The New FIG Tax Regime – What is it?

by John McLaughlin & Urooj Sheikh, in , , ,

The UK government have introduced a new tax regime to replace the current taxation of non-UK domiciles (“Non-Doms”) living in the UK. The new Foreign Income & Gains (FIG) Regime will come into force on 6th April 2025. It will negatively affect some individuals, but it will positively impact others. This is the first of a series of articles that provide general guidance on the new regime and transitional arrangements. We hope this will provide you with enough information to make any necessary decisions about your foreign assets before that date. This article should not be regarded as tax advice. If you would like advice on your specific circumstances, please get in touch. 

Certain individuals will not be affected at all, so please disregard the below if any of the following apply to you:

  • You will be a non-resident of the UK for 2025/26
  • You have no foreign assets (cash, investments, pensions, property etc held outside of the UK)
  • You are originally from the UK (or you are UK domiciled) and arrived/returned to the UK prior to 6th April 2021
  • You arrived in the UK before 6th April 2021, but have never claimed the Remittance Basis

What are the new rules?

The FIG regime will replace the Remittance Basis. The concept is the same, whereby foreign income and gains will not be subject to UK tax during a specified period, but there are a few distinct differences:

  • Eligibility – Nationality and domicile are no longer factors when considering the taxation of foreign income and gains. Instead, the individual must have had at least 10 consecutive years of non-residence prior to arriving in the UK which means that returning Brits can also benefit from this regime.
    • The Statutory Residence Test will still be used to determine tax residency, ignoring any claim for non-UK residence under a tax treaty, and split years. This means that the period of non-residence must be ten complete tax years.
  • Period – The previous seven-year period under the remittance basis will be replaced by a four-year period during which foreign income and gains are exempt from UK taxation. There is no longer an option to extend the period of tax relief by paying a charge.
  • Remittances – Foreign Income and gains generated after 6th April 2025 can be brought into the UK without incurring a tax charge. This is a significant shift from the current system, where income and gains were taxed upon remittance.
  • Reporting – Foreign income and gains in the initial four-year period will need to be itemised on the UK tax return even though they are not subject to UK tax. This differs to the previous remittance basis claim whereby unremitted foreign income and gains were not recorded on the tax return.
  • Foreign earnings – A “foreign employment election” can be made to claim relief for foreign workdays. This is a continuation of the old Overseas Workday Relief rules, but it has been extended to four years. In addition, the relief will be capped annually at the lower of £300,000 or 30% of the individual’s total employment income for the year. Again, there is no requirement to retain foreign earnings outside of the UK.

There will not be a charge for using the FIG regime – unlike countries with similar regimes which may apply a flat rate charge. However, opting to utilise the regime will mean forfeiting the tax-free personal allowance and capital gains annual exemption which is a draw-back like the previous remittance basis claim. Individuals who earn less than £100,000 per annum and have full entitlement to the personal allowance, will need to assess whether making the claim is beneficial.

It will also prevent the use of foreign losses. It is unclear at this stage how this will interact with any foreign loss elections made previously. We will issue further guidance when we have more clarity.

At the end of the initial four years of claiming the FIG regime, individuals will be taxed on their worldwide income and gains as it arises. Before the end of their relief period, individuals should look to review the tax efficiency of their portfolio.

It is important to note that the following categories of income and gains will be excluded from the relief:

  • Foreign gains realised on the disposal of interests in companies whose value is substantially derived from UK land and property
  • Chargeable event gains from the surrender of a foreign life insurance policy
  • Income received in connection with performance as a sportsperson or entertainer, anywhere in the world.

How does this apply to me?

The date of arrival in the UK will determine the availability of the above relief and the transitional rules for long term residents.

Are there any transitional arrangements?

To ease the tax burden of those negatively affected by the introduction of these new rules, there are two transitional arrangements. These are discussed further in this article – The New FIG Regime – Transitional Rules

What should I do now?

There are three main takeaways from the above:

  • Accelerating Income & Gains – If you are currently a remittance basis taxpayer and your foreign investments will be exposed to UK tax from 6th April 2025, we strongly recommend that you review your portfolio. You have an opportunity to rebase assets, sell inefficient investments and optimise your portfolio without paying any UK tax in your last remittance basis tax year. You should work with a financial adviser or wealth manager to achieve this.
    • IMPORTANT: If you are a US taxpayer, you should carefully consider any US tax implications and any exposure to double taxation if you plan to use the TRF.
  • Delaying Remittances – Any current or former remittance basis taxpayers who were considering remitting money to the UK may benefit from delaying the remittance until after 5th April 2025. They will achieve a lower tax rate under the TRF.
  • Deferring Income & Gains – If you have recently arrived in the UK, you may want to consider deferring income and realising capital gains after 5th April 2025 to benefit from the FIG regime. This will enable you to remit the income & gains to the UK without a tax charge.

Important changes

We have tried to relay all the relevant details of the current legislation into succinct paragraphs for you to easily digest. We hope this provides you with enough information to make an informed decision about your own situation.

Please be aware that further details about the new regime are due to be released very soon. Although we do not expect any significant changes to the legislation, some details provided may change. We will try to keep these article as current as possible and update the relevant details at the earliest opportunity.

If you would like to discuss your own situation with a tax professional, please get in touch.