The UK’s proposals for non-doms and their structures

The UK’s new tax

The UK’s new tax regime for internationally connected individuals and their structures (as of 25 June 2025)The UK’s tax laws were the subject of material changes on 6 April 2025 and many of theseare particularly relevant to individuals and structures with connections to both the UK andother jurisdictions.This article explains the core aspects of the new regime. A much shorter, and higher-level summary can befound here.SummaryThe final version of the new rules was not as bad as some had feared but nor was it as favourable as othershad hoped. Whatever one’s views of them, they represent a very material change from the previous statusquo and any individuals or trustees who might be affected should ensure that they have taken appropriateadvice.Summary of changes for individualsFirst of all, the remittance basis regime was replaced with effect from 6 April 2025. In its place, those movingto the UK can now claim a new special status (the “4-year FIG regime”) in their first four years of UKresidence. To the extent it is claimed, the 4-year FIG regime will exempt non-UK source income and gains(and some employment income relating to duties performed abroad) from income tax and capital gains taxand the relieved income and gains can be used in the UK without further tax.There are also two transitional reliefs for individuals. One of these offers a form of rebasing for foreignassets.The other is known as the “temporary repatriation facility” or “TRF” and allows:• foreign income and gains which have arisen under the previous remittance regime to be converted into“clean capital” in exchange for paying a one-off charge of either 12% or 15% on the value of the fundsbeing converted;• certain distributions made from non-UK resident trusts between 6 April 2025 and 5 April 2028 to be taxedat those same flat rates (12% or 15%).The UK’s inheritance tax (“IHT”) rules have also changed, again with effect from 6 April 2025, such thatindividuals are generally exposed to IHT on their worldwide assets if they have been UK tax resident for 10or more of the previous 20 tax years (this new status is referred to as being “Long-Term Resident”).Once an individual becomes “Long-Term Resident” they will retain that status for as long as they are UK taxresident and for a certain number of tax years after they cease to be UK tax resident. The length of this “tail”ranges from 3 to 10 tax years depending on how long they were UK tax resident prior to leaving.Summary of changes for trustsThe new rules also made significant changes to the taxation of many non-UK resident trusts.SettlorsFrom 6 April 2025, “protected” status was stripped from non-UK resident trusts which previously had it. Thiscould result in income and gains from those trusts arising on or after 6 April 2025 being attributed to (andtaxable on) any living, UK resident settlor.Whether (and the extent to which) any given settlor is impacted by this will depend on a range of factorsincluding the beneficial class of the trust, its investment approach and whether certain defences are availableto prevent attribution.The 4-year FIG regime may also be available to some settlors in connection with the income and gainswhich might otherwise be taxable on them.The trust itselfIn principle the exposure of the trustee and any underlying non-UK resident company to UK income tax,capital gains tax or corporation tax (as appropriate) has not changed.However, the IHT position is very different. In most cases if (and for so long as) the settlor of a trust becomes“Long-Term Resident” (see the summary of changes for individuals above) the trust fund will also beexposed to IHT to at least some extent.2

The UK’s new tax regime for internationally connected individuals and their structures (as of 25 June 2025)For trusts in which one or more beneficiaries have a fixed interest (generally known as “life-interest trusts”)the test is more complicated and can also be impacted by whether any beneficiaries with such fixed interestsare Long-Term Resident or not.BeneficiariesIf the settlor becomes taxable on a trust’s income and gains, those should not be available to “match” todistributions so the settlor’s position will have a bearing on the taxation of beneficiaries as well.Beneficiaries should also consider whether they can use the 4-year FIG regime or the TRF in relation todistributions made to them.If a trust is brought within the scope of IHT, some capital distributions and other benefits could trigger IHTcharges of up to 6%.TimingUnless expressly stated otherwise, all of the changes described in this article came into effect on 6 April2025.The new rules for individualsThe “4-year FIG regime”The previous income tax and capital gains tax regime for non-doms (the remittance basis) has beenabolished for foreign income and gains arising on or after 6 April 2025.It has been replaced by a new special status which can be claimed during the first four years of tax residencyin the UK.Those eligible for the new status are defined in the legislation as “Qualifying New Residents” and guidanceissued by the UK’s tax authority refers to the new regime as the “FIG” regime. However, it was originallydescribed as the “4-year FIG regime” when first proposed and we have used that name in this article in orderto better distinguish it from the old remittance basis.A high-level comparison of the old remittance basis and the current 4-year FIG regimeThe previous remittance basisregimeThe current 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 were tax free unless “remitted”, butwere then subject to income tax or capitaltax as appropriate if remittedMost forms of non-UK source income andgains are tax free, even if brought into or usedin 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 were notreported to HMRC unless they wereremitted, in which case the amount ofremitted income and gains had to bereportedClaimants must quantify all foreign income andgains and specify which they want the regimeto apply to (including the relevant details intheir tax return)3