UK non-dom tax regime changes coming into effect April 2025

After being threatened by various governments and opposition parties over the past few years, the UK government has finally announced plans to abolish the non-dom tax status in the UK. The changes are being heralded as one of the biggest shakeups of the UK tax system for over 200 years, so it is important to understand the implications.

While the full abolition of the current non-dom system was not expected, and with a likely new Labour government proposing a significant overhaul of the non-dom tax regime in the UK, some changes were always going to be coming by the end of 2025.

Now that the changes have been announced, it’s vital that anybody who is currently utilising the Remittance Basis of Assessment or any foreign nationals planning on coming to the UK have a full and thorough understanding of the changes and what it will mean for them.  It should also be noted that the new rules are available to returning British Expats too, providing they have been non-resident for at least ten years prior to their return.

This article is written as a guide only and there are potentially going to be further changes over the coming months, especially with a General Election and likely additional budget later in 2024, so you must seek advice from a UK tax specialist before making any decisions.

What is the non-dom tax status?

The UK’s non-dom tax status is a preferential tax situation designed for people who are not domiciled in the UK, technically a foreign national that is UK tax resident resident in the UK but considers their permanent home to be outside of the UK.

Normally, UK tax residents would have their worldwide income and gains subject to UK tax rules. The non-dom tax status enables eligible people to avoid paying tax on their overseas income and gains, unless the foreign earned income is remitted into the UK.  This special treatment can apply for up to 15 years in some cases.

This non-dom tax status was also known as the Remittance Basis of Assessment.

You can read more about the current non-dom tax status and Remittance Basis of Assessment in our full explanation.

The new foreign income and gains tax regime

The current Remittance Basis of Assessment technically penalises anybody who remits foreign earned income and gains into the UK and therefore acts as a deterrent to doing so.

The new system is designed to give people who have not been a UK tax resident for at least 10 previous tax years the opportunity to bring foreign income and gains (“FIG”) into the UK without having to pay UK tax on that income for their first four years of being a UK tax resident.  Under this tax system, individuals will also be able to receive distributions from offshore trusts during this period without attracting any UK tax.

To take advantage of this tax system, the person would have to sacrifice their personal allowance (currently £12,570) and their capital gains allowance (currently £3,000).

Under the current remittance basis of assessment, these tax allowances are also removed if someone opts to claim the remittance basis and their unremitted overseas income or gains exceed £2,000.

Taxpayers already UK resident but who have been here for less than 4 years when the new FIG rules are introduced on 6 April 2015, will qualify for these rules for any remaining tax years they have until their fourth year of residence i.e. resident in 2023/24 and 2024/25 under the old rules, can claim FIG treatment for 2025/26 and 2026/27.

Implications for people currently using the Remittance Basis of Assessment

People who are currently using the remittance basis of assessment and who have been a tax resident for more than four years will be subject to these new rules from 6^th April 2025. This would ordinarily mean that, as they have been a UK tax resident for at least one year previously that they would not qualify for this tax regime and therefore would have to pay UK tax on all of their worldwide income and gains, whether remitted into the UK or not.

Recognising this is unfair on people given the short notice, several transitional provisions have been introduced to “soften the blow”. These include:

• Non-doms currently claiming the remittance basis of taxation will be able to exempt 50% of their foreign income arising in the 2025/26 tax year. Capital gains will not be able to benefit from this favourable treatment. For subsequent tax years (i.e. from 2026/27 onwards) all of their foreign earned income and gains will be subject to UK tax rules.
  • Labour have suggested that they would not keep this exemption in place if they won the imminent general election.
• Any offshore wealth that has been accumulated by people claiming the remittance basis of assessment will be able to bring that money into the UK (except money from offshore trusts) at a special rate of 12% on the total amount remitted into the UK for tax years 2025/26 and 2026/27. After these tax years, this money will be subject to standard UK tax rules.
• Non-doms or UK nationals who have previously lived in the UK, but not been a UK tax resident for 10+ years will be eligible to use the new tax regime as normal.

How long do I have to get my affairs in order?

The replacement of the non-dom tax status and Remittance Basis of Assessment will happen relatively quickly following the announcement giving people currently utilising the remittance basis of assessment a year to ensure their tax affairs are adequately in order to avoid unexpected tax payments.

It’s also important to note that while these changes are expected to start from 6^th April 2025, if there is a change of government before that date and therefore a budget, these proposals would be re-evaluated as they differ from other UK parties own proposals surrounding non-doms.

I’m a non-dom claiming the remittance basis – what do I need to do to minimise my tax burden?

Firstly, it is important not to panic and make rash decisions, however you will need to speak to both a UK tax specialist as well as a wealth manager who has the relevant knowledge when it comes to understanding issues surrounding non-dom tax status.

There is limited time to act, but if a tax consultant and wealth manager are working in tandem with each other, you should be able to structure your income and wealth to ensure you benefit from the various loopholes and interim proposals.

It is important that you speak to specialists as soon as possible to begin any necessary processes, and work out your best course of action.

We recommend you follow these steps in a timely manner to ensure you are fully informed and able to make the best possible decisions over the next few months and years:

1. Speak to a tax specialist who can evaluate your wealth situation and provide clarity on how your money and assets will be subject to tax under the new regime.
2. Determine how any proposed interim tax reliefs may apply to you.
3. Work with your advisor(s) to create a watertight plan to avoid any unnecessary tax.

Speak to a specialist, don’t leave it to chance

Experts for Expats works with a number of trusted tax specialists and wealth managers who have been studying the non-dom tax changes who can help you.

Request an introduction using our specific non-dom introduction service and we will evaluate your situation and hand pick the most suitable partner from our network to assist you.

As part of our introduction service, you will be invited to book a free, initial consultation which will act as a discover call where you can discuss your situation without any obligation to proceed.

During this call you will be able to ask questions about the proposed changes, however, our partner will not be able to provide formal advice regarding your circumstances until you formally engage with them so they can perform the appropriate due diligence on your situation.

This will provide you with protection from receiving incomplete advice and ensure any advice your receive is protected.

Request your free introduction to a UK tax specialist >