07 March 2024

Wednesday's budget contained some momentous announcements for non-doms. This article explains the changes being made for individuals, the transitional rules that have been announced, what this means for trusts and what those affected might do in response.


The key changes are all scheduled to take effect on 6 April 2025 which will be after the next General Election. It is very possible that Labour will take power at that Election so – although the announcements broadly mimic Labour policy - there is a question mark as to how much of this new regime will ever actually become law or whether a Labour Government will make changes to the detail before it is implemented.

It has become clear that the non-dom changes will not be included in the Spring Finance Bill and the technical note simply makes the vague assertion that “draft legislation… will be published later in the year for technical comments.”. There is therefore a possibility that none of this makes it into law before the Election. However, there is no certainty here and it would be dangerous to assume that the changes will simply not be implemented. We are advising clients to start thinking about their options but (in most cases) to delay substantive action until we have more clarity.

There is particular doubt as to whether the inheritance tax changes will make it into law before the Election because those are due to be consulted on first.  

Nevertheless, it is clear that there will be changes one way or another and it also seems likely that they will reflect the core of what was announced by the Chancellor. It is therefore important for affected individuals and trustees to start thinking about how they will react. Details of the new regime can be found in the documents published by the government (Spring Budget 2024: Non-UK domiciled individuals policy summary - GOV.UK (www.gov.uk) and Technical note: Changes to the taxation of non-UK domiciled individuals - GOV.UK (www.gov.uk)) but the key headlines are:

  • The existing income tax and capital gains tax regime for non-doms (the remittance basis) will be abolished for future income and gains arising after 6 April 2025;
  • It will be replaced by a new special status which can be claimed during the first four years of tax residency in the UK. Government documents refer to this as the “4-year FIG regime”:
    • Individuals who claim the new status will not pay any UK tax on foreign income and gains arising in those four years and can freely bring such funds into the UK without further tax;
    • To be eligible, an individual must not have been UK tax resident in any of the 10 tax years preceding the four-year period;
  • There will be a number of transitional rules including:
    • Those who lose access to the remittance basis on 6 April 2025 and are not eligible for the 4-year FIG regime will only pay tax on 50% of their foreign income in the 2025/26 tax year (but there is no such relief for foreign gains);
    • There will be a form of rebasing relief for individuals who have claimed the remittance basis in the past and are neither domiciled nor deemed domiciled as of 5 April 2025. If they dispose of an asset on or after 6 April 2025 which was held by them on 5 April 2019 they can calculate the taxable gain by reference to its 6 April 2019 value; and
    • There will be a “Temporary Repatriation Facility” (TRF) available to those who have claimed the remittance basis in the past. They will be able to remit pre-6 April 2025 foreign income and gains in the 2025/26 or 2026/27 tax years and pay tax on such remittances at a flat rate of 12%..
  • From 6 April 2025 the protected trust regime will effectively cease to apply, meaning that income and gains in affected trust structures could become taxable on the settlor(s) from that date.
  • There is also an intention to change inheritance tax so that exposure is determined by reference to residence rather than domicile but those plans are yet to be firmed up and will be subject to consultation.

Existing non-doms should look at their estate planning and trust structures now and begin working out how they might react to the changes:

  • For those currently able to access the remittance basis it may be worth, where possible, advancing additional foreign income and gains prior to 6 April 2025 so that this can then be remitted in the 2025/26 tax year and only be taxed at 12%;
  • Those who already have significant foreign income and gains may wish to defer any planned remittances until after 6 April 2025 so as to benefit from that flat rate as well;
  • Existing trust structures are expected to retain their inheritance tax benefits but these will now need to be weighed against the possibility of income tax and/or capital gains tax liabilities for UK resident settlors;
  • It may be possible to amend trust terms to reduce the impact of the lost protections; and
  • Depending on the circumstances and the importance of inheritance tax planning to the individual, it may still be worth creating new trust structures prior to 6 April 2025 so as to lock in preferential inheritance tax treatment.

Those looking to move to the UK may want to defer their arrival until after 6 April 2025 and will be incentivised to keep as much of their wealth outside of the UK as possible in the first four years of residence (to minimise UK income and gains and maximise foreign income and gains which will benefit from the new rules).

