From 6 April 2025, many non-UK domiciled individuals (non-doms) are likely to see significant changes to their income tax, capital gains tax (CGT), and inheritance tax (IHT) exposure and reporting. This is understandably causing concern and uncertainty, and some people are actively reducing their UK ties in response.
Disadvantages for some can mean advantages for others, and the new rules provide opportunities, for example, for returning long-term expat Brits, who could now benefit from the new reliefs, and for existing non-doms looking to bring money to the UK in a tax-efficient manner.
What's changing?
The current remittance basis allows UK-resident non-doms to claim a UK income tax and CGT exemption on most foreign income and gains, provided they were received and kept outside of the UK. An annual charge is payable after seven years but even so, an individual could continue receiving such exemptions for up to 15 years. Non-doms are normally also limited to UK IHT on UK situs assets only for this period, and in many cases fully exempt following their departure from the UK.
The eligibility criteria for the new Foreign Income and Gains (FIG) regime, which replaces the remittance basis on 6 April 2025, will be based on UK tax residence rather than the abstract notion of domicile. This creates winners and losers. For instance, non-domiciled individuals who have been previously UK resident in the 10 tax years prior to arrival won't be eligible to claim FIG but would have likely qualified for the remittance basis. On the other hand, Brits who have been long-term resident abroad (ie, for more than 10 years) may now qualify for FIG relief on their return despite being UK domiciled.
The FIG regime will offer an income tax/CGT exemption on foreign income and gains, but for a reduced period of up to four years, after which UK tax is payable on worldwide income and gains (with double tax relief possible). There'll also be enhanced reporting requirements when claiming FIG exemptions. The current indication is that HMRC will require worldwide income and gains to be calculated under UK rules and reported on the UK tax return to be exempt, increasing complexity and compliance costs.
A new IHT regime also applies from 6 April. Individuals will potentially be subject to UK IHT on worldwide assets after 10 years of residence in a 20-year period (including years prior to the new rules being introduced), and an exposure continuing for between three and 10 years after they leave the UK.
What's the impact on individuals?
We're seeing these tax changes prompt affected individuals to reassess their plans to remain in the UK for as long as previously intended. In particular, those non-doms who have been here close to the 10-year mark may be concerned about the risk of incurring a worldwide IHT charge, or having that risk hang over them for several years after they leave the UK.
The potential impact of FIG is also being factored into the decisions of those considering coming to the UK to work. This is particularly the case if they've previously lived here in the preceding 10 years.
Some are even re-evaluating their plans to move fully to the UK. Instead they are seeking to agree commuting arrangements with their employer, whereby they remain tax-resident abroad and only come to the UK for a limited number of work days to enable them to remain non-UK tax resident.
But it’s not all bad news. The proposed Temporary Repatriation Facility will enable those who have previously used the remittance basis to bring their money into the UK until 5 April 2028 (currently) at a lower tax rate than they would otherwise face. Similarly, Brits who have resided outside the UK for more than 10 years may also have an unexpected tax incentive under FIG to return to the UK, which may help employers in those discussions.
Employee wellbeing, retention and attraction
These matters are impacting employee wellbeing, and talent retention and attraction to the UK for employers. FIG is being factored into decisions to commence or extend assignments in the UK, and leading long-term non-UK domiciled residents to reassess their plans for the future.
A first step for employers is to analyse their employee population, identify who the rule change is likely to affect, and engage with those employees. This includes not just international assignees, but also any foreign national local employees.
There are a range of ways employers can support their people. The most appropriate for each company will depend on its individual situation and the number (and seniority) of employees affected.
Five potential actions for employers
1 Provide access to tax advice, either on a one-to-one basis (particularly effective for senior or key individuals) or more general support, such as webinars and factsheets.
2 Provide key individuals with additional compensation or benefits to incentivise them to remain in the UK, eg, additional allowances to offset increased UK tax or compliance costs, or even the cost of insurance against an unexpected IHT liability. This should be considered as part of the full benefits offering to staff.
3 Consider whether tax guarantees, such as tax equalisation or tax protection, could be offered so the individual is shielded from unexpected or increased UK tax costs. However, such agreements should only be made after careful analysis of the administration required and the expected costs.
4 Offer greater flexibility around international remote working for those seeking to manage their time spent in the UK. This, however, can create risks for the business in the overseas location, eg, foreign corporate tax reporting, employer tax and social security reporting obligations, immigration, employment law, data protection, etc. Appropriate diligence should be carried out before allowing employees to operate cross-border.
5 Provide formal international assignments or permanent relocations to those looking to remain with the organisation but who want to break UK tax residence.
Ultimately, to help employees prepare and minimise disruption to the business, identification, communication and planning are key.
Farewell domicile – what’s next for globally mobile employees?
Figuring out FIG
As an employer, you can play a crucial role in supporting your key people impacted by these changes, increasing employee wellbeing, as well as talent retention and attraction to the UK.
The rules change in a matter of weeks so knowing who your affected employees are is the key first step to assessing the impact of the new FIG regime on your workforce. The next is to decide on the level and nature of assistance that’s required.
For more insight and guidance on FIG and your transition to the new regime, get in touch with Heather Smallwood or Chris Girdlestone.
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