UK Non-Dom Reform 2025: What Actually Changed and What Didn't

The End of the Remittance Basis

On 6 April 2025, the United Kingdom abolished the remittance basis of taxation that had existed in broadly its modern form since the Finance Act 2008. The change, announced at the Autumn Budget 2024 and legislated through Finance (No.2) Act 2025, ends the ability of non-domiciled UK residents to shelter foreign income and gains from UK tax by keeping them offshore.

The abolition is not merely a rate change. It is a structural replacement of the domicile-based system with a residence-based system for most purposes. An individual who has lived in the United Kingdom for any period now faces UK taxation on worldwide income and gains from the moment they cease to qualify for the Foreign Income and Gains (FIG) regime — a four-year window available to genuine new arrivals.

Understanding what changed, what transitional relief exists, and what planning remains available requires a careful reading of the legislation rather than reliance on media summaries, which have frequently overstated or understated the practical impact.

The Four-Year FIG Regime for New Arrivals

The most important replacement provision is the Foreign Income and Gains regime. Any individual who has not been UK tax resident in any of the ten tax years immediately preceding their arrival in the United Kingdom qualifies for complete exemption from UK tax on non-UK income and gains for four tax years.

This is materially more generous in one respect than the old remittance basis: there is no charge for the relief (unlike the £30,000 RBC after seven years of residence and £60,000 after twelve years), and there is no requirement to keep the income offshore. A FIG-qualifying individual can bring their foreign earnings into the United Kingdom freely during those four years.

The conditions are strict. Any single year of UK residence in the preceding ten-year window disqualifies the individual. This creates a hard break for returning UK domiciliaries — someone who left the UK in 2015, returned briefly in 2021, and then returned again in 2025 does not qualify.

FIG Regime: Practical Scope

The FIG exemption covers:

• Foreign employment income
• Foreign self-employment income
• Foreign rental income
• Foreign dividends and interest
• Foreign capital gains

It does not exempt UK-source income or gains, which remain taxable from day one. A US citizen arriving in the UK and receiving salary from a US employer for remote work performed in the UK faces a classification question: if the work is performed in the UK, HMRC's position is that the income has a UK source, regardless of where the employer is located.

Transitional Rules for Existing Non-Doms

For individuals already in the UK who had been claiming the remittance basis before April 2025, the legislation provides two overlapping transitional provisions.

Temporary Repatriation Facility

The Temporary Repatriation Facility (TRF) allows individuals with pre-6 April 2025 unremitted foreign income and gains to designate those amounts and pay a reduced tax charge on remittance. The reduced rates are:

Period	TRF Rate
2025/26	12%
2026/27	12%
2027/28	15%
From 2028/29	Full marginal rate

The TRF applies only to income and gains that arose in tax years before 6 April 2025 while the individual was a remittance basis user. Gains on assets held through that period but not yet realised do not benefit from TRF — the concessionary rate applies to pre-2025 accumulated unremitted amounts, not to the base cost of assets.

Using TRF requires a formal designation on the self-assessment return for the relevant year. There is no automatic application. Individuals who fail to designate before the facility closes in April 2028 will face full UK rates on any subsequent remittance of pre-April 2025 offshore income.

Overseas Workday Relief Transitional Rules

Employees who qualified for Overseas Workday Relief (OWR) before April 2025 face a different set of transitional considerations. OWR continues to exist post-reform but is limited to FIG-eligible individuals in their first four years. The interaction of old-regime OWR claims with the new framework requires specialist advice for anyone in years two through four of an existing OWR claim that straddles the April 2025 boundary.

Offshore Trusts: The Ten-Year Long-Term Resident Test

The most structurally significant change for established non-dom planners is the new treatment of offshore trusts. Under the pre-April 2025 position, an offshore trust settled by a non-domiciled individual before they became deemed domiciled could retain its excluded property status indefinitely, sheltering growth from UK IHT and, if the settlor remained offshore, from income tax and CGT under certain conditions.

