Non-Domicile Status and UK Pensions: How the April 2025 Reforms Affect Planning

For much of the past two centuries, the UK's non-domicile regime offered internationally mobile, high-net-worth individuals a tax framework that taxed UK income fully but allowed overseas income and gains to remain offshore, untaxed, unless remitted to the UK. This was the remittance basis — a longstanding feature of the UK tax system that attracted significant international wealth to London and the wider UK.

In April 2025, the remittance basis was abolished for most long-term UK residents. The change represents the most significant reform to the taxation of internationally mobile individuals in a generation, and its implications for pension planning — UK pensions, overseas pensions, QROPS, and cross-border inheritance — are far-reaching.

This guide explains the regime that existed before, what changed in April 2025, and how we approach pension planning for non-dom clients in the new environment.

Understanding Domicile: The Legal Foundation

Domicile is a common law concept distinct from residence. While tax residence is determined primarily by counting days spent in the UK in a given tax year (under the Statutory Residence Test), domicile refers to the country you regard as your permanent home — a concept rooted in intention, not just presence.

Most people acquire their domicile of origin from their father at birth. A British citizen born in the UK to a UK-domiciled father is UK-domiciled by origin, regardless of where they subsequently live. Conversely, a person born outside the UK with a non-UK domicile of origin retains that non-UK domicile unless they acquire a domicile of choice — which requires settling in the UK with the intention of remaining there permanently.

The distinction matters because, until April 2025, it determined eligibility for the remittance basis.

The Pre-April 2025 Regime: Remittance Basis

Under the old regime, a non-domiciled individual resident in the UK could elect to be taxed on the remittance basis. This meant:

• UK-source income and gains were taxed in full in the UK, as for any UK resident.
• Overseas income and gains — including pension income from overseas pension schemes — were only taxed in the UK if they were remitted (brought) to the UK.

For non-doms with significant overseas pension income, this offered a powerful planning opportunity: keep the pension income in an overseas account, live off UK income or capital, and the overseas pension income accumulates without UK tax. When the individual eventually left the UK, they could access the accumulated overseas income without any UK tax charge at all.

The regime was not cost-free. Non-doms who wished to claim the remittance basis and had been UK resident for seven of the prior nine tax years faced a Remittance Basis Charge — £30,000 per year. Those resident for twelve of the prior fourteen years faced a charge of £60,000. For high earners, the charge was nevertheless worthwhile.

The April 2025 Reforms: What Changed

The Spring Budget 2024 announced the abolition of the remittance basis, with effect from 6 April 2025. The replacement is the Foreign Income and Gains (FIG) regime:

• New arrivals to the UK who have not been UK resident in the preceding ten tax years may claim exemption from UK tax on all foreign income and gains for their first four tax years of UK residence. This is a generous transitional benefit — better than the old regime in some respects for short-term UK residents.
• After four years of UK residence, individuals are taxed on their worldwide income and gains in full, in the same manner as any UK-domiciled, UK-resident taxpayer. The remittance basis ceases to be available entirely.

In practice, this means that a non-domiciled individual who has been UK resident for more than four tax years — the overwhelming majority of long-term non-dom residents — lost their remittance basis advantage from 6 April 2025 and is now taxed on worldwide income, including overseas pension income previously kept offshore.

Transitional Arrangements

The Government did not want to trigger an immediate, forced remittance of years of accumulated offshore income, so a series of transitional provisions were introduced:

Temporary Repatriation Facility

A Temporary Repatriation Facility (TRF) was introduced to allow previously non-dom individuals to bring offshore income and gains accumulated before 6 April 2025 to the UK at a reduced tax rate — 12% in the first year of the facility, rising thereafter. The facility is time-limited.

For non-dom clients who have been keeping significant overseas pension income (or other income) offshore under the remittance basis, the TRF may offer an opportunity to regularise that position at lower cost than waiting until the income becomes taxable at full marginal rates. The decision requires careful modelling — the right answer depends on the volume of offshore income, your marginal rate, your long-term plans, and your country of residence.

Overseas Workday Relief

Some relief continues for genuine overseas workday arrangements in the early years of UK residence, though the rules changed alongside the FIG regime. We do not cover this in detail here as it falls outside the scope of pension planning specifically.

Implications for Pension Planning

UK SIPP in Drawdown: Now Fully Taxable

If you hold a UK SIPP and are UK resident, drawdown withdrawals are UK income. This was true under the old regime as well — the remittance basis only affected overseas income. UK pension income was always UK-taxable for UK residents.

