The UK’s proposals for non-doms and their structures (as of 10 March 2025)

Budget 2024 – Non-dom

Budget 2024 – Non-dom proposalsA high-level comparison of the old and new regimesThe current remittance basis regime The new 4-year FIG regimeCriteriaNon-UK domiciled under common law andnot deemed domiciledNon-UK tax resident for at least 10 consecutiveyears before becoming UK tax residentMaximum length15 tax years (generally)3 tax years (for certain types of foreignemployment income)4 tax yearsTaxation of foreignincome and gains (ifrelief is claimed)Most forms of non-UK source income andgains are tax free unless “remitted”, but arethen subject to income tax or capital tax asappropriate if brought into or used in theUKMost forms of non-UK source income andgains will be tax free, even if brought into orused in the UKRelief on employment income derived fromduties performed outside of the UK is subject toa capDetails to provide toHMRC of foreignincome and gainsForeign income and gains are not reportedto HMRC unless they are remitted, inwhich case the amount of remitted incomeand gains must be reportedClaimants must quantify all foreign income andgains which are being relieved by the newregime and include details in a tax returnCriteriaTo be eligible for the 4-year FIG regime, an individual must not have been UK tax resident in any of the 10tax years preceding the four-year period.Residence will be tested using the UK’s statutory residence test (explained here: An introduction toResidence and Domicile) for tax years 2013/14 and later and a person’s status under any applicable doubletax treaties will be irrelevant. “Split years” will count as full UK tax years. Tax years prior to 2013/14 aretested using the pre-statutory residence test rules.For those who meet that criteria and first became tax resident in the UK in the 2022/23, 2023/24 or 2024/25tax year, such that they will have been UK resident for fewer than 4 tax years as of 6 April 2025, they will beable to claim the 4-year FIG regime for whatever is left of their first 4 years of UK tax residence.For example:Became a UK tax resident 6 April 2025Tax year10+ years ofnon-UKresidence22/23 23/24 24/25 25/26 26/27 onwardsTax statusNon-UKresidentRemittance basis taxpayer4-yearFIGregimeArising basis taxpayer(UK income tax and capital gains taxon worldwide income and gains)3

Budget 2024 – Non-dom proposalsThree types of claim under the new regimeIn practice the “4-year FIG regime” is comprisedof three distinct but related sub-regimes, each ofwhich an individual can opt into as they see fit:1 A regime for employment income derivingfrom duties performed outside of the UK(regardless of where the employer is);2 A regime for other forms of foreign income;and3 A regime for foreign gains.Those eligible for the 4-year FIG regime generallycan make a claim for any combination of these (ornone at all) in each of their first four years of UKtax residence and can change the combinationeach year.They can also pick and choose which of theirforeign income and gains they want to relieve withany given claim. So, for example, an individualcould choose to claim relief on foreign sourcedividends from one shareholding but not onforeign source dividends from another.There are some restrictions on the types offoreign income and gain which can benefit fromthe 4-year FIG regime and some slight changesas compared to the types which can currentlybenefit from the remittance basis.The drawbacks of using the new regimeAlthough there will be no charge for using the 4-year FIG regime, claiming it will have somedownsides.In particular, making any one or more of the threepossible types of claim will result in the individuallosing all of:• their personal allowance (relevant to incometax);• their annual exempt amount (relevant tocapital gains tax); and• the ability to deduct foreign losses realised inthat tax year from chargeable gains (alsorelevant to capital gains tax).How to make a claim for the 4-year FIG regimeClaims must be made in a tax return by 31January two years after the end of the relevant taxyear. So if an individual wants to claim relief onforeign income arising in the 2025/26 tax year,they must make a claim by 31 January 2028.That is a shorter timeframe than for most forms ofUK tax relief (which can generally be claimed upto four years after the end of the relevant tax year)and there will be less scope than usual for makingclaims out of time so filing an accurate tax returnwithin the deadline will be critical.Effect of the new regimeThe effect will depend on which claim (orcombination of claims) is made.• A foreign employment income claim canrelieve UK income tax on up to 30% of theindividual’s employment income or £300,000of that income, whichever is lower.“Employment income” for these purposes willgenerally be the net taxable income from allemployments for which at least some dutiesare performed outside of the UK (it does notmatter whether the employer is in the UK ornot).• A foreign income claim (used for all othertypes of foreign income) will provide 100%income tax relief on all foreign incomespecified in the claim.• A foreign gain claim will provide 100%capital gains tax relief on all foreign gainsspecified in the claim.Any income and/or gains relieved by these claimscan also be brought into and used in the UKwithout further tax (albeit that bringing the fundsinto the UK could expose them to IHT as theywould then become UK situated assets).There is no need to segregate new income andgains under the new regime as there is under theremittance basis. However, existing remittancebasis users will need to maintain segregation inrelation to foreign income and gains which havearisen under the current regime.Lastly, the 4-year FIG regime can be used inrelation to income and gains attributed toindividuals (whether settlors or beneficiaries) fromtrusts but the effect is complicated and can havesurprising results (such as causing the relievedincome and gains to be taxable on another personinstead).CommentLinking access to the new regime to residencerather than domicile will make it simpler to applyand give greater certainty to taxpayers.It will be available for a much shorter period thanthe current remittance regime (4 tax years asopposed to a maximum of 15). However, wherethe new regime does apply, it will be moregenerous than the existing remittance basis in anumber of ways. In particular:• It will be available to those who want to moveto the UK permanently (the remittance basis isonly available to those who intend to leave theUK again); and4