Concept
From 6 April 2025 the remittance basis and domicile as a connecting factor for personal tax were abolished. All UK residents are now taxed on the arising basis on worldwide income and gains, with a four-year Foreign Income and Gains (FIG) regime for qualifying new residents and transitional relief for former remittance-basis users. Residence itself is still decided by the Statutory Residence Test, so the first question in any case is how many UK tax years the person has actually accumulated. HMRC's RDRM71000 confirms that from 6 April 2025 the remittance basis can no longer be used. Finance Act 2026 (2026 c. 11, Royal Assent 18 March 2026) narrowed the settlement that followed: FIG relief is now deductible only from the income or gains it relates to, the TRF machinery has been rewritten with retrospective effect, and the inheritance tax perimeter has been extended to pensions and given a cap on trust charges.
What changed on 6 April 2025
| Change | Effect |
|---|---|
| Remittance basis abolished | Foreign income and gains taxed on the arising basis like any UK resident |
| 4-year FIG regime introduced | Qualifying new residents with 10+ consecutive prior non-resident tax years get four UK tax years of relief on eligible foreign income and gains |
| Temporary Repatriation Facility | Flat designation charge on pre-6 April 2025 offshore income and gains: 12% for 2025/26 and 2026/27, 15% for 2027/28 |
| Deemed domicile abolished | The Statutory Residence Test now does the work for income tax and CGT |
| IHT long-term residence test | Worldwide IHT exposure once UK resident in 10 of the previous 20 tax years, with a 3–10 year tail after departure |
| Protected settlements repealed | Offshore trust income and gains attributable to a long-term-resident settlor are taxable as they arise |
Before the reform
Until 6 April 2025 the connecting factor was domicile, not residence, and indefinite non-dom status was capped by deemed domicile — an “imputed” domicile introduced from April 2017 on either of two grounds: UK residence in 15 of the previous 20 tax years, or formerly domiciled resident status for a person born in the UK with a UK domicile of origin who becomes UK resident again. Deemed domicile removed the remittance basis, moved the individual to the arising basis on worldwide income and gains, and brought worldwide assets within IHT. According to HMRC, around 83,000 people used non-dom status in 2022/23.
The offshore excluded property trust changed with it: protection of foreign assets from IHT used to follow the settlor’s domicile and now mirrors the settlor’s residence — once the settlor is a long-term resident the trust assets enter the IHT perimeter with an entry charge, the ten-year periodic charge and an exit charge. The old “15 out of 20” line is no longer the benchmark: four FIG years and the “10 out of 20” IHT test took its place.
The 4-year FIG regime
A qualifying new resident is UK resident now and was non-UK resident throughout the 10 consecutive tax years before the year of arrival. HMRC's 4-year foreign income and gains guidance sets out the relief. The benefit runs for four consecutive UK tax years from arrival and is claimed annually on the Self Assessment residence pages SA109. Inside the window, eligible foreign income and foreign chargeable gains can be relieved. Because the four years run from arrival rather than from 6 April 2025, the regime also reaches 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.
An individual who became UK resident in one of those years is a qualifying new resident only for the residual years of the window from 2025/26 onwards — 2025/26 alone for a 2022/23 arrival, 2025/26 and 2026/27 for 2023/24, and 2025/26 to 2027/28 for 2024/25. No relief is given for years before 2025/26, unused years cannot be carried forward, and residence beginning before 2022/23 gives no access at all.
Foreign employment income runs through Overseas Workday Relief rather than FIG. HMRC's Overseas Workday Relief guidance confirms the relief is for the same four-year qualifying period and is subject to an annual limit of the lower of £300,000 or 30% of qualifying employment income. An OWR election forfeits the personal allowance, the capital gains annual exempt amount and the ability to claim foreign losses for that year. After four years the individual is taxed on the arising basis like any other UK resident.
Finance Act 2026 narrowed the regime on two fronts. First, FIG relief is limited to the qualifying income or gains it relates to, with effect from 2025/26. Unused relief cannot offset other UK income, so each category must be modelled separately. The statutory amendments and their effect on the calculation are explained in the FIG regime.
The second is an age condition: s 845B(1)(d) ITTOIA 2005 adds a fourth limb to the definition of a qualifying new resident — 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.
