The UK’s New FIG Regime: Redefining Tax Residence and the End of the 'Non-Dom' Era

1. Introduction: The End of a Centenary Paradigm

April 6, 2025, marks a structural milestone in the tax history of the United Kingdom. Following years of political debate, macroeconomic pressures, and demands for administrative simplification, the British government has definitively abolished the concept of domicile as a relevant connecting factor in its tax system. With this decision, the historic remittance basis of assessment has also disappeared, a mechanism that allowed non-domiciled residents (popularly known as non-doms) to keep their foreign source income and gains outside the reach of HM Revenue & Customs (HMRC), provided those funds were not introduced or transferred into British territory.

In its place, the British legislature has introduced the Foreign Income and Gains (FIG) regime, a modern model based strictly on tax residence as determined by the Statutory Residence Test (SRT). This new scheme seeks to maintain the UK's appeal for high-net-worth investors and professionals, but under a radically different framework of transparency and simplicity. From the effective date of this reform, all UK residents are taxed, by default, on the arising basis of assessment on their worldwide income and gains, unless they expressly opt for the FIG regime during their first four years of tax residence, provided they meet rigorous prior non-residence requirements.

2. The Core of the FIG Regime: Mechanics and Eligibility

The FIG regime must not be confused with the former remittance basis of assessment, as they are legally distinct instruments with opposing operational philosophies. While the previous system penalized the repatriation of capital, the FIG regime exempts eligible foreign income and gains from tax and allows them to be freely brought into the United Kingdom without generating any additional tax liability.

To access this four-year benefit, the taxpayer must qualify as a qualifying new resident. This requires the individual to have been a non-UK tax resident for a period of at least ten consecutive tax years immediately prior to their arrival. The determination of residence is made exclusively through the Statutory Residence Test (SRT), removing any consideration of the taxpayer's nationality or historic domicile.

The window of opportunity is strict: the benefit is limited to the first four consecutive tax years of residence in the United Kingdom. It is critical to note that this period is not suspended or accrued. If a taxpayer temporarily leaves the UK during this four-year period, the years of absence continue to count toward the maximum four-year limit, and the benefit for those periods is irrevocably lost.

3. The Active Claim Requirement and the Loss of Basic Allowances

One of the most important warnings for tax planning professionals is that the FIG regime does not apply automatically. To benefit from the tax relief, the taxpayer must make an active claim in their Self Assessment tax return for each corresponding tax year. This annual optional nature provides flexibility but also imposes a substantial administrative and strategic burden.

The decision to claim the FIG regime carries automatic financial trade-offs that must be carefully evaluated. By making the claim, the taxpayer immediately loses for that tax year:

• The personal allowances for income tax.
• The capital gains tax (CGT) annual exempt amount.
• The blind person's allowance (where applicable).

Therefore, for taxpayers with modest foreign income but significant UK-source income, claiming the FIG regime could be counterproductive. The cost-benefit analysis must be performed annually, comparing the tax savings on foreign income against the loss of personal allowances applicable to UK-source income.

4. Comparative Table of Tax Instruments

To clarify the legal boundaries between current and repealed instruments, the following comparative table is presented:

This differentiation demonstrates that the FIG regime represents a complete break from the past. The ability to bring foreign income and gains into the UK economy without suffering double taxation or tax penalties eliminates the need to maintain complex bank account segregation structures abroad, which were mandatory under the old remittance basis regime.

5. Transition Rules for Pre-Existing Residents, the Temporary Repatriation Facility (TRF), and CGT Rebasing

The introduction of the FIG regime has generated significant concern among taxpayers who had already moved to the UK prior to April 6, 2025. The British legislature has designed specific transitional rules for these cases.

If an individual's first four years as a UK tax resident started before April 6, 2025, they can only use the regime for the remaining years of their original four-year window. For example, if a taxpayer became a UK resident in the 2023/2024 tax year (their second year being 2024/2025), they can only claim the FIG regime for the 2025/2026 and 2026/2027 tax years, which correspond to the third and fourth years since their arrival. Once this period expires, the taxpayer will automatically transition to the arising basis of assessment on their worldwide income and gains.

