Despite being a tax software provider primarily supporting institutions like private banks and financial platforms, over recent months we’ve been fielding enquiries directly from HNW individuals perturbed by the end of non-domicile taxation arrangements in the UK. Financial planning has become an even bigger headache for those now caught by the new Foreign Income and Gains regime (FIG), established by the Finance Act 2025, and it has left many feeling unsupported by their advisers.
Let’s face it, for decades non-domiciled residents living in the UK, once they’d appropriately arranged their worldwide wealth, could enjoy the beneficial tax treatment afforded to them by the remittance basis and not have to worry about paying UK tax on their worldwide income and gains unless it was brought into or sourced in the country. But given the new rules, this is no longer an option.
Instead, these individuals are now faced with urgent decisions, a new tax regime and complex transitional arrangements that mean that they must approach their UK tax affairs in an entirely new way. And, in my view, if their advisers haven’t already begun to think this through, they need to get their skates on and get a proper grasp of FIG to ensure their clients can make the most of the new tax environment.
The New Foreign Income & Gains Regime
From 6 April 2025, any individual who is deemed UK-resident will pay tax on any worldwide income and gains. However, former non-doms may be able to gain full relief from UK tax on foreign income and gains if they meet specific residence conditions.
To be eligible for zeroed tax on overseas-derived income and gains, those with previous non-domiciled status now must claim and be identified as a ‘qualifying resident’. According to HMRC’s definitions, a qualifying resident is classified as a UK tax resident under the statutory residence test (SRT) and is still within their first four years as a UK tax resident following “at least a 10-year period as a non-UK tax resident”.
The key issue for financial advisers is whether affected clients are still within their first four years designated as a UK tax resident, after previously spending at least 10 years as a non-UK resident for tax purposes. If a client sits outside this strict time frame and continues to have investment portfolios and/or bank accounts in different countries, advisers’ attention should be focused on taking advantage of several avenues to reduce tax levied on foreign gains.
Certain concessions are currently available to defray tax for such individuals. This includes rebasing, relating to a period from April 2017 to April 2025 when foreign assets were held. Individuals can choose base cost or market value when declaring such assets – whichever is higher can incur a lower gain for CGT purposes, thereby reducing the tax take.
Transitional Tax Arrangements
Another tactic is to use the Temporary Repatriation Facility (TRF) in effect from 2025, enabling people to pay a reduced rate of tax on assets meeting the definition of ‘qualifying overseas capital’. HMRC information includes helpful examples of how TRF applies.
Note that the TRF is assuredly a time-limited measure, available for a fixed period of three tax years: 2025-26, 2026-27 and 2027-28. The lower rate of tax is set at 12% for tax years 2025/26 and 2026/27, and 15% for 2027/28.
Both these opportunities provide for substantial relief if deployed correctly.
Another issue for advisers to bear in mind is the avoidance of double taxation. If a client is taxed by a non-UK tax authority on interest earned in a foreign bank account, they shouldn’t be taxed by HMRC on this same income if a double taxation treaty applies. To verify this, it’s important to refer to the specific tax treaty in force between the UK and the other country involved.
Former non-doms will need support through all this complexity from their advisers and in turn advisers will need access to timely knowledge and expertise about the FIG regime and the best tax-efficient strategies available. With the right platform partner and the right technology, advisers can be equipped to do so and ensure their HNW foreign clients are properly supported.
The information supplied here is meant to provide a general steer for advisers seeking to help relevant UK-settled clients benefit from various tax relief options if they aren’t covered by the FIG regime and are therefore liable to pay tax on worldwide income and gains. As always, tax treatment is dependent on and governed by the specific circumstances of individual UK taxpayers.
Written by Michael Edwards, Managing Director at FSL.
This article originally appeared in FT Adviser.