Temporary Repatriation Facility
The TRF lets a former remittance-basis user designate pre-6 April 2025 foreign income and gains — including certain pre-2025 amounts in offshore trusts attributable to the settlor — at 12% for 2025/26 and 2026/27 and 15% for 2027/28; 2027/28 is the last designation tax year, with an election deadline of 31 January 2030. Validly designated capital can be remitted later; undesignated amounts may remain taxable on remittance. Finance Act 2026 rewrote the machinery retrospectively: the changes affect designations of trust capital payments; income treated as arising under s 732 ITA 2007 is inside the perimeter, and a TRF charge paid is credited against assessments for 2024-25 or earlier, after which the election cannot be revoked. Access conditions, the designation machinery, tracing and mixed funds sit in Remittance basis after 6 April 2025 and the TRF designation mechanics entry.
Inheritance tax and the long-term residence test
HMRC's long-term UK resident guidance explains that from 6 April 2025 inheritance tax follows residence, not domicile. A person UK resident for 10 of the previous 20 tax years is a long-term resident and within IHT on worldwide assets on a transfer or on death. The status carries a tail after departure: three years for 10 to 13 years of residence, scaling to ten years, and ten consecutive non-resident tax years reset the test. UK-situs assets are always within IHT. Overseas assets settled into a trust can also stay within IHT depending on when they were settled and where they were situated, so settlors should treat a change in long-term-resident status as a trustee event.
Finance Act 2026 added two further layers. Section 73 inserted subsections 65(8B) and 65(8C) into IHTA 1984: the exemptions from the exit charge in ss 65(7), 65(7A) and 65(8) do not apply where a long-term residence change took place before the event — the settlor not being a long-term UK resident at the start of the tax year 2025-26, or ceasing to be one at the start of a later year — which did not itself produce a charge but would have done had the property been situated outside the United Kingdom. The subsection is treated as having come into force on 26 November 2025, and it closes the obvious route of moving property out of a settlement behind a settlor's loss of status.
The second layer is pensions. Section 66 inserted s 150A into IHTA 1984: a member of a registered pension scheme, a qualifying non-UK pension scheme or a section 615(3) scheme is treated as beneficially entitled immediately before death to “notional pension property”. The mechanism works through that deemed entitlement, with the value computed under the steps in the section itself, separately for money purchase and defined benefits arrangements. Sections 67 and 68 allocate liability for the tax and insert new ss 226A–226B IHTA 1984 — a withholding notice from the personal representatives to the scheme administrator, withholding of benefits and payment of the tax by the administrator. Under section 71 all of this applies to deaths occurring on or after 6 April 2027.
Offshore trusts after the reform
The reform reached settlor-interested offshore trusts as well. Protection for foreign income and gains is gone: a UK-resident settlor who does not qualify for the FIG regime is taxed on the trust's income and gains as they arise where the settlor, a spouse or a child or grandchild can benefit. For inheritance tax, non-UK assets in the trust become relevant property once the settlor is a long-term resident, so the trustees face the ten-year anniversary charge of up to 6% and a pro-rated exit charge when the settlor ceases to be a long-term resident. A change in the settlor's long-term-resident status is therefore a trustee event as much as a personal one.
Rates after Finance Act 2026
Year five after FIG meets a different scale. From the tax year 2026-27 the dividend ordinary rate rises from 8.75% to 10.75% and the dividend upper rate from 33.75% to 35.75% (section 4). The dividend additional rate is untouched, so the increase reaches two of the three rates.
From 2027-28 there are separate savings rates — 22%, 42% and 47% (section 5) — and a separate class of rates for property income: sections 6 and 7 insert ss 6D, 11CA and 16A into ITA 2007 and set the property basic, higher and additional rates at 22%, 42% and 47%. The property rates are fixed by statute for 2027-28 only: s 6D defines them as the rates determined as such by Parliament for the tax year, so later years are not yet set.
Section 8 and Schedule 2 hand the Scottish and Welsh property rates to the Scottish Parliament and the Senedd; the section was not in force at Royal Assent and is commenced by Treasury regulations for a tax year after 2026-27, so there will be no single UK-wide scale here. Section 10 extends the freeze on the basic rate limit (£37,700) and the personal allowance (£12,570) through 2028-29, 2029-30 and 2030-31.
