Let’s start with a question: How long has the concept of domicile been relevant to income tax? 

A: 100 years

B: 200 years

C: More than 200 years

The answer is at the end of this article and (at the risk of giving a clue) it may surprise you! 

Whichever answer you’ve chosen, it is clear that domicile has been with us for as long as anyone reading this article can remember. Therefore, it will take some time to adapt to the fact that the concepts of domicile and the remittance basis cease to be relevant to the UK’s taxation of overseas income and gains that arise from 6 April 2025. 

UK resident, non-UK domiciled individuals (non-doms) could previously benefit from a special set of tax rules for their foreign income and gains for up to 15 years, subject to paying a charge. This has been replaced with a four-year tax regime for foreign income and gains (FIG) that is only available to newly resident individuals. All UK resident individuals who are not eligible to use FIG are taxable on the arising basis on their worldwide income and gains. I’ll provide an overview of the new rules in this article. 

Residency is key

The rules introduced by the Finance Act 2025 are based on whether an individual is UK resident, as determined by the statutory residence test (SRT), and how long they have been UK resident for. Years of arrival and departure where split-year treatment is claimed count as a full year of UK residency, as do years where the taxpayer is dual resident but overall treaty non-resident.

ICAEW TAXguide 04/18, which we will be updating in due course, has more detail on the SRT. HMRC’s guidance on the SRT has moved to the new Residence and FIG Regime (RFIG) manual. HMRC suggests an order in which the tests should be considered at RFIG20040.

Foreign income and capital gains up to 5 April 2025

Let’s have a quick refresher of the rules up to 5 April 2025.

Individuals who were UK resident but non-UK domiciled could choose to either pay tax on their overseas income and capital gains when they arose (the arising basis) or when the funds were remitted to the UK (the remittance basis). 

In most cases, the remittance basis had to be claimed on a self assessment return, unless an individual’s unremitted overseas income and gains for a tax year were less than £2,000.

Non-domiciled individuals who were UK resident (under the SRT) for at least seven of the nine previous tax years had to pay the £30,000 remittance basis charge (RBC) annually in order to access the remittance basis. The RBC increased to £60,000 once they had been resident for 12 of the previous 14 tax years.

Once a taxpayer had been UK resident for 15 of the 20 previous tax years, they became deemed domiciled in the UK, at which point they could no longer use the remittance basis and defaulted to the arising basis. We will cover the rules for inheritance tax (IHT) in a separate article.

There are two options for dealing with historical sums that arose up to 5 April 2025 while the taxpayer used the remittance basis that have not yet been taxed in the UK. Taxpayers can use the temporary repatriation facility (TRF), which we will cover below, to pay a reduced rate of tax on previously untaxed remittance basis income and gains.

If taxpayers do not use the TRF, their advisers will still need to track overseas income and gains that arose up to 5 April 2025 when taxpayers were UK resident but non-UK domiciled and were using the remittance basis. Any income or gains that are not covered by the TRF, and that have not already been taxed in the UK, will still be taxable when they are remitted, even if the remittance occurs after 5 April 2025.

The remittance basis will still need to be claimed on tax returns up to 2024/25 and taxpayers will need to pay the RBC if they are liable for it.

Guidance on the old rules to 5 April 2025 remains in HMRC’s Remittance Basis and Domicile manual.

Temporary repatriation facility

The Temporary repatriation facility (TRF) is a voluntary facility that is available for a fixed period of three tax years. Taxpayers with previously untaxed remittance basis income and gains that arose up to 5 April 2025, including sums held in mixed funds, can elect to pay tax on those income and gains at a reduced rate of:

• 12% for 2025/26 and 2026/27; and
• 15% for 2027/28.

There are some key points to be aware of if a taxpayer wants to use the TRF:

1. The taxpayer must be UK resident under the SRT in the year(s) they want to use the TRF. In our representations to HMRC, ICAEW queried why this was not available to those who are currently non-resident but who may wish to return to the UK after 2027/28. Unfortunately, the policy was not changed.
2. The taxpayer must have previously used the remittance basis for at least one tax year prior to 2025/26. Taxpayers who did not have to claim the remittance basis in earlier years – for example, where their unremitted income and gains were under £2,000 – are treated as having used the remittance basis.
3. The taxpayer has to ‘designate’ the amounts that they wish to pay tax on under the TRF. The amounts that are designated must come within one of the six categories of ‘qualifying overseas capital’ (see RDRM72100), which are:
1. Amounts that arose to an individual in 2024/25 or earlier when they used the remittance basis and that have not previously been remitted to the UK.
2. Amounts belonging to former remittance basis users where they are uncertain about the source of the funds.
3. Capital payments received between 6 April 2025 and 5 April 2028 (the TRF period), which are matched with income or gains that arose to an offshore settlement prior to 6 April 2025.
4. Amounts that are treated as the income of the settlor of a non-resident settlement during the TRF period and which are matched with pre-6 April 2025 protected foreign source income or transitional trust income of a non-resident trust.
5. Income that arose before 6 April 2025 which is treated as income of a settlor from 6 April 2025 onwards when it is remitted.
6. Benefits received during the TRF period that are taxable on an individual under the transfer of assets abroad legislation and which are matched with relevant foreign income that arose prior to 6 April 2025.