More planning suggestions are set out at the end of this article.

The new 4-year FIG regime:

For those who would otherwise have been able to claim the remittance basis the 4-year FIG regime will generally be significantly less attractive but it does have a few positives.

Whilst the new regime applies it will be more generous than the existing remittance basis in a number of ways. In particular:

  • It will be available to those who want to move to the UK permanently (the remittance basis is only available to those who intend to leave the UK again);
  • It will completely exempt foreign income and gains from UK income tax and capital gains tax and will allow them to be brought into and used in the UK without any further taxation.

By linking the new regime to residence rather than domicile the Government will also make it simpler to apply and give greater certainty to taxpayers.

However, the four year limit is a marked reduction compared to the maximum of 15 years for which the remittance basis could be claimed.

In practice, it will also feel like much less than four years for most people because (a) the UK tax year runs from 6 April to 5 April and most people move only part of the way through it and (b) the technical papers suggest that split years will count as full years for these purposes. The 4-year FIG regime will only be available in the first four tax years of UK residence so, for example, if a person becomes resident in the UK on 1 January 2026, their four years will begin to run from 6 April 2025 and they will only get the benefit of the new status for just over three months in their first tax year of residence (which may mean they only use it for three years and three months in total). In the most extreme cases the “4-year FIG regime” may be available for as little as 2 years and 60 days to some people.

It is also worth noting that periods of non-UK residence in those first four years may effectively waste the benefits of the new regime. So if a person becomes UK resident in the 2025/26 tax year (year 1), then is non-UK resident in 2026/27 and 2027/28 (years 2 and 3) before becoming UK resident again in 2028/29 (year 4) they will only benefit from the 4-year FIG regime for two tax years (year 1 and year 4) and will lose access to it in 2029/30 (year 5). This contrasts with the current system under which years of non-residence do not “use up” any of the 15 tax years for which the remittance basis can be claimed.

For those who first became tax resident in the UK in the 2022/23 tax year or later, such that they will have been UK resident for fewer than 4 tax years as of 6 April 2025, they will be able to claim the 4-year FIG regime for whatever is left of their first 4 years of UK tax residence.

The 4-year FIG regime will be optional and it will be possible to claim it in some years but not others. There will be some drawbacks to making a claim, such as losing entitlement to the income tax personal allowances and the capital gains tax annual exempt amount.

Once new arrivals are into their 5th year of UK tax residence their worldwide income and gains will be within the scope of income tax and capital gains tax. However, it will still be important to consider double tax treaties and other reliefs to the extent that other jurisdictions are involved.

Transitional rules:

Three transitional rules are proposed.

1. Reduced income tax on foreign income for those losing access to the remittance basis on 6 April 2025

This appears to be targeted at those who are remittance basis users in 2024/25 but will lose access to the remittance basis from 6 April 2025 and cannot benefit from the 4-year FIG regime (either because they have been UK tax resident for too long or because they did not have enough years of non-UK residence prior to their move).

For the 2025/26 tax year only, they will pay income tax on half of their foreign income (rather than all of it). They will still be subject to capital gains tax on all of their foreign gains however.

2. Capital gains tax rebasing

Rebasing will be available to those who have claimed the remittance basis in the past and are neither UK domiciled nor deemed domiciled as of 5 April 2025.

If those individuals dispose of a foreign asset on or after 6 April 2025 which they had held on 5 April 2019, they can elect to calculate their capital gains tax exposure by reference to the value of the asset as of 5 April 2019.

However, the technical paper also states that “This rebasing will be subject to conditions that will be set out later.

3. Temporary Repatriation Facility (TRF)

This is probably the most eye-catching of the transitional rules.

In the 2025/26 and 2026/27 tax years individuals will be able to remit FIG which arose prior to 6 April 2025 and be subject to a flat rate of tax of 12% on such remittances.

That is potentially a very valuable relief (given that otherwise the rate of tax might be as high as 45%). The Government has also indicated that it will relax the usual ordering rules to make it easier for individuals to take advantage of the TRF even if their FIG is mixed with other funds or they don’t know exactly how much FIG they have.

