UK Post-Starmer: Reassessing the FIG Regime, IHT and Pillar Two

UK Post-Starmer: Reassessing the FIG Regime, IHT and Pillar Two

Keir Starmer's resignation as UK Prime Minister, formalized on June 22, 2026, introduces significant uncertainty into the British fiscal framework for high-net-worth individuals (HNWIs) and multinational corporations. Barely a year after structural reforms reshaped the treatment of non-domiciled individuals and Inheritance Tax (IHT), the leadership transition within the Labour Party opens a range of scenarios. These range from policy consolidation to review or even tightening. For Latin American family offices and investors with UK exposure, or those planning relocation, a critical window has opened for the strategic reassessment of their structures. This analysis examines the implications for the Foreign Income and Gains (FIG) regime, the IHT reform, and the trajectory of Pillar Two, outlining risk vectors and immediate planning considerations.

The core of the current uncertainty lies in the durability of the new fiscal paradigm. The Starmer government, in power since July 2024, acted swiftly to dismantle the old non-domiciled regime, which the party deemed inequitable and outdated. The Finance Act 2025 replaced it with the FIG regime, effective April 6, 2025. This new system offers a four-year exemption period for new residents on their Foreign Income and Capital Gains, which can be remitted to the UK without taxation. Once this four-year period is over, individuals become subject to tax on their worldwide income base.

Concurrently, transitional measures, such as the Temporary Repatriation Facility (TRF), were introduced to encourage the repatriation of funds accumulated under the previous regime at a reduced rate. The abrupt departure of this reform's architect raises fundamental questions about the long-term viability of the four-year window and the stability of the associated transitional rules.

FIG Regime and IHT: Consolidation or Reversal?

The reform of Inheritance Tax (IHT) was the other pillar of fiscal restructuring. The Finance (No.2) Act 2024-25 abandoned the concept of domicile as the connecting factor for IHT, replacing it with a residence-based test. Under the new regulations, an individual enters the scope of IHT on their worldwide assets after accumulating 10 years of residence in the UK. Furthermore, a 10-year 'tax tail' was established, during which a former resident may remain subject to British IHT on their global assets. This reform aimed to provide greater certainty and align with practices in other OECD jurisdictions, but the choice of a 10-year threshold was a subject of debate.

The central question is whether Starmer's successor, though from the same party, will keep these policies intact. Three plausible scenarios emerge:

1. Continuity: The new administration consolidates the reforms, confirming their stability to attract capital and talent under clear, albeit stricter, rules than before. This would provide legal certainty to those who have already structured their wealth based on the FIG and new IHT rules.
2. Technical Adjustment: This would involve modifications to correct complexities or unintended consequences. For example, aspects of the Temporary Repatriation Facility could be reviewed, or the residence test for IHT could be marginally relaxed, without altering the fundamental architecture. This scenario could arise from consultation with the industry and tax advisors to optimize the system's functionality.
3. Tightening: This is the scenario of greatest risk for HNWIs. A new leadership with a more left-leaning stance might consider the FIG's four-year exemption period excessively generous and propose its reduction, for instance, to two years. Similarly, the 10-year threshold for IHT could be perceived as too lenient and be shortened. Such a measure would have a de facto retroactive impact on planning undertaken by individuals and families who adopted the new regime trusting in the established timelines. The likelihood of this scenario will depend on the ideological profile of the new Prime Minister and on internal and external political pressures. For Latin American family offices, this is the material risk that demands immediate modeling.

Implications for Pillar Two and Strategic Planning

The UK has been an early and enthusiastic implementer of the OECD's Pillar Two GloBE rules, which establish a global minimum tax of 15% for large multinational enterprises. The Multinational Top-up Tax and the Domestic Top-up Tax (a Qualified Domestic Minimum Top-up Tax or QDMTT) have been in effect for accounting periods beginning on or after December 31, 2023. Unlike the FIG and IHT, a unilateral UK reversal on this front is extremely unlikely given the concerted nature of the international agreement.

However, political instability is not harmless for the application of Pillar Two. The uncertainty is centered on the administrative and enforcement posture. A new government could influence resource allocation to HMRC's Large Business Service, the interpretation of grey areas within the legislation, and the aggressiveness of audits. For family holdings with diversified operations exceeding the EUR 750 million consolidated revenue threshold, a change in HMRC's administrative tone is an operational risk factor that must be monitored. The stability of the Safe Harbours, designed to simplify compliance in the initial years, and the future interaction of Pillar Two with the UK's Controlled Foreign Companies (CFC) regime, are areas sensitive to policy shifts.

Given this landscape, proactive planning is imperative for Latin American fortunes:

1. Structural Diagnosis: Conduct a diagnosis of all structures with a UK nexus, assessing their resilience against a possible tightening of the FIG and IHT regimes. This includes reviewing wills, trust structures, and succession plans.
2. Relocation Sensitivity Analysis: Those considering relocation to the UK must now incorporate a sensitivity analysis that contemplates a reduction in the four-year exemption window. The attractiveness of the FIG regime has become conditional.
3. Quantification of Tax Impact: Current residents, especially those in the initial FIG period or who transitioned from the 'non-dom' regime, must quantify the fiscal impact of an acceleration of their move to worldwide taxation.
4. Pillar Two Monitoring: Although Pillar Two appears to be a stable pillar, constant vigilance of communications from HMRC and the British Treasury is necessary to detect any change in approach that could affect reporting obligations or the effective tax burden.

Keir Starmer's departure has closed a brief chapter of fiscal certainty in the United Kingdom. The period until a new leadership is consolidated is a phase of high risk, but also an opportunity to adjust structures and contingency plans. A 'wait and see' strategy carries significant risk. Specialized advice and the modeling of alternative scenarios are, as of today, indispensable tools for capital preservation and navigating the complex British fiscal environment.