% for the 2027–28 tax year.

After 5 April 2028, the TRF closes. Offshore income and gains accumulated under the remittance basis and not repatriated or designated under the TRF will be:

• Taxable at full income tax or CGT rates when brought to the UK (old remittance basis rules apply to the extent the individual is UK resident and remits).
• Or, for some categories, remain permanently offshore and outside UK tax if never remitted (depending on the individual's future UK residence history).

The TRF is a one-time opportunity to regularise pre-2025 offshore income and gains at a low flat rate. Whether it is beneficial depends on the scale of offshore income/gains and the anticipated future pattern of UK residence and remittances. Individuals with large offshore income accumulations should model the TRF against their expected future tax position.

Protected Settlements: The New Rules

Under the old regime, offshore trusts created by non-doms before they became deemed-domiciled could be "protected settlements" — sheltering offshore income and gains from UK tax indefinitely, provided certain conditions were met (no UK additions, no UK benefits above the prescribed threshold).

From April 2025, the protected settlement regime is restructured:

• Existing trusts created before 6 April 2025: these trusts enter a new "transitional protected" status for a limited period. The exact rules for transitional protection depend on whether the settlor is in their FIG period or is past it.
• New trusts created from April 2025 onwards: cannot benefit from protected settlement status in the same way. From year 5 of UK residence, offshore trust income and gains are attributed to a UK-resident settlor on an arising basis, regardless of whether distributions are made.
• Beneficiary basis: where a UK-resident beneficiary receives a distribution from an offshore trust, the distribution is taxable as income in the year of receipt. The old "matching" rules (matching distributions to accumulated trust income and gains) continue to apply in modified form.

For non-doms who established offshore trusts as part of their wealth planning, the new trust rules require urgent review. The window during which transitional protected status provides a benefit is limited.

IHT: Long-Term Resident Status

For Inheritance Tax, domicile is replaced from 6 April 2025 by a concept of Long-Term UK Residence (LTUR). An individual becomes subject to UK IHT on worldwide assets once they have been UK resident for 10 of the previous 20 tax years. Before reaching LTUR, UK IHT applies only to UK-situs assets (the non-dom IHT position).

Once an individual leaves the UK, they retain LTUR status — and therefore worldwide IHT exposure — for a "tail" period. The tail period is between three and ten years, depending on how long the individual was UK resident:

• Resident for 10–13 years → 3-year tail.
• Resident for 14–19 years → the tail increases by one year for each additional year of residence above 13 (e.g., 15 years resident → 5-year tail; 17 years resident → 7-year tail).
• Resident for 20+ years → 10-year tail (the maximum).

This means long-term UK residents considering departure must plan their exit carefully: the IHT tail can be substantial, and significant gifts or offshore restructuring before departure may need to be timed with reference to the tail period.

Planning Implications for New Arrivals

Individuals considering UK residence from abroad should take specialist advice before arriving. Key planning steps include:

1. Review offshore portfolio structure: ensure offshore investments are structured to maximise the FIG exemption period. Assets that will generate income or gains during years 1–4 benefit from FIG; consider restructuring before arrival.
2. Establish employment contracts appropriately: if working for an overseas employer, structure contracts to preserve OWR eligibility.
3. Review existing trusts: offshore trusts settled before UK arrival should be reviewed for transitional protected status.
4. Model the IHT exposure: understand the 10-year LTUR threshold and plan the level and duration of UK residence accordingly.
5. Consider the TRF if returning: individuals with prior UK non-dom status and accumulated offshore income/gains should model the TRF window before it closes in April 2028.

Compliance Caveat

The new non-dom regime came into force on 6 April 2025 and represents a fundamental restructuring of UK international tax. The rules — including the FIG exemption conditions, the TRF rates and deadlines, the OWR restructuring, and the LTUR IHT threshold — are established by the Finance Act 2025 and related secondary legislation. This guide reflects the law as at June 2026. Aspects of the new regime continue to be clarified through HMRC guidance, and technical amendments may be made in subsequent Finance Acts. Internationally mobile individuals affected by these changes should obtain urgent specialist advice. This is a complex area where the consequences of incorrect planning can be substantial.

How Global Investments Can Help

Global Investments specialises in advising internationally mobile HNW individuals on the tax and financial planning implications of UK residence. Whether you are a new arrival considering the FIG exemption, a long-term resident assessing your post-2025 position, or a departing resident planning around the IHT tail, our advisers can provide a comprehensive analysis of your situation and introduce you to specialist UK non-dom tax counsel. We also advise on offshore portfolio structuring, trust reviews, and the interaction of UK tax with your home country obligations. Contact us for a confidential initial consultation.