To incentivize the repatriation of historical funds accumulated under the old remittance basis, the government has introduced the Temporary Repatriation Facility (TRF). This transitional mechanism will be available for a 3-year period starting April 6, 2025, allowing former non-doms to designate and remit accumulated foreign income and gains arising before April 6, 2025, to the UK at a reduced, flat tax rate: a rate of 12% for the 2025/2026 and 2026/2027 tax years, and 15% for the 2027/2028 tax year, avoiding the standard high tax rates that would otherwise apply under the old remittance rules.

Additionally, as another key transitional measure, the capital gains tax (CGT) rebasing rule is introduced. Former non-doms who have previously claimed the remittance basis may elect to rebase certain foreign assets to their market value as of April 5, 2017, for disposals taking place on or after April 6, 2025, thereby significantly reducing the taxable gain.

6. The Inheritance Tax (IHT) Reform: The Shift to Residence

One of the most profound changes impacting estate planning for high-net-worth individuals (HNWIs) is the structural reform of Inheritance Tax (IHT). Effective April 6, 2025, the UK is moving from a domicile-based system to a residence-based system for IHT.

Under the new rules, an individual's worldwide estate will be subject to UK IHT if they have been a UK tax resident for at least 10 out of the 20 tax years preceding the tax year in which the taxable event (such as death or certain transfers into trusts) occurs.

Furthermore, the reform introduces a retention of liability period (known as the "tail"). Once an individual meets the 10-year long-term residence threshold, they will remain subject to UK IHT on their worldwide assets for a period of between 3 and 10 tax years after they cease to be a UK tax resident. This tail period varies based on the taxpayer's exact number of prior tax residence years: for instance, a 3-year tail applies to those resident between 10 and 13 years, increasing progressively up to a maximum 10-year tail for those who were resident for 20 years. This change necessitates an urgent review of existing succession planning and physical presence in the UK.

7. Interaction with International Structures and Anti-Avoidance Rules

Although the FIG regime offers a clear exemption for direct foreign income and gains, its interaction with international corporate and trust structures is highly complex. Taxpayers who hold shares in offshore companies or who are beneficiaries of foreign trusts must carefully analyze the UK's international tax transparency rules.

In particular, the Transfer of Assets Abroad (ToAA) provisions and the settlements legislation remain fully in force, but with a critical modification: the abolition of trust protections. Effective April 6, 2025, tax protections for foreign settlor-interested trusts are eliminated. This means that income and gains arising within a protected trust will be taxed directly on the settlor if they are a UK resident and do not qualify for the FIG regime, removing the historic tax deferral. Under the new framework, if a resident qualifies for the FIG regime, income attributed under the ToAA or settlements rules that constitutes foreign income may benefit from the relief, but any deviation or failure to meet formal requirements can trigger severe tax contingencies.

Furthermore, structures established abroad, including those in low-tax jurisdictions such as the United Arab Emirates (UAE), must be analyzed under this new lens. Although low-tax jurisdictions typically require closer scrutiny, it is essential to remember that international tax transparency rules (such as ToAA) apply globally to any offshore structure, regardless of its geographical location. The economic substance of foreign entities and the correct classification of the source of income remain paramount to prevent the recharacterization of income as UK-source.

8. Conclusion: A New Horizon for Tax Planning

The FIG regime simplifies the tax landscape for new residents in the United Kingdom for a defined four-year period, eliminating the friction associated with the repatriation of capital. However, the brevity of the regime (four years compared to the indefinite or long-term access permitted under the old non-dom system) demands much more dynamic and proactive wealth planning.

Tax advisors and taxpayers must accept that the United Kingdom has transitioned to a pure residence-based system. The four-year window should be understood as a transitional period to restructure global assets before becoming fully subject to worldwide taxation on an arising basis. The rigidity of the deadlines, the requirement for an active annual claim, the loss of personal allowances, the abolition of trust protections, and the new 10-year residence test for IHT are critical factors that demand detailed monitoring and impeccable technical execution.

9. Disclaimer

This article is provided for informational purposes only and does not constitute personalized tax, legal, or financial advice. Tax laws and regulations are subject to change, and their application can vary based on individual circumstances. It is highly recommended to consult with a qualified tax professional before making any decisions based on this information.