Carried interest sits on its own track. Section 58 inserted s 23I into ITTOIA 2005: the recipient of carried interest is treated as carrying on a trade, and the profits of that trade are the sum of the non-qualifying profits and 72.5% of the qualifying profits. The charge runs as trading income with national insurance contributions on top, but the base is cut by that multiplier. The rules have effect for the tax year 2026-27 and subsequent years, in relation to investment management services whenever performed. For arrivals the interaction with FIG matters: s 58(4) added rows 1A and 1B to the table in s 845H ITTOIA 2005, under which part of those profits qualifies as qualifying foreign income of a qualifying new resident.
The three positions
Arriving now
A new arriver with 10+ prior non-resident years claims FIG for four years and OWR for foreign employment income up to the limit. Plan the exit from FIG before year five, when worldwide income meets the arising basis.
Long-standing former non-dom
Someone UK resident since before 2022/23 is outside FIG. The tools are the TRF for the pre-6 April 2025 stack, the CGT rebasing relief (and any election to disapply it) where it applies, and ordinary planning. Anyone who arrived in 2022/23, 2023/24 or 2024/25 should check the residual FIG window under s 845B(3)(c) ITTOIA 2005 first. Designating at 12% in 2025/26 or 2026/27 is cheaper than waiting for 2027/28.
In or after a FIG window
Plan year five before it arrives: review which foreign income streams meet the arising basis, the long-term-residence IHT count, and the departure tests if leaving is on the table.
CGT rebasing to 5 April 2017
A separate transitional relief rebases qualifying personally held foreign assets to their value on 5 April 2017 when the statutory conditions are met, unless the individual elects to disapply it for a particular disposal. It is available where the remittance basis was claimed in a relevant year and the individual was never UK-domiciled or deemed-domiciled before 6 April 2025. For long-held foreign assets it can shelter historic gains and may be worth more than the TRF in absolute terms, so it should be modelled alongside it — the detailed treatment sits in Remittance basis after 6 April 2025.
Residence and departure
The Statutory Residence Test still decides UK residence for each year, applied in order: automatic overseas tests, automatic UK tests, then sufficient ties. HMRC's RDR3 guidance sets out the test and split-year cases. Temporary non-residence catches a person who had sole UK residence in at least 4 of the 7 tax years immediately preceding the year of departure (including qualifying split years) and whose period of non-residence is five years or less, re-taxing certain income and gains arising during the absence in the year of return. UK residential property disposals by a non-resident stay within UK CGT, with reporting and payment normally within 60 days under HMRC's property gains guidance. A trial year abroad rarely works; escaping these temporary non-residence rules requires a period of non-residence exceeding five years.
The immigration calendar: the earned settlement reform
For arriving capital the tax and immigration clocks used to run from the same arrival date and broadly coincide: indefinite leave to remain after 5 years, a 4-year FIG window, and the “10 out of 20” inheritance tax threshold far beyond the planning horizon. The earned settlement reform breaks that alignment: the Home Office proposes a default qualifying period of 10 years instead of 5, with reductions for income and for certain routes. It is still a proposal — there is no final Immigration Rules text as at 14 August 2026, and rules are expected in autumn 2026. The consultation, the reduction table, the timetable and the retrospectivity question are set out in the canonical review of the earned settlement reform.
The tax perimeter has not moved by a day. FIG still runs for four years, and long-term resident status for inheritance tax still arrives on residence in 10 of the previous 20 tax years (HMRC IHTM47020). If the baseline becomes 10 years, the timeline for a new resident with no reductions reads: years 1 to 4 under FIG; years 5 to 10 on the full arising basis on worldwide income and gains, relief gone and permanent status not yet available; and from the eleventh year of residence worldwide assets inside IHT — which is roughly when the right to apply for ILR first arises, rather than five years after it. The familiar sequence of status first, tax threshold later, inverts.
The immigration reductions do not move the tax calendar. Table 2 of CP 1448 proposes minus 7 years for income of £125,140 or more for three consecutive years or for 3 years held as a Global Talent worker or Innovator Founder, minus 5 years for income of £50,270 or more, and minus 1 year for English at C1 — but FIG still lasts four years and the “10 out of 20” count is shortened by neither income nor route. Global Talent and Innovator Founder are the one corner of the proposed model where the immigration period stays at three years; for everyone else the gap between the end of the FIG window and settlement stretches to five or six tax years.
