🇬🇧UK FIG Regime: Foreign Income and Gains

Background

Until 6 April 2025 a non-UK-domiciled resident could keep foreign income and gains outside the UK net on the remittance basis, in some cases for up to fifteen years. That door closed. Domicile was removed from income tax and capital gains tax, the inheritance tax system was rebuilt around residence, and a new four-year relief took the place of the old open-ended planning. FIG is the headline part of that settlement: a short, deliberate welcome for people in their first years of UK residence.

Concept

The Foreign Income and Gains regime lets a qualifying new UK resident escape UK tax on foreign income and gains arising in their first four years of residence. It is residence-based and strictly time-limited, and it carries none of the permanence of the remittance basis it replaced. Every other UK resident pays tax on the arising basis on worldwide income and gains; FIG is the narrow exception, and only for amounts arising on or after 6 April 2025.

FIG buys four years on foreign income and gains, and nothing beyond them. Prove the ten-year non-resident history and the age condition first, then decide each year on its own before the tax year closes, because every claim surrenders that year's personal allowance and CGT annual exempt amount. Since Finance Act 2026 the relief is deducted only from the income or gains it relates to.

The rule

From 6 April 2025 every UK resident is taxed on the arising basis. The exception is for someone who becomes UK resident after at least ten consecutive tax years of non-UK residence: they can claim relief on eligible foreign income and gains for each of their first four UK-resident years. Residence is fixed by the statutory residence test, the four years run consecutively from the year residence begins, and unused years cannot be carried forward. Because the clock starts at arrival rather than at 6 April 2025, the regime also reaches some people already here: s 845B(3)(c) ITTOIA 2005, inserted by s 37 Finance Act 2025, treats 2022-23, 2023-24 and 2024-25 as qualifying tax years where the 10-year non-residence test was met, so someone who became UK resident in one of them claims the residual years of the window from 2025/26 — 2025/26 alone for a 2022/23 arrival, three years for a 2024/25 arrival. Residence beginning before 2022/23 gives no access, and a 2025/26 claim must be made by 31 January 2028 (s 845A(5) ITTOIA 2005).

Finance Act 2026 (2026 c. 11, Royal Assent 18 March 2026) added a fourth limb to the definition. Under s 845B(1)(d) ITTOIA 2005 the individual must be at least 10 years old at the commencement of the tax year. The condition measures the individual's own age and takes children under 10 out of the regime; the requirement of ten consecutive years of non-UK residence remains a separate limb of the same definition and is unchanged. Unlike the neighbouring paragraphs of the same Schedule, this paragraph carries no commencement provision of its own, so its temporal reach should be checked against HMRC guidance.

The test

Scope

FIG suits new arrivals, returners after a long absence, founders holding foreign companies, investors with offshore portfolios and beneficiaries of non-UK trusts. Being non-British, formerly non-dom, or simply holding assets abroad qualifies no one on its own. Foreign employment income sits outside FIG and runs instead through Overseas Workday Relief, which was rebuilt alongside it.

Consequences

Eligible foreign income and gains drop out of the income tax and CGT charge for each claim year, but since Finance Act 2026 the relief is deducted only from what it relates to. Section 845A(3A) ITTOIA 2005 allows the deduction only from qualifying foreign income and s 41P(4A) ITEPA 2003 only from qualifying foreign employment income, with parallel amendments in s 25 ITA 2007 and Schedule D1 TCGA 1992 for gains. Unused relief cannot be moved to another category, so a year of large foreign gains and small foreign income is now computed category by category. The amendment has effect for the tax year 2025-26 and subsequent years — the first year of the regime — so computations made before March 2026 need rebuilding.

The claim carries its own price as well: the personal allowance and the CGT annual exempt amount for that year, together with the married couple's, marriage and blind person's allowances where they applied. The relieved income still counts towards adjusted net income, so it can trigger the High Income Child Benefit Charge or remove access to tax-free childcare. UK-source income, UK gains and UK land stay fully taxable.

Examples

A founder who becomes UK resident in 2026/27 after 12 years abroad and sells shares in a non-UK company during the 4-year period may be within FIG for the foreign gain if the conditions are met. A former long-term London resident who spent only 7 years outside the UK before returning is outside FIG even if assets and bank accounts are offshore. A UK-source consulting fee cannot be converted into FIG by invoicing through an offshore company.

Risk

The main risks are assuming eligibility without proving the 10-year history, claiming FIG on UK-source items, failing to model the loss of allowances, and confusing FIG with OWR. Finance Act 2026 added two more: reading the relief as a general exemption and setting it against the wrong category of income, and claiming the regime for a child who is not yet 10 at the start of the tax year. Trust and transfer-of-assets-abroad income can interact with FIG, but those analyses require exact attribution under HMRC's RFIG45300 and RFIG45400 guidance.

Evidence

The file should prove 10 years of non-UK residence, the first UK-resident year, split-year status, the source of each item, the foreign situs of assets, foreign taxes paid and the claim mechanics on SA109. It must remain usable after the 4-year window closes, when the same income and gains return to the arising basis.

Planning

FIG planning works best before UK residence begins. Disposals, portfolio composition, trust benefits, company distributions, overseas duties and foreign-tax-credit capacity all want modelling against the four-year window while there is still time to change them. The regime is a bridge taken deliberately, year by year, with the far bank already in view.

The package around FIG

FIG never travelled alone. The Temporary Repatriation Facility is its counterpart for the past: three designation tax years for qualifying pre-6 April 2025 foreign income and gains at a flat rate, 12% for 2025/26 and 2026/27 and 15% for 2027/28, against the up-to-45% a normal remittance would cost. Designate the funds, pay the charge, and the money then moves freely with no further UK tax.

