Expert Guidance on Transitioning From Non-Dom Status to The New Foreign Income And Gains Regime In 2025-26

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Non-Dom Status Ending in 2025? | Expert Guide to the New Foreign Income & Gains (FIG) Regime UK

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Understanding the Shift from Non-Dom to the FIG Regime

What Was the Non-Dom Regime, and Why Is It Ending?

Now, if you’ve been enjoying the perks of non-dom status, you might be wondering why the UK’s shaking things up. The non-domiciled regime, a 200-year-old tax framework, allowed UK residents whose permanent home (or “domicile”) was outside the UK to avoid tax on foreign income and gains unless they brought that money into the country. This remittance basis was a boon for wealthy individuals, with HMRC reporting 74,000 non-doms in 2022-23, up from 68,900 the previous year. But, as of 6 April 2025, this system is history, replaced by a residence-based Foreign Income and Gains (FIG) regime. The government, under Chancellor Rachel Reeves, aims to modernise taxation, ensuring long-term UK residents pay their fair share, projecting to raise £12.7 billion over five years.

The shift isn’t just about fairness—it’s about aligning the UK with global tax trends while keeping it attractive for mobile talent. Unlike the old system, where domicile status (a tricky legal concept tied to your permanent home) determined your tax liability, the new FIG regime focuses purely on how long you’ve been a UK tax resident. This change eliminates the need to navigate complex domicile rules, but it also means you’ll need to rethink your tax strategy.

Who Qualifies for the New FIG Regime?

So, who gets to benefit from this new setup? The FIG regime offers a four-year tax holiday on foreign income and gains for “qualifying residents.” To qualify, you must:

●       Be a UK tax resident under the Statutory Residence Test (SRT).

●       Have been non-UK tax resident for at least 10 consecutive years before arriving in the UK.

●       Be within your first four years of UK tax residency starting from 6 April 2025 or your arrival date, whichever is later.

For example, if you moved to the UK in 2023-24 after 10 years abroad, you can claim FIG relief for 2025-26 and 2026-27 (your third and fourth years). But if you’ve been in the UK longer or were a UK resident in any of the last 10 years, you’re out of luck. Members of the House of Commons or Lords are also ineligible. The catch? Claiming FIG relief means giving up your Income Tax Personal Allowance (£12,570 for 2025-26) and Capital Gains

Tax Annual Exempt Amount (£3,000 for 2025-26).

FIG Regime Eligibility Criteria	Details
UK Tax Residency	Must meet SRT conditions.
Non-UK Residency Period	At least 10 consecutive years before UK arrival.
Time Limit	First 4 years of UK tax residency.
Exclusions	MPs, Lords, or those resident in the UK in the prior 10 years.
Trade-Offs	Loss of Personal Allowance (£12,570) and CGT Annual Exempt Amount (£3,000).

How Does the FIG Regime Work in Practice?

Let’s break this down with a real-world scenario. Imagine Priya, a tech entrepreneur from India, moves to London in April 2025 after 12 years in Singapore. She earns £200,000 annually from her overseas investments. Under the FIG regime, Priya can claim 100% relief on this income for four years (2025-26 to 2028-29), meaning no UK tax, even if she brings the money to the UK. She files a claim via her Self-Assessment tax return by 31 January 2028 for the 2025-26 tax year, specifying which income sources (e.g., dividends, rental income) qualify. But she’ll forgo her £12,570 Personal Allowance, so her UK-sourced income (say, £50,000 from consulting) will be taxed at the full rate: 20% up to £50,270, 40% from £50,271 to £125,140, and 45% above that.

Now, consider this: If Priya only has small foreign earnings (say, £1,500 annually), she might not bother claiming FIG relief, as the loss of allowances could outweigh the tax savings. The regime’s designed for high-net-worth individuals, not those with modest overseas income.

What Happens to Your Taxes After the Four-Year FIG Period?

Be careful! Once your four-year FIG window closes, you’re taxed on your worldwide income and gains like any UK resident. For 2025-26, this means:

●       Income Tax: 20% (basic rate) on income up to £50,270, 40% (higher rate) up to £125,140, and 45% (additional rate) above that.

