From 6 April 2025, the UK government is changing how non-UK domiciled individuals are taxed. The current rules will be replaced with a new residence-based tax system. Here’s what you need to know:
Key Changes
- New 4-Year Foreign Income and Gains (FIG) Regime
- If you are a new UK resident, you will receive 100% tax relief on foreign income and gains (FIG) for your first four years.
- To qualify, you must not have been a UK tax resident for the past 10 years before arriving.
- Temporary Repatriation Facility (TRF)
- If you were previously taxed on a remittance basis, you can choose to pay tax on previously untaxed foreign income and gains (FIG) at a reduced rate.
- Tax rates: 12% for the first two years, 15% for the third year.
- Available for UK residents from 2025 to 2028.
- Inheritance Tax (IHT) Moves to a Residence-Based System
- The old domicile-based system will be replaced.
- Non-UK assets will be subject to IHT if you have been a UK resident for at least 10 of the last 20 years.
- New Overseas Workday Relief (OWR) Rules
- Employees working abroad can still claim tax relief on their foreign employment income during the first four years of UK residency.
- There will be a limit on how much OWR you can claim, set at the lower of:
- £300,000 per year
- 30% of your qualifying employment income
- Employees can bring this income into the UK without extra tax charges.
- Changes to PAYE for Globally Mobile Employees
- From 6 April 2025, the process of applying for an HMRC direction to reduce PAYE on foreign earnings will end.
- Employers will now need to submit an online notification form to specify the proportion of income that should be exempt from PAYE.
- Any existing HMRC directions will expire on 6 April 2025.
What You Need to Do
You don’t need to take any action right now, but it’s important to be aware of these changes.
If you have any questions, please feel free to give us a call on 0208 249 6007 for free consultation.