Remittance Basis for Non-Domiciled UK Residents: The Complete Picture

The Remittance Basis: Context and Abolition

The remittance basis of taxation, available to non-domiciled UK residents, allowed individuals to elect to pay UK income tax and capital gains tax only on foreign income and gains that were brought to ("remitted to") the United Kingdom. Income and gains left offshore were not taxed by the UK.

The remittance basis was abolished for new arrivals from 6 April 2025 by Finance (No.2) Act 2025, replaced by the four-year Foreign Income and Gains (FIG) regime. However, the remittance basis rules have not disappeared entirely. They remain directly relevant for two reasons:

1. The Temporary Repatriation Facility (TRF), available until April 2028, allows former remittance basis users to designate pre-April 2025 unremitted foreign income and gains and pay a reduced rate on remittance. To use the TRF, individuals must understand what constitutes remittance of those pre-2025 amounts.

2. HMRC continues to investigate historic remittance basis claims, and individuals who have made errors in identifying remittances — particularly under the complex mixed fund and services rules — face significant back-tax liabilities.

This article explains the full remittance basis framework as it applied (and continues to apply to historic periods), including the most complex and frequently misunderstood provisions.

What Constitutes a Remittance

The definition of a remittance is set out in Chapter A1 of Part 14 of the Income Tax Act 2007 (ITA 2007), as inserted by Finance Act 2008. The definition is deliberately broad. A remittance occurs when:

1. Money or other property is brought to, or received or used in, the United Kingdom
2. A service is provided in the United Kingdom that is paid for (directly or indirectly) with offshore income or gains
3. A debt is brought to the UK (i.e., a UK lender provides credit backed by offshore assets)

The breadth of categories 2 and 3 catches many arrangements that taxpayers do not intuitively associate with "remitting" money.

The Services Rule

If a non-dom hires a contractor to renovate their UK property, and pays that contractor from an offshore account, that is a remittance of the funds used to make the payment — even though the money never physically entered the UK. The payment for a service enjoyed in the UK is treated as a remittance of the funds used to make that payment, regardless of where the payment is actually made.

Similarly, if a non-dom uses their offshore Amex card in the UK — at restaurants, hotels, or shops — each charge constitutes a remittance of the offshore income used to settle the card balance. HMRC has specifically confirmed this treatment in RDRM33160.

The Debt/Collateral Rule

A remittance occurs when a UK-source loan is secured against offshore assets, if those offshore assets include foreign income or gains. For example, a non-dom who uses their offshore investment portfolio as collateral for a UK mortgage has remitted the portfolio assets (to the extent they represent foreign income or gains) at the point the mortgage is drawn down.

This rule was significantly tightened by Finance Act 2012, which introduced Section 809V ITA 2007. The effect is that the use of offshore income-containing assets as collateral for a UK liability is treated as a remittance, even without any physical transfer.

The Property Rule

Physical property (including tangible assets such as artwork, jewellery, or vehicles) that is brought to the UK is a remittance of the offshore funds used to acquire it if those funds were foreign income or gains. A non-dom who purchases a watch in Geneva using offshore earnings, then brings it to the UK, has remitted the cost of the watch.

The commercial importation exception provides relief where property is brought to the UK for sale or commercial use by a business, but it is narrow in scope.

Mixed Funds: The Most Complex Rule

The mixed fund rules are widely regarded as the most technically complex provisions in the entire non-dom code. They are set out in sections 809Q-809Z5 of ITA 2007.

A "mixed fund" is any account or asset that contains more than one type of money or property — for example, an offshore bank account that contains a combination of foreign employment income, foreign capital gains, and clean capital (money that was never UK-taxable income or gains, such as pre-arrival savings or inherited capital).

When an amount is remitted from a mixed fund, the rules prescribe a mandatory ordering for determining which type of money is deemed to have been remitted first:

Priority	Category
1	UK-taxable income for the current year
2	UK-taxable income for earlier years
3	Foreign-taxable income for the current year (i.e., remittance basis income)
4	Foreign-taxable income for earlier years
5	Capital gains for the current year
6	Capital gains for earlier years
7	Clean capital

This ordering means that clean capital — the portion of the account that represents non-taxable savings — is always the last to be treated as remitted. A non-dom with an account containing both offshore investment income and pre-arrival clean capital cannot choose to remit only the clean capital. Every withdrawal from that account first exhausts the income layers.

The practical consequences are severe. Many non-doms have commingled income, gains, and clean capital in single offshore accounts over many years, creating "mixed fund" accounts where accurate calculation of each component is now impossible without year-by-year reconstruction.

The Remittance Basis Charge

Before April 2025, the remittance basis was not free for long-term UK residents. After seven years of UK residence, claiming the remittance basis required payment of the Remittance Basis Charge (RBC):

Years of UK Residence	RBC
7-11 years	£30,000 per year
12+ years	£60,000 per year

The RBC was a fixed charge, not a credit. It did not offset UK tax on other income — it was simply an additional tax payable in exchange for the ability to leave foreign income and gains offshore untaxed. For individuals with modest offshore portfolios, the RBC could exceed the tax that would have arisen on full taxation of offshore income, making the remittance basis economically irrational.

From 6 April 2025, the RBC no longer applies. The FIG regime — which is free of charge — replaced it for new arrivals. Existing non-doms approaching their seventh year of residence who had been considering whether to continue claiming the remittance basis in 2024/25 face a binary choice: pay the 2024/25 RBC for one final year, or accept UK taxation on their 2024/25 offshore income.

Interaction with Offshore Trusts

For non-doms who had settled offshore trusts, the pre-April 2025 position was that trust income could accumulate offshore without UK tax attribution to the settlor (under the TCGA 1992 section 86 and ITA 2007 section 628 rules, which only applied to UK-domiciled settlors). When capital was distributed from the trust to a non-dom beneficiary, the matching rules in section 87 TCGA 1992 applied to any capital distributions that matched undistributed gains, but only if the beneficiary remitted the distribution to the UK.

From April 2025, the long-term UK resident test has changed this analysis significantly. Trusts settled by individuals who are now long-term UK residents have their income and gains attributed directly — the remittance element no longer applies because the settlor/beneficiary is taxable on worldwide income in any event.

The Temporary Repatriation Facility

The TRF allows individuals who claimed the remittance basis in years before 6 April 2025 to designate pre-2025 unremitted foreign income and gains and pay a reduced charge of 12% (2025/26 and 2026/27) or 15% (2027/28) instead of the full marginal rate that would otherwise apply on remittance.

To benefit from TRF, the individual must:

1. Have been a remittance basis user in at least one tax year before 6 April 2025
2. Designate the amounts on their self-assessment return for the year of remittance
3. Have the designated amounts represent actual pre-April 2025 unremitted income or gains

The TRF does not apply to gains on assets held at April 2025 that are realised after April 2025 — those gains are post-2025 gains subject to the new rules. It applies only to amounts of income and gains that arose in pre-2025 years while the individual was a remittance basis user.

Given the TRF window closes in April 2028, any non-dom with substantial pre-2025 offshore accumulations should urgently assess whether the 12% TRF rate — combined with freedom to bring those funds to the UK — creates an opportunity to rationalise and consolidate their offshore holdings before rates rise and the facility closes.

HPT Group advises on the full spectrum of remittance basis compliance, from mixed fund reconstruction and TRF strategy to offshore trust restructuring in light of the April 2025 changes. Many clients find that a structured review of their offshore position — identifying what was accumulated, when, and in which accounts — is the essential precursor to making optimal use of the TRF window. To discuss your position, contact our international tax team or apply for a consultation.