The April 2025 reforms change the position where a non-dom was planning to draw UK pension income and keep it in the UK whilst sheltering overseas pension income under the remittance basis. That shelter has now gone: both the UK pension and the overseas pension are now fully UK-taxable once you have been UK resident for four years.

Overseas Pension Income: The Critical Change

The biggest practical change for pension planning is the treatment of overseas pension income — income from pension schemes established outside the UK, drawn by individuals resident in the UK.

Previously: a non-dom could draw overseas pension income and leave it overseas under the remittance basis. Now: after four years of UK residence, that income is UK-taxable in the year it arises, whether or not it is remitted. The old planning strategy is no longer available.

Affected individuals include those with:

• Pension schemes in former countries of employment (US 401(k) plans, German betriebliche Altersversorgung, French assurance vie pension plans)
• Overseas personal pension arrangements
• QROPS held in jurisdictions other than the UK

QROPS and the Post-Reform Environment

A Qualifying Recognised Overseas Pension Scheme (QROPS) is an overseas pension scheme recognised by HMRC. Transfers from UK registered pension schemes to QROPS are subject to the Overseas Transfer Charge (25%) unless certain conditions are met — principally that the member and the scheme are in the same country, or both are within the EEA.

Under the old non-dom regime, holding a QROPS in a low-tax jurisdiction offered the possibility of drawing pension income in that jurisdiction and not remitting it to the UK. In the post-reform world, once you are UK resident and beyond the four-year FIG window, you will be taxed in the UK on QROPS income in the year it arises, regardless of whether it is remitted.

This does not mean a QROPS is no longer useful — but it does mean the tax planning rationale has changed. A QROPS in a jurisdiction with a strong DTA with the UK may still result in the pension income being taxed only in the QROPS country, at potentially lower rates, rather than in the UK. But this analysis depends entirely on the specific DTA, the QROPS country, the nature of the pension income, and the individual's circumstances. Professional advice is essential.

Non-Domicile Status and Inheritance Tax

The April 2025 reforms also materially change the IHT position for long-term UK residents. Previously, non-doms were only subject to UK IHT on UK-sited assets. Overseas assets — including overseas pension funds — were outside the UK IHT net.

From 6 April 2025, a residence-based IHT test is being introduced: individuals who have been UK resident for 10 of the last 20 tax years will be subject to UK IHT on their worldwide assets. There are tail provisions — once the 10-year threshold is crossed, the worldwide IHT exposure continues for a period even after leaving the UK.

Pension funds present a specific IHT dimension. Currently, UK pension funds are outside the estate for IHT purposes (though this is under review as part of the Government's pension IHT consultation, with changes proposed for April 2027). The interaction between the new residence-based IHT regime and pension funds — UK and overseas — requires careful analysis.

Our Approach to Non-Dom Clients

We do not advise in isolation. Non-domicile planning sits at the intersection of UK tax law, common law domicile concepts, overseas tax obligations, and pension regulation — a combination that requires co-ordinated input from a UK pension specialist, a UK non-dom tax adviser, and (where relevant) tax advisers in the country of origin and the country of residence.

Our role is to ensure the pension architecture — the structures, schemes, and strategies — is designed to work coherently with the broader tax planning. We do not give UK tax advice ourselves; we work with specialist partners who do. When we review a non-dom client's pension, the outcome is a picture of their entire pension landscape: what they hold, where, what the tax treatment is under the current rules, and what opportunities or risks exist.

How Global Investments can help

The April 2025 non-dom reforms create both urgency and opportunity for affected individuals. If you were previously on the remittance basis and holding overseas pension income offshore, the window to use the Temporary Repatriation Facility at preferential rates is time-limited. If you hold a QROPS and had planned to access it from the UK, the tax treatment of that income needs reassessment in light of the new rules.

Our pensions team works with non-dom clients and their tax advisers to ensure pension structures are reviewed and, where necessary, reorganised in light of the post-2025 landscape. We make no claim that our advice covers all aspects of non-domicile law — this is a highly specialised area and we always recommend working with a specialist UK non-dom tax adviser alongside any pension review. Pension rules, tax legislation, and HMRC guidance are subject to change. Investments can fall as well as rise and past performance is not a guide to future returns. Please contact us to discuss your specific circumstances.