4. The designated amounts do not have to be remitted to the UK during the year(s) when they are designated under the TRF, but the taxpayer can choose to remit at the time they use the TRF if they wish. Once funds have been designated under the TRF, they can be remitted to the UK without any further tax charges beyond the 12% or 15% rate.
5. The election to designate ‘qualifying overseas capital’ will be made on the individual’s tax return (see RDRM73310) and must specify:
1. The total amount designated.
2. Which amounts that have been designated have been remitted to the UK in the tax year of designation (this could be £nil).
6. The designated amount is the net figure after the deduction of any foreign tax paid or payable. This means that no further credit for foreign tax can be claimed against the TRF rate.

RDRM73340 provides an example of claiming foreign tax credit relief for the remittance of a capital gain, compared with making a designation under the TRF. The rules for dividend tax credits are different (see RDRM73330). 

Foreign income and gains arising from 6 April 2025

From 6 April 2025, all UK residents are taxable on their worldwide income and gains as they arise.

The FIG regime offers full relief from UK tax on an individual’s FIG that arise during their first four years of UK residency, provided they were non-UK resident for at least 10 consecutive tax years prior to that. An individual who meets these tests is referred to as a ‘qualifying new resident’ (RFIG44000). As noted above, residency is determined under the SRT. 

If an individual’s UK residency commenced from 2022/23 onwards, they can use the FIG regime for the balance of their first four years of UK residency that they have left at 6 April 2025.

The FIG regime is voluntary, but it does need to be claimed on a self assessment return and the amounts on which relief is claimed must be quantified. A taxpayer does not need to use the FIG regime for all of their first four years of UK residency – they can choose on a year-by-year basis.

The regime actually requires up to three separate claims for relief (RFIG42100), depending on the sources of income/gains that the individual has:

1. A claim for relief on foreign income, other than employment income and capital gains (RFIG45100).
2. A claim for relief on capital gains on the disposal of foreign assets (RFIG45500).
3. An election for overseas workday relief (OWR), which has to be accompanied by a separate claim quantifying the relief, for the element of employment income that relates to non-UK duties (EIM43550). OWR is separate because the relief is limited to the lower of:
1. £300,000; or
2. 30% of the ‘relevant qualifying employment income’.

As was the case under the remittance basis, the individual loses both their income tax personal allowance and their CGT annual exemption for a tax year in which they have made any one or more of the above claims. Other reliefs and allowances can also be affected and there is a full list at RFIG43000.

It is a requirement that the income and gains on which FIG relief is claimed are quantified (RFIG42100 for income and RFIG45500 for capital gains). The FIG regime record-keeping requirements will no doubt deter some individuals from making a claim, especially given that it is only available for a maximum of four consecutive tax years.

Claims to use the FIG regime must be made within 12 months of 31 January that follows the tax year (ie, the normal self assessment amendment window). Amendments beyond this window (consequential claims) are not permitted if an assessment or amendment is treated as careless or deliberate. Therefore, it is important that the amounts are quantified accurately. 

ICAEW warned HMRC that the inability to make a consequential claim may lead to claims being overstated, for example where the overseas tax position has not yet been finalised. 

At this point, ICAEW does not know what the SA109 residence pages for 2025/26 self assessment returns will look like.

Challenges ahead

The abolition of the remittance basis regime for non-doms and the introduction of the new FIG regime represent a significant challenge for taxpayers and their advisers. Up to 31 January 2026, and beyond, particularly for clients who do not use the TRF, advisers will need to keep two sets of rules in mind; the ‘old’ rules when completing 2024/25 tax return and the ‘new’ rules when advising on the position post-April 2025. 

This has been and remains one of the most complex areas that personal tax advisers have to deal with and, as required by Professional Conduct in Relation to Taxation (PCRT), advisers should ensure they are suitably experienced before advising taxpayers.

And, in case you thought we’d forgotten, the answer is C – more than 200 years. Domicile has been relevant to income tax since 1799. The remittance basis has been around for 111 years, as that was introduced in 1914.

Katherine Ford, Technical Manager, ICAEW