At the same time, domicile largely disappeared as a connecting factor from the UK personal tax system; new residence-based rules were introduced for Inheritance Tax, Overseas Workday Relief was reformed and transitional measures were introduced for former remittance basis users.
A recap of the four-year FIG regime
For individuals arriving in the UK following at least 10 consecutive tax years of non-UK residence, the FIG regime can be extremely valuable. Broadly, during the first four tax years of UK residence, qualifying individuals can claim relief from UK tax on eligible foreign income and foreign gains. This can include foreign dividends and interest, overseas property income, many forms of foreign pension income and gains realised on foreign assets, although the precise treatment depends upon the nature of the income and any applicable double tax treaty.
Importantly, qualifying income and gains can also be brought into the UK without creating an additional UK tax charge. This is a significant departure from the old remittance basis. Under FIG, there is generally no need to keep qualifying post-arrival income and gains offshore simply to preserve the UK tax exemption.
However, FIG is not automatic. Claims have to be made through Self-Assessment and can be made selectively. Making a claim also comes at a cost as the individual loses their UK personal allowance and Capital Gains Tax annual exempt amount for that year. The decision therefore needs to be made by reference to the individual’s overall UK and overseas position rather than simply assuming that a FIG claim should always be made. There is also no ability to “save” unused FIG years. The four-year clock runs from the individual’s first year of UK residence following the required period of non-residence.
Residence
With domicile removed from much of the regime, there is a far greater need for the Statutory Residence Test to be considered before an individual arrives in or leaves the UK, rather than after the tax year has ended. A relatively small change in the timing of an arrival or departure can potentially affect an entire year’s exposure to UK tax and, for a new arrival, when the four-year FIG window begins. Split-year treatment, sufficient ties, UK workdays and the number of days spent in the UK therefore remain vital considerations for internationally mobile individuals.
Overseas Workday Relief
FIG should also be considered alongside Overseas Workday Relief (OWR). For qualifying new residents whose employment duties are performed partly outside the UK, OWR can provide UK Income Tax relief in respect of employment duties performed outside the UK. Under the post-April 2025 rules, relief is no longer dependent on keeping the relevant earnings offshore. However, an annual cap applies, broadly limiting relief to the lower of 30% of qualifying employment income and £300,000. For internationally mobile executives and employees, this makes the location and recording of workdays an important part of the tax planning exercise.
Former non-doms
The abolition of the remittance basis did not simply make historic offshore income and gains disappear; individuals who previously used the remittance basis may still have pre-6 April 2025 foreign income and gains held offshore. Bringing those funds to the UK can potentially trigger a tax charge under the historic remittance rules. The Temporary Repatriation Facility (TRF) therefore deserves particular attention as former remittance basis users can designate qualifying historic offshore amounts and pay tax at a reduced rate of 12% in 2025/26 and 2026/27, increasing to 15% in 2027/28.
Importantly, designation and remittance do not necessarily have to take place at the same time. For individuals with significant historic offshore funds, the remaining TRF window provides an opportunity to review old bank accounts, investment portfolios and mixed funds and consider whether amounts should be designated before the facility disappears.
Capital gains – transitional rebasing for certain former remittance basis users
Subject to the detailed and sometimes restrictive conditions, qualifying foreign assets held at 5 April 2017 can potentially be rebased to their market value at that date when subsequently disposed of. For individuals contemplating the sale of long-held overseas investments, businesses or property, establishing whether rebasing is available and obtaining appropriate historic valuations can make a material difference to the UK taxable gain.
Inheritance Tax
Perhaps the biggest structural change, the UK’s Inheritance Tax system has moved away from domicile towards a residence-based test. Broadly, an individual becomes a long-term UK resident once they have been UK resident for at least 10 of the previous 20 tax years. Once within the regime, overseas assets can potentially fall within the scope of UK IHT as well as UK assets. There can also be a continuing exposure after leaving the UK. Depending upon the individual’s previous residence history, the IHT “tail” can last for between three and ten tax years.
This makes residence history important not only when someone comes to the UK, but also when they are planning to leave. For internationally mobile families, succession planning, wills, trusts and the ownership of overseas assets should therefore be reviewed alongside the individual’s FIG position.
Overseas pensions require separate consideration
One area where care is particularly important is overseas pensions as the fact that an individual qualifies for FIG does not mean that every payment from an overseas pension automatically falls outside UK tax. The precise nature of the pension, the type of payment or distribution and the terms of any relevant double tax treaty all need to be considered.
US pensions provide a good example. 401(k)s, IRAs, Roth IRAs and governmental pensions can each require different analysis, and treaty provisions may alter the domestic UK tax result. The same principle applies to pension arrangements in other jurisdictions.
Overseas property and investments
New UK residents should also review their existing investment structures. Foreign rental income, offshore investment portfolios, foreign companies and other overseas assets may benefit from FIG during the qualifying period, but the position changes once the four-year window closes.
There can therefore be considerable value in looking ahead for example, consideration might be given to whether assets should be sold, investment portfolios reorganised or distributions taken during the FIG period, taking account of tax consequences in the overseas jurisdiction as well as the UK.
FIG should not be viewed simply as a four-year tax exemption. Used properly, it can provide a window in which an individual’s international affairs can be reorganised before normal UK taxation of worldwide income and gains begins.
Double Tax Treaties
Finally, the new rules have not reduced the importance of the UK’s extensive double tax treaty network. An individual may be resident under the UK’s domestic Statutory Residence Test but treaty resident elsewhere under the residence tie-breaker provisions. Treaties can also determine which country has taxing rights over pensions, employment income and other cross-border income. Foreign tax credit relief also remains important where the same income or gain is taxable in more than one jurisdiction so the domestic FIG rules should therefore never be considered in isolation from the tax rules of the other country involved.
In closing
For new arrivals, the key questions are increasingly about when to become UK resident, what to realise during the four-year window and how to prepare for year five. For established UK residents who previously used the remittance basis, the focus may instead be on historic offshore funds, the Temporary Repatriation Facility, CGT rebasing and the new Inheritance Tax rules. For individuals leaving the UK, residence, split-year treatment, temporary non-residence and the continuing IHT residence tail all need to be considered.
This article is intended as a general overview only. The application of the FIG regime and the wider international tax rules depends upon individual circumstances and, where more than one jurisdiction is involved, local tax advice may also be required.