One would have thought that a distribution from a trust to a remittance basis user made prior to 6 April 2025 would generate new FIG in the hands of the individual taxpayer and that such FIG could then be remitted using the TRF. However, the technical document states that “TRF will not apply to pre-6 April 2025 FIG generated within trusts and trust structures.”. We understand this to refer just to the trust’s own income and gains (not to benefits from the trust which are treated – under the trust matching rules - as income/gains in the hands of the recipient of the benefit). But it is possible the Government intends to prevent trust distributions from benefiting from the TRF. Further clarification will be needed.

Inheritance tax:

The technical document published after the budget states that “From 6 April 2025 the government intends to move inheritance tax from a domicile based regime to a residence based regime. This will be subject to consultation.”

Later on it indicates that the current intention (on which views will be sought) is to move to a system where:

  • People who have been tax resident in the UK for 10 years will be subject to inheritance tax on their worldwide assets; whereas
  • People who do not satisfy those criteria will only be subject to inheritance tax on their UK situated assets.

They are also considering a 10 year “tail” such that people remain exposed to inheritance tax on their worldwide assets for a further 10 years after leaving the UK.

One of the reasons that inheritance tax is more difficult to move from a domicile to a residence basis is that any new rules will apply to everyone and presumably part of the purpose of the consultation is to think through how it will effect “regular” expats – e.g. those retiring to sunnier climates. Under the rules as proposed, they would materially reduce their UK inheritance tax exposure after 10 years whereas at present they need to prove that they intend to make a new country their permanent home, and not return to the UK, to achieve a similar outcome.


Currently, certain trusts established by individuals who were neither domiciled nor deemed domiciled at the relevant time benefit from “protected trust” status. This effectively means that gains and foreign income arising within the trust are not taxable on the settlor(s) and are generally only subject to UK tax when distributions are made to UK resident beneficiaries.

There were hopes that, even if these rules were changed, existing trusts would be “grandfathered” and continue to benefit from this tax treatment. Instead, protected trust status will essentially be lost from 6 April 2025, regardless of when the trust was established.

From that date onwards foreign income and gains arising in trusts could be taxable on UK resident settlors unless either:

  • The settlor can claim the new 4-year FIG regime; or
  • The terms of the trust exclude the settlor and certain family members, such that the anti-avoidance rules which attribute income and gains do not apply.

Excluding the settlor and any spouse or civil partner may be feasible to prevent the attribution of income in some circumstances. However, gains could be more difficult to address because one would need to exclude the settlor’s children and grandchildren (and their spouses/civil partners) as well to switch off the anti-avoidance rule which attributes gains to settlors. Although there are some statutory rights of reimbursement (and one of those in theory allows a settlor to recover the tax they pay on such gains from the trustee), that may be difficult to enforce in practice if the trust is not governed by English law.

It looks as though the taxation of trusts where the settlor has died will be unchanged but this will need to be confirmed.

At least as far as inheritance tax goes, there does appear to be some grandfathering. The Government has said that excluded property trusts established by 5 April 2025 will retain that status (so should continue to be exempt from inheritance tax going forwards).

However, trusts established on or after 6 April 2025 could be exposed to inheritance tax if (and for so long as) the settlor meets the new 10 year residency criteria, or is within the 10 year tail period, when assets are added to the trust and/or when charges such as the 10 year anniversary charge occur.

How should existing non-doms react?

There is still sufficient uncertainty (both as to the precise scope of these rules and whether changes might be made if Labour win the next election) that individuals should proceed with caution. It appears as though the only group who need to consider acting immediately are those becoming deemed domiciled on 6 April 2024. They might want to establish excluded property trusts between now and then to benefit from grandfathered IHT treatment.

However, most non-doms should speak to their advisers, work out how the changes could affect them (assuming they come in as planned) and look at any opportunities that the new rules might present. A judgment should then be made in the run up to, and immediately after, the election as to what the rules are likely to look like in practice come the 6th of April 2025. Ideally individuals will get themselves into a position where they can act quickly as soon as there is more clarity so that they can complete any planning in time for the 6 April 2025 deadline.

