The recent Budget 2024 announcement has brought significant changes to the UK taxation regime, especially the UK Tax Changes for Non-Residents, which are affecting UK resident non-domiciled individuals (“non-doms”). The Chancellor has introduced a new, simplified residency-based system to replace the existing regime, aiming to keep the UK competitive globally. Here’s an overview of these changes and how BSO-Fintax can guide you through the complexities.
Understanding the New Regime for UK Tax Changes for Non-Residents
From 6 April 2025, the current remittance basis of taxation will be abolished. In its place, a four-year foreign income and gains (FIG) regime will be introduced for individuals who become UK tax residents after ten years of non-UK residence. Under this regime, eligible individuals will not pay tax on foreign income and gains (FIG) during the first four tax years of UK residency and can remit these funds into the UK without additional charges. However, they will still pay tax on UK income and gains.
Key Points of the New Regime:
- The Statutory Residence Test will determine tax residency, ignoring treaty residence or non-residence and split years.
- Individuals must claim the four-year FIG regime each year it applies.
- Claimants will lose entitlement to personal allowances and the annual exempt amount for capital gains tax (CGT).
Example Scenario
Take Pierre, who became a UK resident in 2022-23 after a ten-year period of non-UK residence. By 6 April 2025, Pierre will have been a UK resident for up to three tax years. He can claim the new FIG regime for 2025-26, as this will be his fourth year following a ten-year non-UK tax residence period.
Additional UK Tax Changes for Non-Residents
- Formerly Domiciled Residents (FDRs):
- The unfavourable regime for FDRs will be abolished. They will fall under the new four-year regime provided they meet the ten-year non-resident requirement.
- Reduction in Taxable Foreign Income:
- For those moving from the remittance basis to the arising basis and not eligible for the FIG regime, only 50% of foreign income in 2025/26 will be taxed. This does not apply to foreign chargeable gains.
- Capital Gains Tax (CGT) Rebasing:
- Individuals who have claimed the remittance basis and are neither UK domiciled nor deemed domiciled by 5 April 2025 can rebase foreign assets to their value as of 5 April 2019 when disposing of them after 6 April 2025.
- Temporary Repatriation Facility (TRF):
- A new 12% tax rate will apply to remittances of FIG in tax years 2025/26 and 2026/27 for individuals previously taxed on the remittance basis. This aims to encourage bringing overseas-earned wealth into the UK for investment and spending.
- Overseas Workday Relief (OWR):
- OWR will be available under the new FIG regime for the first three tax years of UK residence, providing income tax relief on earnings for employment duties performed outside the UK.
- Inheritance Tax (IHT):
- From 6 April 2025, the UK will move to a residence-based system for IHT. Individuals who have been UK residents for ten years will be subject to IHT on their worldwide estate. There will be a ‘tail’ provision, keeping individuals within the scope of IHT for ten years after leaving the UK.
How BSO-Fintax Can Help with UK Tax Changes for Non-Residents
Navigating these changes can be complex and challenging. At BSO-Fintax, our team of experienced chartered accountants is here to help you understand and adapt to these new regulations. Here’s how we can assist:
- Expert Guidance: We provide personalised advice on the new FIG regime and help you determine your eligibility and the potential benefits.
- Tax Planning: Our tax experts will help you optimise your tax position under the new rules, ensuring you take advantage of all available reliefs and exemptions.
- Compliance Assistance: We guide you through the process of claiming the new FIG regime, ensuring all necessary documentation and claims are correctly filed.
- Asset Management: We assist with rebasing foreign assets and navigating the Temporary Repatriation Facility to minimise your tax liabilities.
- Inheritance Planning: Our team will help you understand the new IHT rules and plan your estate to ensure efficient tax management.
Conclusion
The changes announced in Budget 2024 mark a significant shift in the UK’s approach to taxing non-doms and individuals with UK connections. By staying informed and seeking expert advice, you can navigate these changes effectively and ensure compliance while optimising your tax situation.
Contact BSO-Fintax today to schedule a consultation and learn how we can assist UK Tax Changes for Non-Residents and beyond.