●       Capital Gains Tax: 10% (basic rate) or 20% (higher/additional rate) for most assets, 18% or 24% for residential property, after the £3,000 annual exempt amount.

●       Dividend Tax: 8.75% (basic), 33.75% (higher), or 39.35% (additional), with a £500 dividend allowance.

If Priya stays in the UK past 2028-29, her £200,000 overseas income becomes fully taxable, potentially adding £80,000+ to her tax bill annually, depending on her total income. Planning ahead—perhaps by restructuring investments or relocating before the four years end—is crucial.

UK Tax System Post-FIG Period

Why Does This Matter for Business Owners?

Now, if you’re a business owner, this shift could hit your wallet hard. Many non-doms run international businesses, with profits parked offshore. Under the old remittance basis, you could keep those profits tax-free unless brought to the UK. Post-2025, if you don’t qualify for FIG relief, those profits are taxed as they arise, even if they stay abroad. For instance, Rupert, a UK-resident non-dom who owns a Dubai-based consultancy, previously avoided UK tax on his £500,000 annual profits. From April 2025, unless he qualifies for FIG, he’ll face UK tax on the full amount, potentially owing £200,000+ annually. This could push business owners to rethink their residency or explore jurisdictions like Dubai or Singapore with lower tax rates.

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Navigating Transitional Reliefs and Practical Strategies for the FIG Regime

What Are the Key Transitional Reliefs Available?

Now, if you’re a former non-dom, the government’s thrown you a few lifelines to ease the shift to the FIG regime. These transitional reliefs, outlined by HMRC for the 2025-26 tax year, are designed to soften the blow of losing the remittance basis. Let’s unpack the big three: the Temporary Repatriation Facility (TRF), Capital Gains Tax (CGT) rebasing, and transitional provisions for trusts. Each comes with specific rules, deadlines, and benefits, so you’ll need to act fast to make the most of them.

The TRF, for instance, lets you bring foreign income and gains earned before 6 April 2025 into the UK at a reduced tax rate of 12% (or 15% for 2026-27) if remitted by 5 April 2027. Say you’re sitting on £1 million in offshore dividends from 2023-24. Remitting this under the TRF could save you over £300,000 compared to the standard 45% additional rate. But you’ll need to declare this on your Self-Assessment return and keep meticulous records of pre-2025 income, as HMRC’s cracking down on compliance.

How Does CGT Rebasing Work?

Let’s talk about CGT rebasing, because this one’s a game-changer for asset holders. If you were a non-dom on the remittance basis before 6 April 2025, you can rebase the value of assets held on 5 April 2019 to their market value on that date, but only for disposals made in 2025-26 or 2026-27. Why does this matter? It reduces your taxable gain. For example, consider Eamon, a former non-dom who bought shares in a US tech firm for £200,000 in 2010. By April 2019, they were worth £800,000, and he sells them in 2025 for £1.2 million. Without rebasing, his gain is £1 million, taxed at 20% (£200,000). With rebasing, the gain is only £400,000 (£1.2m - £800k), slashing his tax bill to £80,000. You’ll need to elect for rebasing via your tax return and provide valuation evidence, so dig out those old records now.

CGT Rebasing Example	Without Rebasing	With Rebasing
Purchase Price (2010)	£200,000	£200,000
Value on 5 April 2019	-	£800,000
Sale Price (2025)	£1,200,000	£1,200,000
Taxable Gain	£1,000,000	£400,000
CGT at 20%	£200,000	£80,000

What Happens to Trusts Under the New Rules?

Now, if you’ve got money tied up in offshore trusts, things get a bit trickier. Pre-2025 trusts set up by non-doms were often shielded from UK tax on foreign income and gains. From 6 April 2025, these trusts lose their special status unless you qualify for FIG relief. If you’re a settlor or beneficiary, any trust income or gains arising after this date are taxable in the UK, regardless of where the trust is based. However, a transitional relief lets you claim 50% relief on foreign income and gains from such trusts for 2025-26 only, provided you were a non-dom in 2024-25.

