Non-UK residents and tax implications

The Autumn Budget 2024 introduced changes to the UK tax regime, impacting non-residents with links to the UK that are some of the most substantial we have seen in recent years.

Individuals returning to or arriving in the UK must consider these changes carefully and potentially consider restructuring their affairs in advance to ensure that UK tax consequences are properly accounted for.

Old regime pre-5 April 2025

Under the old regime, taxpayers were subject to tax in the UK as follows:

• If considered UK resident – subject to UK tax on their worldwide income and gains with double tax relief available on non-UK income
• If considered non-UK resident – subject to UK tax only on their UK situs income and gains (i.e., UK property income, investment income and UK wages/pension)

An individual’s residency was determined by “statutory residency tests” which are based on the number of days an individual spends in the UK. The tests are complex, but the basic principle is that the maximum number of permitted days is restricted by the number of “ties” a person has to the UK.

The exception to this rule were non-UK-domiciled individuals, that were UK resident for tax purposes. These individuals had the option to claim “remittance basis” to exempt non-UK income from tax generally and to only pay UK tax on the income that was remitted to the UK.

Charges were imposed depending on the period of UK residency:

• Resident for 7 of the last 9 tax years: £30k charge to use remittance basis
• Resident for 12 of the last 14 tax years: £60k charge to use remittance basis
• Resident for 15 of the last 20 tax years: deemed domicile and remittance basis no longer available

This remittance basis allowed taxpayers that were not ordinarily resident in the UK to shelter overseas income and gains from UK tax by not remitting them to the UK.

New Income Tax regime – Foreign Income and Gains (FIG)

Since 6 April 2025, the remittance basis has been repealed, meaning UK residents are subject to tax on their worldwide income and gains regardless of their domicile status.

This means that where a new UK resident has non-UK income, it is subject to tax in the UK immediately, whereas it could previously be sheltered from UK tax for 7 years by keeping the income in an overseas bank account.

As part of this reform, the “Foreign Income and Gains” (FIG) regime was introduced, whereby individuals satisfying certain criteria may exempt foreign income and gains from UK taxation, as follows:

• The individual is a UK resident for the tax year
• The individual is in their first 4 years as a UK resident following a period of at least 10 years that they were non-UK resident

This gives individuals a maximum of four years to restructure their affairs and optimise their UK tax position.

If an individual had already become UK resident before 6 April 2025, then the four year window is restricted.

For example, if an individual became UK resident on 6 April 2023, then they have already had two years of UK residency by 6 April 2025, so the FIG regime period is reduced to two years.

Temporary Repatriation Facility (TRF)

Additional consideration must be given to any unremitted income and gains that arose pre-6 April 2025.

Under the new regime, the remittance basis continues to apply to any gains that had been excluded from UK tax by virtue of the remittance basis previously.

The TRF was introduced to encourage remittance basis users to bring their income and gains into the UK by offering a reduced rate of tax on remittances during a specific period. Where a taxpayer has unremitted income and gains that have previously been exempt from UK tax, they have the option to remit under the TRF at the following rates:

• Remitted during year to 5 April 2026: 12%
• Remitted during year to 5 April 2027: 12%
• Remitted during year to 5 April 2028: 15%

After 6 April 2028, any income and gains will be taxable at the normal rates of UK taxation during that tax year, which are significantly higher than the TRF rates.

Income tax planning tips for new and returning UK residents

Bearing in mind the new FIG regime, and the availability of the TRF, individuals that are thinking of coming to, or returning to, the UK can consider the following planning points:

• Consider disposing of any offshore assets within the first four years of UK residency, to ensure they are covered by the FIG regime and so exempt from UK taxation
• Retain loss-making assets beyond any applicable FIG regime period to ensure that these can be utilised for UK income tax purposes, going forward
• Remit any pre-6 April 2025 income and gains that have benefitted from the remittance basis into the UK during the TRF period
• Consider restructuring overseas assets (for instance into companies) during the FIG regime period to optimise the UK tax position

Here to help: Tax advisory support for Non-UK residents

The move from the long-standing remittance basis to the new Foreign Income and Gains (FIG) regime, alongside the introduction of the Temporary Repatriation Facility (TRF), represents a major shift in the way the UK taxes internationally mobile individuals.

For non-UK residents and taxpayers with overseas connections, proactive decision-making from the outset is essential to make the most of the complex mechanisms available and, ultimately, to retain flexibility.

Timing of residence, crystallisation of gains, restructuring of offshore assets and sequencing of remittances all need to be carefully coordinated, in order to optimise your tax position in the UK.

First and foremost, we can help you to review your current position, assessing your eligibility for and potential outcomes under the new regimes, before considering an optimal structure for your assets going forward that aligns with any personal and business objectives you might have.

To discuss your requirements with one of our specialist tax advisers, please contact us today.