Common mistakes
- Reading domicile abolition as a clean slate when worldwide IHT now follows the long-term residence test and its tail.
- Missing the TRF designation deadlines: the charge is 12% for 2025/26 or 2026/27 and 15% for 2027/28; undesignated amounts may remain taxable when remitted.
- Making only one designation where a capital payment qualifies both under a remittance provision and through trust-gains matching: relief on both grounds requires one designation on each basis.
- Planning a FIG claim for a child under 10: s 845B(1)(d) ITTOIA 2005 closes the regime until the tenth birthday.
- Assuming residence before 6 April 2025 closes FIG by itself — the test is 10+ prior non-resident years plus the first four years of residence, and s 845B(3)(c) ITTOIA 2005 makes 2022-23, 2023-24 and 2024-25 qualifying tax years, so a residual window may still be open. A 2025/26 claim can be made up to 31 January 2028 (s 845A(5) ITTOIA 2005).
- Treating all foreign employment income as FIG instead of running it through OWR within the limit.
- Leaving for a single year and being caught by temporary non-residence on return.
Advisor trigger
A chartered tax adviser can handle FIG claims, OWR and TRF designations where the residence history and records are clean. A UK tax solicitor should be involved where there are offshore trusts, business investment relief history, CGT rebasing relief (and any election to disapply it), a long-term-residence IHT position, a contested treaty tie-breaker or prior non-disclosure.
For US persons
A US passport, green card or US tax residence does not switch off US tax. US citizens are taxed on worldwide income wherever they live, and the UK-US treaty, FATCA and the PFIC and CFC rules continue to apply. The US estate tax runs on its own residence-and-citizenship logic that does not track the UK long-term-residence test, so the two regimes have to be mapped together. The UK changes here address UK exposure only; the US-side analysis is separate.
Q/A
When did the remittance basis end
For income tax and capital gains tax, on 6 April 2025. The remittance basis is no longer available to anyone, regardless of domicile of origin, and the arising basis applies subject to the FIG regime for qualifying new residents.
Who qualifies for the 4-year FIG regime
A person who is UK resident now and was non-UK resident throughout the 10 consecutive tax years before arrival. The relief runs for four consecutive UK tax years and is claimed on SA109. Foreign employment income runs through OWR within the £300,000 or 30% limit.
Can offshore funds be brought to the UK at a reduced rate
For former remittance-basis users, yes — under the Temporary Repatriation Facility. Pre-6 April 2025 foreign income and gains can be designated at 12% in 2025/26 and 2026/27 and 15% in 2027/28. 2027/28 is the last designation tax year; the election for that year can be made by 31 January 2030, and validly designated capital can be remitted later.
Does leaving the UK end inheritance tax exposure
Not immediately. IHT follows residence: a long-term resident — UK resident in 10 of the previous 20 tax years — keeps worldwide IHT exposure for a tail of three to ten years after leaving, and ten consecutive non-resident tax years reset the test.
Is FIG available to someone who became UK resident before 6 April 2025
Partly. The four-year window runs from the first year of UK residence, and s 845B(3)(c) ITTOIA 2005 treats 2022-23, 2023-24 and 2024-25 as qualifying tax years, so an arrival in one of those years claims the residual years from 2025/26 onwards — 2025/26 alone for a 2022/23 arrival. Anyone UK resident before 2022/23 is outside FIG and uses the TRF, the CGT rebasing relief (and any election to disapply it) and ordinary planning instead.
What did Finance Act 2026 change
For FIG, two things. The relief is deductible only from the category of income or gains it relates to (s 845A(3A) ITTOIA 2005, s 41P(4A) ITEPA 2003), with effect for 2025-26 and subsequent years. And an age condition was added to the definition of a qualifying new resident: the individual must be at least 10 years old at the commencement of the tax year (s 845B(1)(d) ITTOIA 2005). For the TRF the designation machinery was rewritten; for inheritance tax the Act added the cap on trust charges, the disapplication of the exit-charge exemptions and pensions from 6 April 2027.