Take Zara, who set up a Jersey trust in 2018 with £2 million in overseas investments. In 2025-26, the trust earns £100,000 in dividends. Without relief, Zara faces a £45,000 tax bill (45% additional rate). With the 50% relief, only £50,000 is taxable, halving her bill to £22,500. You must elect for this relief by 31 January 2027 via your tax return, and HMRC advises consulting a tax adviser to ensure compliance, as trust taxation is a minefield.

How Can You Plan for the FIG Regime?

So, the question is: how do you make this transition work for you? Strategic planning is key, especially for high-net-worth individuals and business owners. Here’s a step-by-step guide to get you started:

Step-by-Step Guide: Transitioning to the FIG Regime

1. Assess Your Residency Status: Use HMRC’s Statutory Residence Test tool (available at www.gov.uk/statutory-residence-test) to confirm your UK tax residency and check if you’ve been non-UK resident for 10 consecutive years.

2. Review Your Foreign Income and Gains: List all pre-2025 offshore income and gains. Separate them into categories (e.g., dividends, interest, capital gains) to calculate potential TRF savings.

3. Evaluate FIG Eligibility: If you’re in your first four years of UK residency, decide whether claiming FIG relief outweighs losing your Personal Allowance and CGT exemption. Use HMRC’s tax calculator (www.gov.uk/estimate-income-tax) for estimates.

4. Plan Asset Disposals: If selling assets, consider CGT rebasing for disposals in 2025-26 or 2026-27. Obtain valuations as of 5 April 2019 from professional valuers to support your claim.

5. Restructure Trusts: Work with a tax adviser to review offshore trusts. Consider collapsing or repatriating trust assets under the TRF to minimise future tax exposure.

6. File Early: Submit your Self-Assessment return by 31 January following the tax year to claim TRF, CGT rebasing, or trust reliefs. Keep records for at least six years, as HMRC may audit.

For instance, Sanjay, a UK-based investor, used this approach in 2024-25 to prepare for the FIG regime. He identified £500,000 in pre-2025 foreign dividends, planned to remit them in 2025-26 under the TRF (saving £150,000 in tax), and rebased his property portfolio, cutting his CGT liability by £90,000. Early planning gave him clarity and control.

Navigating the FIG Regime Transition

What Are the Risks of Getting It Wrong?

Be careful! Missteps in this transition can be costly. Failing to claim reliefs by deadlines (e.g., 5 April 2027 for TRF) means paying full UK tax rates. Incorrectly assuming you qualify for FIG relief could lead to penalties if HMRC audits your return. In 2023-24, HMRC issued £1.2 million in penalties for non-dom errors, and they’re ramping up scrutiny for 2025-26. Overlooking trust changes could also expose you to unexpected IHT liabilities, as trusts created post-2025 face stricter rules, with IHT rates of up to 40% on assets above the £325,000 nil-rate band.

Now, consider this: If you’re a business owner with offshore entities, misjudging your FIG eligibility could trigger double taxation. For example, a UK-resident director of a Cyprus company might face UK tax on worldwide profits plus Cyprus’s 12.5% corporate tax unless reliefs are claimed correctly. Consulting a tax professional early—ideally by late 2025—can save you from these pitfalls.

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Key Takeaways and Advanced Strategies for UK Taxpayers and Business Owners

How Can You Optimise Your Tax Position Long-Term?

Now, if you’re looking to stay ahead of the game, long-term planning under the FIG regime is where you can really shine. The shift from non-dom status isn’t just a one-off tax change—it’s a chance to rethink your financial strategy. For UK taxpayers and business owners, this means looking beyond the four-year FIG relief and transitional measures to build a tax-efficient future. Start by reviewing your global asset structure. If you hold significant overseas investments, consider consolidating them in tax-friendly jurisdictions before your FIG relief expires. For instance, setting up a holding company in a place like Malta, with its 5% effective corporate tax rate for certain structures, could reduce your tax exposure post-2029.