The working part of the TRF is designation: amounts are designated in the Self Assessment return for the year, and once the charge is paid the money can be remitted in any later year with no further UK tax (RDRM73100). Designation also rewrites the mixed fund arithmetic (RDRM75200, RDRM75100). For trust capital payments, check that machinery before claiming relief. The transitional layer in full sits in remittance basis after 6 April 2025.

Beside the TRF sits a separate transitional relief — it is not part of the TRF and runs on its own terms: CGT rebasing under Schedule 11 to the Finance Act 2025. On a disposal on or after 6 April 2025 of a foreign asset held personally on 5 April 2017, the base cost is reset to the asset's market value on 5 April 2017, leaving only the later growth in charge. The gate runs on conditions attaching to the individual and to the asset — among them no actual or deemed UK domicile in any tax year before 2025/26 — and is set out in full in the same transitional entry. The TRF cleans up the past; rebasing trims the taxable slice of the future.

Inheritance tax changed in the same reform. Domicile no longer decides exposure; long-term residence does. Anyone UK resident for at least ten of the previous twenty tax years becomes a long-term resident, taxable on worldwide assets. On leaving, a tail keeps those assets in scope: three years for ten to thirteen years of residence, lengthening by a year for each further resident year up to a maximum of ten, and resetting only after ten consecutive years of non-residence. Succession planning now turns on this clock rather than on domicile.

Two layers of the IHT change matter most in practice. For trusts, excluded property status is no longer fixed at settlement: it is dynamic, tested against the settlor's long-term-resident position at the date of each charge, so a trust can drift in and out of the IHT net as the settlor's residence history moves — the mechanics are in trusts and inheritance tax, the wider reform in the abolition of the non-dom regime. That entry also carries the three layers Finance Act 2026 added: the cap on trust charges (IHTA 1984 s 75B), the disapplication of the exit-charge exemptions on a long-term residence change (ss 65(8B)–(8C)) and pensions inside the IHT perimeter from 6 April 2027. And the clocks are unsynchronised by design: FIG's four-year window closes six years before long-term residence can begin, while a long stay leaves a tail of up to ten years after departure (GOV.UK).

Plan both horizons together — the income tax runway and the IHT clock — or the free years mask the exposure building behind them. A third clock now runs alongside them: the proposed earned settlement model would raise the default qualifying period for indefinite leave to remain from 5 to 10 years, so permanent status could arrive around the time long-term residence begins rather than years before it — see the earned settlement reform.

Overseas Workday Relief was re-cut to match. It now runs for four tax years rather than three, drops the old need to keep the pay offshore, and is capped each year at the lower of £300,000 or 30% of qualifying employment income. Anyone who qualifies for FIG and has overseas duties can elect into it, whatever their former domicile.

Where it is heading

The first year of the regime ran on technical fixes. At Legislation Day in July 2025 the government published technical amendments to the regime, most effective retrospectively from 6 April 2025, and the Autumn 2025 Budget confirmed the four-year limit with no extension. The second year brought narrowing: Finance Act 2026 tied the relief to the category of income with retrospective effect from 2025-26 and closed the regime to children under 10. For planning that matters more than the content of the amendments — the four-year window held, but the legislature is willing to reprice what sits inside it after the fact. The shape stays a four-year runway, and it rewards people who model the exit before they arrive.

Set against Europe's standing alternatives, FIG is generous but brief, which is why the planning is front-loaded. Italy's flat tax, the Cyprus and Greece non-dom routes and the UAE's zero-rate residence compete for the same mobile families on very different terms. The digest puts FIG on the same axes as six of them; the full matrix of sixteen regimes belongs to special tax regimes, and the departure side of the same decision — exit charge, the year of the move, the tail left behind — is set out country by country in the relocation matrix.

FIG Against the Alternatives

A family choosing the UK is choosing between windows of very different length at very different prices. Six regimes compete for the same arrival, and the axes that decide the result are the term, what the relief actually covers, the price of entry, the years of absence demanded and — the one the UK is worst at — what happens to the estate. Figures are those in force in September 2026.

Four years is the shortest window in the group — Spain gives six, Portugal ten, Italy fifteen, Cyprus seventeen, and Switzerland and the UAE run indefinitely while the conditions hold. That compression is the whole planning problem: what is to be realised has to be realised inside the window, and a disposal postponed past the fourth year is taxed at ordinary UK rates rather than at a lower one somewhere else.

The price structure runs the other way. Italy asks €300,000 a year whatever the income, Switzerland charges ordinary cantonal rates on a notional base, and Spain, Portugal and Cyprus ask nothing beyond the ordinary charge on local income. FIG has no fee at all; what it costs is the allowances surrendered in each claim year, which makes it the cheapest of the seven to enter and, after the fourth year, the most expensive to sit in — 45% on income and inheritance tax at 40% against zero in three of the rows above.

The entry gate is where FIG is strictest. Ten consecutive tax years of non-residence is a harder bar than Italy's nine of the last ten, Portugal's and Spain's five, or Cyprus's domicile-of-origin test. A Briton returning after seven years abroad is outside FIG altogether while remaining eligible for the Beckham regime or IFICI; that asymmetry, not the rate, decides most returner cases.

The estate column is the one the four-year debate usually misses. Italy takes foreign inheritances out of the charge for the whole fifteen years, Cyprus and the UAE do not tax estates at all, and Spain confines wealth tax to Spanish assets. The UK, by contrast, pulls the worldwide estate into a 40% charge once ten of the previous twenty years have been spent here, and keeps it there for up to ten years after departure. Read that way, the comparison is not four free years against fifteen, but a runway with a 40% cliff at the end against regimes that never build one.