From 6 April 2025, the key question for offshore trust taxation (both for income/CGT and for IHT purposes) is whether the settlor is a "long-term UK resident." The test: an individual is a long-term UK resident if they have been UK tax resident for at least ten of the preceding twenty tax years.

Scenario	Trust Treatment from April 2025
Settlor resident 0-9 of last 20 years	FIG regime applies; trust income/gains not attributed to settlor if kept offshore
Settlor resident 10+ of last 20 years	Trust income and gains attributed to settlor under TCGA 1992 s.86 and ITTOIA 2005 s.629
Trust settled before 30 Oct 2024, settlor was non-dom	Transitional protections apply until April 2026 in some cases

The twenty-year window is a rolling test recalculated each year. An individual who leaves the UK for five or more years can reset their long-term resident status — creating a planning window for those prepared to genuinely establish offshore residence before reaching the ten-year threshold.

What Did Not Change: IHT and Domicile

One of the most misreported aspects of the April 2025 reforms is the continuing relevance of domicile for inheritance tax. While the income tax and CGT system has moved to a residence basis, inheritance tax remains linked to domicile under IHTA 1984 — subject only to the new long-term UK resident overlay.

An individual who is domiciled in the UK under general law remains subject to UK IHT on worldwide assets regardless of how many years they have been resident. The April 2025 changes added the long-term resident test as an additional route to IHT exposure (for those who are resident but not domiciled), but did not remove domicile as the primary basis.

Conversely, a genuine non-domiciliary who has been UK resident for nine of the last twenty years but not ten remains outside the long-term resident IHT net — even post-reform.

Domicile of Choice: Still Planning-Relevant

Acquiring a domicile of choice in a new jurisdiction — by establishing a permanent home there and demonstrating an intention never to return to the UK — remains a legitimate and important planning step. It does not affect the long-term resident count directly, but it affects IHT on any period after the domicile of choice is established and after the individual ceases to meet the long-term resident test.

Old Regime vs New Regime: Comparison

Feature	Pre-April 2025	From April 2025
Basis for exemption	Domicile (non-dom status)	Residence history (10-year rule)
Duration of exemption	Unlimited (until deemed dom at 15/20)	4 years (FIG, new arrivals only)
Charge for exemption	£30k (7yr+), £60k (12yr+)	None (FIG is free)
Remittance requirement	Yes — income must stay offshore	No — free to remit during FIG years
Offshore trust protection	Broad (excluded property indefinitely)	Limited to non-long-term residents
IHT basis	Domicile + deemed dom (15/20 rule)	Domicile + long-term resident (10/20)
Transitional relief	N/A	TRF at 12% (2025-27)

Planning Implications

For new arrivals to the UK, the FIG regime is a genuine opportunity. A US tech founder relocating to London in 2025 with substantial offshore assets can receive UK-based employment income taxed normally while holding all offshore investments free of UK tax for four years — and can freely deploy offshore funds in the UK without tax consequences. HPT Group's consulting team regularly advises on structuring the four-year window to maximise its benefit.

For existing non-doms approaching or past the ten-year threshold, the choice is stark: establish genuine overseas residence before becoming a long-term UK resident, or accept UK taxation on worldwide income and gains. The transitional rules for offshore trusts settled before 30 October 2024 provide limited breathing room but are not a long-term solution.

For those considering departure, the interaction of the new rules with the temporary non-residence provisions under section 10A TCGA 1992 requires careful planning. Gains accrued during UK residence but unrealised at departure may be caught if the individual returns within five tax years.

HPT Group advises internationally mobile individuals on the full lifecycle of UK non-dom reform — from initial arrival structuring through FIG-period planning to clean exit from the UK tax net where that is the right outcome. Our approach starts from the client's personal and family situation and works backwards to identify the legally compliant structure that minimises unnecessary UK tax exposure. Explore our international tax services or contact us to discuss your position.