Significant tax changes have been announced for UK resident non-domiciled individuals; namely those individuals spending most of their time in the UK but without permanently settling here. The concept of ‘domicile’ will be removed from the UK tax system and replaced by a regime based on years of tax residence.

Income and capital gains taxes

At present, individuals who are both resident and domiciled in the UK must pay UK taxes on their worldwide income and capital gains. However, for UK resident non-domiciled individuals, they are able to claim a ‘remittance basis’ of taxation for their overseas income and capital gains and only pay UK taxes to the extent they remit (bring) the associated funds to the UK. To access this favourable tax treatment, non-domiciled individuals may be required to pay an annual ‘remittance basis charge’ of up to £60,000.

The concept of domicile and the remittance basis of taxation will be abolished from 6 April 2025, meaning all UK residents will default to being taxed in the UK on their worldwide income and gains. However, a 100% relief from tax on foreign income and/or capital gains will be available to individuals in their first 4 years of UK tax residence. It should be noted that if a ‘newly arrived’ individual claims this relief, they will sacrifice their UK personal allowance and CGT annual exemption, along with their ability to claim relief for some foreign losses.

From April 2025, for employed individuals eligible for the 100% relief from UK taxation on their foreign income and/or capital gains, an ‘overseas workday relief’ will remain available in relation to their duties performed overseas. Reforms to the regime will however take place, bringing increased flexibility for some but also a new maximum cap on the relief equal to the lower of £300,000 and 30% of total employment income.

Inheritance tax

Currently inheritance tax applies to the worldwide assets of a UK-domiciled individual but, broadly, just to the UK-situated assets of a non-domiciled individual.

From 6 April 2025, individuals resident in the UK for at least 10 out of the last 20 tax years, will be subject to inheritance tax on both their UK and non-UK assets. They will then remain within the full scope of UK inheritance tax for between 3 and 10 years after leaving the UK.

If you have not always lived in the UK, please talk to us about how the new rules will affect you. There may be some exemptions or transitional reliefs that we are able to claim to support your position, including a ‘temporary repatriation facility’ for any overseas funds you may have and ‘re-basing’ any overseas assets you hold to their April 2017 values to reduce any UK capital gains tax arising in 2025/26 and onwards.