Another smart move is to diversify income streams. Say you’re like Fiona, a business owner who moved to the UK in 2024 and qualifies for FIG relief. She’s using her four-year tax holiday to reinvest foreign profits into UK-based ventures, like a tech startup, which qualifies for Seed Enterprise Investment Scheme (SEIS) relief. This cuts her UK tax bill on future gains by up to 50%, provided she meets HMRC’s criteria (see www.gov.uk/seis for details). Planning like this can turn a tax headache into an opportunity.

What Are the Inheritance Tax Implications?

Let’s not forget about Inheritance Tax (IHT), because this is a big one for high-net-worth individuals. The non-dom regime previously shielded offshore assets from IHT if held in excluded property trusts. From 6 April 2025, the FIG regime brings all worldwide assets into the IHT net for long-term UK residents (10+ years), regardless of trust structures. The IHT rate remains 40% above the £325,000 nil-rate band, with a potential £175,000 residence nil-rate band for family homes (2025-26 figures).

Consider Rupert, a former non-dom with a £5 million offshore trust. Pre-2025, this was IHT-free. If he stays in the UK past 2035, the full amount could face £1.87 million in IHT upon his death. To mitigate this, Rupert’s exploring gifting assets to family members before 2025, using the seven-year IHT exemption rule. Alternatively, he’s considering relocating to a non-UK jurisdiction before hitting the 10-year mark. Timing is critical—HMRC data shows 3,200 non-doms left the UK in 2023-24, partly to dodge similar tax changes.

IHT Implications Post-2025	Details
Taxable Assets	Worldwide assets for 10+ year UK residents.
IHT Rate	40% above £325,000 nil-rate band.
Residence Nil-Rate Band	Up to £175,000 for family homes (2025-26).
Pre-2025 Trust Relief	Excluded property trusts lose IHT protection post-2025.
Mitigation Strategy	Gift assets within 7-year exemption or relocate before 10 years.

How Do You Handle Complex Business Structures?

Now, if you’re a business owner with international operations, the FIG regime demands a closer look at your corporate setup. Offshore companies controlled by UK residents face UK tax on worldwide profits under the FIG rules, unless FIG relief applies. For example, Aisha runs a Singapore-based e-commerce firm generating £1 million in annual profits. As a UK resident in 2025-26, she’d owe £400,000 in UK tax without FIG relief, even if profits stay offshore. To avoid this, she’s exploring the TRF to repatriate pre-2025 profits at 12% and restructuring her business to operate through a UK subsidiary, which qualifies for a 25% corporation tax rate (2025-26) and potential R&D tax credits.

Complex structures like trusts or partnerships need extra attention. HMRC’s 2024-25 guidance warns that Controlled Foreign Companies (CFC) rules will tighten, targeting UK residents who shift profits to low-tax jurisdictions. Aisha’s consulting a tax adviser to ensure her Singapore entity complies with CFC rules, avoiding penalties that hit 1,400 UK businesses in 2023-24, totalling £85 million.

What Are the Biggest Mistakes to Avoid?

Be careful! The FIG regime’s complexity makes it easy to slip up. One common error is underestimating the record-keeping needed for transitional reliefs. HMRC requires detailed evidence of pre-2025 foreign income, asset valuations for CGT rebasing, and trust distributions. In 2024-25, HMRC audited 2,800 non-dom returns, rejecting 15% of relief claims due to poor documentation. Another pitfall is assuming automatic FIG eligibility—failing the 10-year non-UK residency test or missing the Self-Assessment deadline (31 January 2027 for 2025-26) can cost you thousands.

For business owners, ignoring double taxation risks is another trap. Without a double tax treaty (e.g., UK-Singapore), you could pay tax twice on the same income. Check HMRC’s treaty list (www.gov.uk/government/collections/tax-treaties) to plan remittances strategically.

Summary of the Most Important Points

1. The FIG regime, starting 6 April 2025, replaces the non-dom system, taxing worldwide income and gains based on UK residency, not domicile.

2. Qualifying residents (10+ years non-UK resident, first 4 years in UK) get 100% relief on foreign income and gains but lose the £12,570 Personal Allowance and £3,000 CGT exemption.

