Starting April 6, 2025, the tax rules for non-UK domiciled individuals will undergo significant changes. These updates aim to create a fairer tax system, ensuring that long-term residents in the UK contribute their taxes in full.
Key Changes:
1. Switch from Domicile to Residence-Based Taxation: The tax system will no longer consider domicile status. Instead, a residence-based regime will be introduced, offering internationally competitive conditions to attract top talent and investment to the UK.
2. Four-Year Foreign Income and Gains Regime (4-Year FIG Regime): New UK residents will receive 100% tax relief on foreign income and gains for the first four years, provided they were not UK tax residents in the previous ten years. After this period, taxation will apply similarly to other UK residents.
3. Ending Remittance Basis Taxation: Former remittance basis users will be taxed at the same rate as other UK residents on both new income and income gained before April 6, 2025, when remitted to the UK.
4. Reform of Inheritance Tax(IHT): From 2025, IHT will be residence-based. After ten years of residence, individuals will be required to pay IHT on all assets, including those held abroad.
5. Overseas Workday Relief(OWR): The qualifying period for OWR will increase from three to four years, with a limit on eligible income set to the lower of 30% of total earnings or£300,000 per year.
6. Reform of Trusts and Offshore Structures: From 2025, protections for foreign income within trust structures will no longer be available to non-domiciled and deemed domiciled individuals unless they qualify under the 4-Year FIG Regime. These changes a redesigned to address tax avoidance and ensure transparency in offshore structures.
Questions and Further Information
The government recognises that affected individuals and agents will need additional guidance and support regarding these changes. HMRC plans to provide detailed instructions for taxpayers leading up to the effective date.
If you have any questions about the upcoming tax reforms for non-UK residents, please contact us at info@scoolgateaccounts.co.uk or +447511302280 for a tailored consultation. We are here to help you navigate these new tax requirements and optimise your tax obligations within the UK’s legal framework.
