Foreign income tax in the UK: The new tax regime

In the United Kingdom, as of 6 April 2025, a new tax system for the taxation of foreign income and gains (FIG) has applied to individuals who return to the country after a long period of non-residence. It replaces the remittance basis and removes the concept of domicile from UK taxation. The Ecovis advisors explain the details.

Under the FIG regime, individuals who become UK tax residents after ten consecutive years of non-residence, determined by the statutory residence test, are eligible for a four-year exemption from UK tax on qualifying foreign income and gains. Unlike the previous system, there is no requirement to keep funds offshore. Individuals already resident for fewer than four years as of 6 April 2025 may still benefit for the remainder of their initial four-year window.

Those returning to the UK should check carefully to what extent the new FIG rules also apply to them.

Josh Mills, Senior Manager Private Client Tax, ECOVIS Wingrave Yeats, London, United Kingdom

Who the new FIG system applies to

Eligibility extends to both those previously considered UK domiciled and non-domiciled, meaning returning UK nationals who were excluded under the remittance basis may now qualify. Claiming the relief under the FIG regime requires foreign income and gains to be declared on the individual’s self-assessment tax return. Taxpayers must make annual claims and specify which sources of income or gains they wish to apply the relief to. It’s important to note that claiming FIG relief results in the loss of both the personal allowance (GBP 12,570) and the capital gains tax exemption (GBP 3,000).

The regime also includes transitional provisions for those who previously used the remittance basis. These include the ability to rebase foreign assets to their 6 April 2017 value and a temporary repatriation facility (TRF), allowing previously ringfenced funds to be remitted to the UK at reduced tax rates, sitting at 12% for the first two years, 15% in the third, and the individual’s marginal rate thereafter.

What other regulations apply?

Other reliefs have been adjusted to align with the FIG regime. Overseas workday relief (OWR) now runs for four years and no longer requires offshore accounts, though it is capped at GBP 300,000 or 30% of qualifying income. Business investment relief (BIR) remains available during the TRF period but will be phased out from April 2028.

Given the complexity and breadth of these changes, individuals affected are strongly encouraged to seek specialist tax advice and conduct a thorough review of their financial affairs. 

For further information please contact:

Josh Mills, Senior Manager Private Client Tax, ECOVIS Wingrave Yeats, London, United Kingdom
Email: josh.mills@ecovis.co.uk