3. The Temporary Repatriation Facility (TRF) taxes pre-2025 foreign income at 12% (2025-26) or 15% (2026-27) if remitted by 5 April 2027.

4. CGT rebasing allows assets held on 5 April 2019 to be valued at that date’s market value for disposals in 2025-26 or 2026-27, reducing taxable gains.

5. Pre-2025 offshore trusts lose tax protection post-2025, but 50% relief applies to their foreign income and gains for 2025-26 only.

6. Long-term UK residents (10+ years) face IHT on worldwide assets at 40% above the £325,000 nil-rate band, with trusts losing excluded property status.

7. Business owners must review offshore entities to avoid UK tax on worldwide profits, using TRF or UK subsidiaries to optimise tax.

8. Accurate record-keeping for pre-2025 income, asset valuations, and trust distributions is critical to claim reliefs and avoid HMRC penalties.

9. Double taxation risks arise without treaty protection; check HMRC’s treaty list to plan remittances.

10. Early consultation with a tax adviser, ideally by late 2025, is essential to navigate FIG rules and deadlines effectively.

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FAQs

Q1: What is the new Foreign Income and Gains (FIG) regime replacing the non-dom status?A1: The FIG regime is a residence-based tax system introduced from 6 April 2025, replacing the remittance basis for non-UK domiciled individuals. It provides a four-year tax exemption on foreign income and gains for qualifying new UK residents who have been non-UK tax residents for at least 10 consecutive years prior to their arrival.

Q2: Who qualifies for the FIG regime?

A2: Individuals who become UK tax residents after at least 10 consecutive years of non-UK tax residence are eligible. They can claim the FIG regime for their first four tax years of UK residence, provided they make a formal claim via Self-Assessment.

Q3: What happens to foreign income and gains under the FIG regime?

A3: Qualifying individuals do not pay UK tax on foreign income and gains during the first four years of UK tax residence, regardless of whether these funds are brought to the UK.

Q4: What are the consequences of claiming the FIG regime?

A4: Claiming the FIG regime results in the loss of the income tax personal allowance and the capital gains tax annual exempt amount for the tax year of the claim.

Q5: Can individuals choose which foreign income and gains to include in the FIG regime?

A5: Yes, individuals can make separate claims for foreign income, foreign gains, or employment income under Overseas Workday Relief, allowing flexibility in what is included under the regime.

Q6: What is the Temporary Repatriation Facility (TRF)?

A6: The TRF allows individuals who previously used the remittance basis to bring pre-6 April 2025 foreign income and gains to the UK at reduced tax rates of 12% for 2025-26 and 2026-27, and 15% for 2027-28.

Q7: How does the FIG regime affect inheritance tax?

A7: From 6 April 2025, inheritance tax shifts to a residence-based system, where individuals resident in the UK for 10 out of the last 20 years are liable for inheritance tax on their worldwide assets.

Q8: What happens to non-doms after the four-year FIG regime period ends?

A8: After the four-year period, individuals are taxed on their worldwide income and gains in the same way as other UK tax residents.

Q9: Can UK-domiciled individuals claim the FIG regime?

A9: Yes, UK-domiciled individuals can claim the FIG regime if they have been non-UK tax residents for at least 10 consecutive years before becoming UK tax residents.

Q10: What is the capital gains tax rebasing option for former non-doms?

A10: Individuals who claimed the remittance basis between 2017-18 and 2024-25, and were not deemed domiciled by 5 April 2025, can rebase foreign assets held on 5 April.

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About the Author

Mr. Maz Zaheer, FCA, AFA, MAAT, MBA, is the CEO and Chief Accountant of MTA and Total Tax Accountants—two of the UK’s leading tax advisory firms. With over 14 years of hands-on experience in UK taxation, Maz is a seasoned expert in advising individuals, SMEs, and corporations on complex tax matters. A Fellow Chartered Accountant and a prolific tax writer, he is widely respected for simplifying intricate tax concepts through his popular articles. His professional insights empower UK taxpayers to navigate their financial obligations with clarity and confidence.

https://www.linkedin.com/in/totaltaxaccountants/

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