The remittance basis of taxation for UK resident non-domiciled individuals will be terminated next year. A fresh four-year foreign income and gains regime (FIG) will be introduced for those becoming UK tax residents after a period of 10 tax years of non-UK residence.
The UK government has recently announced sweeping changes to the resident non-domicile (non-dom) tax regime, set to take effect from April 2025. While much of the discussion has focused on the tax implications, these changes also have significant ramifications for migrants in the UK. Here is a closer look at what these changes mean from an immigration standpoint.
The Shift Away from Non-Dom Status
For many years, the non-dom status has been a key feature of the UK's appeal to wealthy immigrants and expatriates. This status allowed individuals to reside in the UK while maintaining their domicile abroad, offering various benefits and a degree of separation between their UK and international financial affairs.
However, starting in April 2025, the UK government will abolish the remittance basis and the concept of domicile for tax purposes. This fundamental shift marks the end of a long-standing regime that has played a significant role in attracting global talent and investment to the UK.
The Four-Year Foreign Income and Gains (FIG) System
In place of the non-dom status, the government will introduce a Four-Year Foreign Income and Gains (FIG) system. Under this new system, individuals who have not been UK-resident for the 10 years before the 2025/26 tax year will be eligible for certain benefits for a maximum of four tax years. While the specifics of these benefits are primarily tax-related, the eligibility criteria based on residency history will be crucial for immigrants planning their move to the UK.
Abolition of the Protected Trust Regime
The upcoming changes will also see the abolition of the protected trust regime from 6 April 2025. For many immigrants, trusts have been a key tool in managing their affairs across borders. The removal of this regime signifies a need for immigrants to reassess their financial and legal structures in the UK.
New Residence-Based IHT Regime
The introduction of a new residence-based inheritance tax (IHT) regime will further impact individuals. Under the new rules, the basic test for whether non-UK assets are in scope for IHT will be based on the individual's residency history in the UK. This change highlights the importance of understanding residency criteria and its implications on one's global assets.
Transitional Provisions and Future Consultations
The government has indicated that there will be transitional provisions to help ease the shift from the old to the new system. Additionally, anti-avoidance legislation will be reviewed, with potential changes coming into effect from April 2026. For immigrants, this means staying informed and possibly participating in consultations to ensure their interests are considered.
What This Means to You as an Immigrant Worker
From an immigration standpoint, these changes signify a substantial shift in the UK's approach to attracting and retaining global talent. Here are a few key points for immigrants to consider:
- Plan Your Move Carefully: With the introduction of the FIG system, timing your move to the UK will be crucial. Understanding the eligibility criteria and planning accordingly can help maximise the benefits available under the new regime.
- Review Financial and Legal Arrangements: The abolition of the protected trust regime and the new residence-based IHT rules mean that immigrants will need to reassess their financial and legal structures. Consulting with professionals to navigate these changes will be essential.
- Understand Residency Criteria: The new rules place a greater emphasis on residency history. You should familiarise yourself with these criteria to understand how you may be impacted.
- Stay Informed and Engaged: With further consultations and potential legislative changes on the horizon, staying informed and engaged with the policy-making process can help you advocate for your interests.
In conclusion, the UK's revised immigration and tax policies represent a significant shift in the landscape for immigrants. While these changes bring new challenges, they also offer an opportunity to reassess and optimise one's approach to living and working in the UK. By staying informed and proactive, immigrants can navigate this new environment successfully and continue to thrive in the UK.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
