Changes to residence, domicile and remittance following the Autumn Budget

The Government announced changes to the concept of domicile in the Autumn Budget 2024. This means there will be an end to the alternative remittance basis of taxation for non-UK domiciled residents and the introduction of a new foreign income and gains tax regime from April 2025.

What does this mean for you and your taxation? Paul Webb, Director at Westcotts and a personal tax advisor, examines these changes.

Changes to taxation for non-UK domicile residents

The concept of domicile is ending from 5 April 2025. This means an end to the alternative remittance basis of taxation. This is where non-UK domiciled residents can benefit from deferring tax on their overseas income and gains until the income and gains are remitted to the UK.

In its place is a new ‘foreign income and gains regime’ – the FIG regime. This will apply to anyone who has been outside of the UK for at least ten years, who is coming to or has come to the UK and is a UK tax resident.

These relevant individuals will not be liable to UK tax on their foreign income and gains that arise during the first four years of residence (that occur on or after 6 April 2025). This means that such income/gains can be brought into the UK without a tax consequence. For example, a person who became resident during 2022/23 could benefit from the FIG regime for 2025/26, this being their 4th year of residence.

Electing to use the FIG regime will result in a loss of some tax allowances. So, for those with low levels of FIGs, it may not be worthwhile using this new regime.

The key impact of these new rules is that they potentially also apply to British citizens who have been resident outside of the UK for a long time, but who come back to the UK.

What to do if you are a non-domicile resident with overseas income or gains

From the 6 April 2025, you will be liable to tax on your worldwide income and gains if:

• you are non-UK domiciled;
• are currently resident in the UK;
• have been resident in the UK for more than four tax years;
• and have been previously using the remittance basis of taxation.

You can still access the remittance basis for the current tax year ending 5 April 2025. Consideration should be given as to whether you can accelerate payment of any overseas income or gains. This will allow you to take advantage of the remittance basis before it ends.

Similarly, if you have yet to be resident for four tax years, the FIG regime will apply from 6 April 2025. Can you benefit from accelerating overseas income in the tax years where you will not be charged?

Individuals who previously benefitted from a deferral of the UK tax due on overseas income through the remittance basis rules still need to be careful. They will need to avoid remitting such income/gains into the UK after 5 April 2025, as there will be a tax charge when this happens.

A temporary repatriation facility will be available during 2025/26, 2026/27 and 2027/28. This will allow individuals to elect to pay tax at a reduced rate on remittances of pre-6 April 2025 overseas income and gains. For 2025/26 and 2026/27 the rate is 12%. For 2027/28 the rate is 15%.

Learn more about the domicile changes

If you are not sure if you are going to be impacted by the changes and want to learn more, you can access a longer version of this article, including some planning ideas, on our website here.

Our team are on hand to offer friendly and personalised advice. Contact Paul Webb by emailing paul.webb@westcotts.uk or phone 01392 288555.