The present form of non-domiciled tax regime in the UK is changing.
This tax rule update comes as the UK government wishes to make sure that long-term residents pay tax in the country, no matter their domicile status.
That’s where FIG regime UK will come in, and that’s what we’ll talk about in this post.
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Some of the facts might change from the time of writing, and nothing written here is formal tax advice.
For updated guidance, please contact me.
What is FIG UK tax?
The current remittance basis will be eliminated on April 6, 2025, and replaced with the 4-year foreign income and gains (FIG) regime, a new residence-based scheme.
Under the existing non dom regime UK structure, people who live in the UK but have their permanent residence outside of the country can take advantage of the remittance basis of taxation which only taxes UK income and profits. The program merely charges foreign income and earnings when they are brought into the UK.
How does the new FIG regime work?
The Foreign Income and Gains (FIG) Regime targets to allow newcomers to the UK who have been non-resident for 10 years or more to be eligible for a four-year transitional period during which they will not be subject to taxation on their overseas profits and income, even if those sums are transferred to the UK.
Following this term, people will be subject to the same taxes on their global income and gains as they would if they were regular UK citizens.
This measure tackles the arguable bias of the current system in favor of the wealthy, as they can claim permanent home outside of the UK and enjoy tax benefits through the non dom status.
Those who claim the FIG regime, however, will no longer be eligible for personal allowances or yearly capital gains tax exemptions.
Upon transition, existing non-UK domiciled individuals who are not eligible for the scheme will be subject to ordinary tax legislation. A 50% decrease in foreign income liable to tax will not be applicable to them.
When brought back into the nation, any overseas income and profits that were earned prior to April 6, 2025, when an individual was subject to remittance-based taxation, will continue to be subject to the present regulations.
The Overseas Workdays Relief program will also continue, but specifics about qualifying requirements have not yet been made public.
New Foreign Income and Gains Regime Effect on IHT
The present domicile-based inheritance tax framework will also be replaced with a new residence-based one, according to the government.
This means that your overseas assets may be subject to UK IHT if you have lived in the UK for at least 10 years prior to a chargeable event like death.
Also, you may still be responsible for IHT on foreign assets for 10 years following your departure from the UK.
Excluded Property Trusts currently enable non-doms to shield assets located outside of the UK from inheritance taxes. This will end once the new FIG regime gets implemented.
The government is attempting a phased implementation of this new law for those who already have trusts so that trust arrangements can adapt appropriately.
UK FIG Regime Impact on CGT
The UK government is allowing a one-time reset or rebasing of the value of overseas assets for Capital Gains Tax or CGT purposes for non-doms and former non-doms who will be impacted by the new regulations.
They may consider the worth of the asset as of a certain date rather than the acquisition price when they offload foreign assets.
Only the rise in value from the rebasing date would be levied, so this reset may reduce the taxable gain.
FIG Regime UK Temporary Repatriation Facility (TRF)
A TRF will enable people who pay taxes on a remittance premise to gradually restore their overseas income and earnings from before April 6, 2025, at lower rates once they are no longer eligible for this status.
The exact rate and length are still being worked out.
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