New UK tax regime to attract overseas individuals?

It is not unusual for the end of the tax year to be circled in people’s diaries but 6 April 2025, the start of the new tax year, could be particularly important for some non-UK residents thinking of moving to the UK. 

Much has been written about changes to the tax regime for non-UK domiciled individuals (‘non-doms’) and how individuals affected have been considering their options. What has perhaps been overlooked by many is that the tax regime coming into force from 6 April 2025 might potentially help offset departures of high-earning taxpayers with some arrivals into the UK.

The current tax system for non-doms will largely be consigned to the history books. The current remittance basis of taxation, which has allowed for some non-doms to only be taxed on their UK income and gains, is being completely remodelled and in its place comes the introduction of the Foreign Income and Gains (FIG) regime.

The new FIG regime will provide preferential tax treatment to individuals who become UK tax resident, provided they have been non-UK resident for at least 10 consecutive tax years prior to their arrival. Such individuals will be treated as ‘qualifying new residents’. The criteria for qualifying new residents is tied to tax residency, so there is nothing to stop UK expats from benefiting from them if they have been resident outside the UK for long enough. 

The tax reliefs provided by the new FIG regime are arguably more generous than the previous tax regime for non-doms, albeit the time allowed for individuals to benefit from them is much shorter. In overview, those qualifying for the FIG regime will not be taxable on their foreign income and gains in the UK for the first four years of their UK tax residency. For example, this could apply to dividends from non-UK companies and capital gains made on assets sold overseas, as well as distributions from non-resident trusts. Unlike the current remittance basis of taxation, the FIG regime will still provide relief from income tax and capital gains tax if the foreign income and gains are brought to the UK.

Special rules for those who come to the UK but still spend time working overseas, known as ‘overseas workday relief’, are also set to be simplified from 6 April 2025. This could allow qualifying individuals to potentially suffer no UK tax on their earnings relating to overseas work for their first four years of UK tax residence, albeit most will see this capped at the lower of £300,000 and 30% of their employment income. 

Many existing non-doms in the UK will be unable to benefit from these rules as they have already been resident here for more than four tax years. The new FIG regime could however prove extremely attractive to some individuals who are currently non-UK resident and are likely to generate a large one-off income payment or capital gain. 

The more difficult question for some that want to benefit from the new FIG rules may be whether they can obtain a visa to move to the UK in the first place. If they can, it remains to be seen whether individuals benefiting from the FIG regime will treat the UK as a short-term pitstop or will be encouraged to make it their permanent home. Those tempted to settle in the UK may want to limit their stay to nine years though, as the UK will now charge inheritance tax on a global basis for anyone who stays here for longer. Regardless of how great Britain is, many could see a 40% tax charge on death as too high a price to pay for the privilege of living in the UK for the longer-term.