Some options to consider might include:

  • Establishing excluded property trusts now but waiting to fund them substantively until closer to 5 April 2025 (once there is a better understanding of whether they will definitely be protected from inheritance tax over the long-term);
  • Bringing forward the receipt and realisation of foreign income and gains where possible so as to have more FIG to remit under the Temporary Repatriation Facility (TRF) in 2025/26 and 2026/27;
  • Arranging for trust distributions prior to 5 April 2025 to generate foreign income and gains for the same purpose (assuming this is not blocked by the new rules);
  • Deferring remittances that might otherwise have been made before 6 April 2025 so as to make them when the TRF is available;
  • Changing the terms of trusts so as to minimise the impact of the loss of the trust protections where possible (e.g. it may be feasible to exclude the settlor and certain other family members so as to prevent the attribution of income and gains to the settlor);
  • Using planning tools which until now have been more frequently used by UK domiciled individuals, such as Family Investment Companies or insurance-based solutions; and
  • Carefully considering their ties to the UK and the days that they need to spend here each tax year to see whether they could cease to be UK tax resident.

For those coming to the UK:

Anyone thinking of moving to the UK might want to consider the following:

  • If they have complete freedom as to when to move, it may be advantageous to delay arrival until 6 April 2025 to make maximum use of the 4-year FIG regime;
  • In the tax year of their move, they might also want to arrive in the UK as soon as possible after 6 April (because any time between 6 April and the date of arrival arguably wastes some of the four years in which the new regime can be claimed);
  • It would be sensible to keep as much of their wealth outside of the UK as possible during the first four years of UK residency (so that any income and gains generated are foreign source and benefit from the 4-year FIG regime);
  • It may be sensible to establish a trust now (or at least prior to 6 April 2025) to lock-in advantageous inheritance tax treatment; and
  • They may be able to manage their day counts in the UK to avoid becoming UK tax resident at all (it is often possible to regularly spend up to 90 days in the UK in a tax year, or even 120 in some circumstances, without becoming UK tax resident).

Those who might be better off under the new regime:

The proposed changes will be a blow to many. However, there are categories of people who will be better off under the new rules. These include:

  • People moving to the UK who intend to live here permanently (they cannot benefit from the current remittance basis but would be able to benefit from the new 4-year FIG regime);
  • Similarly, people who are originally from the UK but who have been away for 10 tax years. Having a UK domicile of origin they cannot benefit from the current remittance basis, but would be able to benefit from the new 4-year FIG regime;
  • Those who are only going to stay in the UK for 4 or fewer tax years (for so long as it is available the 4-year FIG regime is more generous, and should be simpler to make use of, than the existing remittance basis);
  • People who have left the UK but intend to return at some point (under the new regime they may be able to lose their exposure to UK inheritance tax for as long as they remain non-UK tax resident whereas under the current system they continue to be within the scope of inheritance tax for so long as they are UK domiciled);
  • Those with very significant foreign income and gains who wish to remit them into the UK (the TRF will allow them to do this at a much more favourable rate of tax than is currently available).

Will this make domicile irrelevant?

The Government has said that it wants to remove domicile as a linking factor for UK tax. However, there has been no indication that it will lose its relevance in other areas of UK law and those moving to and from the UK will still need to be particularly mindful of its impact on matters such as which jurisdiction's laws will govern succession to their estates. It also looks likely to remain relevant for transitional rules for some years to come.

Other miscellaneous points:

Overseas workday relief (which can exempt some of an individual’s salary from UK tax to the extent it relates to work performed abroad) will be available to those who can claim the 4-year FIG regime, but only in the first three years of UK residence. It seems somewhat odd that there is no proposal to align this with the new 4-year FIG regime so that both last for 4 years.

Business Investment Relief (which allows individuals to invest FIG in the UK without triggering a taxable remittance) will continue to apply after 6 April 2025 and be available for FIG generated prior to that date. In other words, to the extent that existing FIG is not remitted using the TRF, it will still be possible to invest it in the UK using Business Investment Relief even after the new regime takes effect.

How we can help:

We have a vast amount of experience advising non-domiciled individuals and those moving to and from the UK.

We can advise you as to how the new regime might impact you and your structures, help you plan your affairs accordingly and assist you in taking advantage of the transitional rules.

Key contact

Headshot of Edward Hayes

Edward Hayes Director

  • Private Client Services
  • Private Wealth
  • Tax

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