UK Tax Changes 2025: The End of the Non-Dom Advantage (But Here’s How to Win Anyway)”
Major Tax Changes Coming in April 2025: What Non-Doms Need to Know
For decades, the UK has been an attractive destination for wealthy international individuals, partly due to its remittance basis of taxation, which allowed non-UK domiciled individuals to only pay tax on foreign income and gains when brought into the UK. However, from April 6, 2025, the tax landscape is set to change dramatically.
What’s Changing?
1. The End of the Remittance Basis
The concept of 'domicile' will no longer determine tax obligations. Instead, tax will be based on residence. This means:
- If you live in the UK, you will be taxed on your worldwide income and gains, regardless of whether they are remitted to the UK.
- The remittance basis election will be abolished, with 2024–25 being the last tax year it can be used.
2. A New 4-Year Tax Break for Recent Arrivals
From April 6, 2025, individuals moving to the UK after a prolonged period of non-residence will benefit from a 100% tax exemption on foreign income and gains (FIG) for their first four years of UK tax residency.
Who is eligible?
- Have been non-UK tax resident for at least 10 consecutive tax years before moving to the UK.
- Become UK tax resident under the Statutory Residence Test (SRT) on or after April 6, 2025.
Key Benefits
- Full exemption on worldwide income & gains.
- No restrictions on remittances.
- Flexibility in claiming relief.
Example Scenario
Sarah, an entrepreneur, has lived in the UAE for 12 years. She decides to move to London in 2026. Under the new rules, she can:
- Earn dividends from her overseas investments tax-free in the UK for four years.
- Sell foreign assets without paying UK Capital Gains Tax (CGT).
- Freely transfer money from her overseas accounts to the UK without triggering a tax charge.
What Happens After Four Years?
Once the 4-year period expires, Sarah will be taxed like any other UK resident, meaning her worldwide income and gains will be subject to UK tax.
3. Temporary Repatriation Facility (TRF) – A One-Time Tax Amnesty
The Temporary Repatriation Facility (TRF) allows individuals who have historically used the remittance basis to bring back previously untaxed foreign income and gains (FIG) at a reduced tax rate.
How Does it Work?
- The TRF will be available for three tax years (2025–26 to 2027–28).
- Individuals can designate untaxed foreign income/gains from prior years and pay tax at a reduced rate:
- 12% in 2025–26 and 2026–27
- 15% in 2027–28
- Once designated, funds can be brought into the UK at any time without additional tax charges.
Who Can Use the TRF?
- Previously claimed the remittance basis in any tax year before April 6, 2025.
- Have foreign income and gains that remain untaxed in the UK.
- Are UK tax residents during the TRF period (2025–28).
Example Scenario
James, a long-term UK resident, has been using the remittance basis for 15 years. He has £2 million in foreign bank accounts from untaxed overseas investments. Under the TRF:
- If he designates £500,000 in 2025–26, he will pay 12% tax (£60,000).
- If he waits until 2027–28, the tax rate increases to 15% (£75,000).
- Once designated, he can bring the money into the UK at any time without further tax liability.
Final Thoughts
Both the 4-Year FIG Regime and TRF provide once-in-a-lifetime tax planning opportunities for internationally mobile individuals.
- If you are moving to the UK, the 4-year FIG regime offers a powerful incentive to structure finances efficiently.
- If you are a long-term UK resident with offshore wealth, the TRF provides a low-tax opportunity to bring money into the UK before the new tax rules fully take effect.
Given the complexity of these changes, individuals should seek professional tax advice to ensure they maximise these opportunities before the window closes.
For expert assistance with your self-assessment tax return, feel free to contact us today!
