New UK tax rules as of 6th April 2025

Please note that the details of these rule changes are very new and how the reporting might work in practice is still being finalised. As is applicable to all articles on this website, this is not advice and in no circumstances should financial decisions be made based on the content.

As of 6 April 2025, for UK tax purposes the concept of domicile has been abolished. As well as there being potential inheritance tax implications (which we are not covering here), there may be income tax implications to those who would previously have been classed as UK resident but non-UK domiciled, as well as anyone (irrespective of domicile), who acquires UK residence after a period of at least ten consecutive tax years of non-UK residence.

The biggest consequence is that the remittance basis of taxation, which has been in place for many years and was available to those who were non-UK domiciled, has been abolished and replaced with a new residence-based taxation system. This affects income and gains from 6 April 2025.
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The new changes have introduced various tax reliefs, including transitional rules for those who previously claimed the remittance basis.

Foreign Income Gains (FIG) Regime

From 6 April 2025, the new tax regime applies for the taxation of foreign income and gains (FIG). Under this, eligible individuals who have been non-resident for at least ten consecutive tax years will be able to claim UK tax relief on foreign income and gains that accrue during their first four years of UK residency. For those who arrived from 6 April 2022, the previous regime will apply up to and including 2024/25, but they may be eligible for the FIG regime for at least one tax year. Anyone who already claimed the remittance basis will still be subject the previous rules regarding remitting untaxed foreign income and gains due to claiming this – albeit, there are transitional rules for those people, as discussed later in this article.

The key benefit of this regime is that individuals can claim UK tax relief on their foreign income and gains during the first four years of becoming UK tax resident, provided they make the appropriate claim(s). Additionally, they will have the flexibility to remit these untaxed funds to the UK without facing any extra tax charges. This marks a departure from the current remittance basis, which requires detailed tracking of FIG through investments, adding complexity for many individuals.

The new regime should be much simpler and more straightforward, offering a smoother process for those (re-)establishing UK tax residency. This regime will also benefit those born in the UK with a UK domicile of origin, who beforehand could not benefit from the remittance basis due to the deemed domicile rules.

The new regime will operate on an annual basis. Individuals will need to make a claim for each year they want to be taxed under the new regime, and for each type of relief, but they will not be required to make a claim for every year of the 4-year period. For example, by claiming treatment under the new regime in the first year it does not have to be claimed again the next.

Separate claims can be made for foreign income, foreign capital gains and/or foreign employment income.
The amount of FIG subject to a claim will need to be quantified, on a source-by-source basis, i.e. you will still need details of your worldwide income and gains for each tax year.

For any year a FIG relief claim is made, individuals will lose their entitlement to their tax-free personal allowances and the capital gains tax annual exemption, nor will they be able to claim relief for foreign capital losses. Deciding whether a claim is beneficial for a tax year will depend on the taxpayer’s foreign income and gains, weighing up the tax savings available after accounting for any foregone allowances and exclusions.

This new FIG regime offers a simplified way to manage tax liabilities and ease the transition into UK residency, while avoiding the worst complications that existed under the remittance basis, such as tracking mixed funds or remittances of income and gains realised years earlier.

Overseas Workday Relief

As part of the new FIG regime, employees will continue to benefit from Overseas Workday Relief (OWR) a long-standing provision designed to reduce the tax burden on earnings from employment duties performed outside the UK in the first few years of arrival.

The new OWR will function similarly to the existing relief, offering tax relief on income earned while working abroad. There are however some key updates to be aware of. The new OWR will generally be available for the first four tax years of UK residence, as long as the individual is eligible for the 4-year FIG regime. If an individual becomes UK tax resident in 2023-24 or 2024-25 and would be eligible for the old OWR regime, they can still claim OWR for the full three years of their residence.

From 2025-26 onwards, however, the relief will only apply to those who are also eligible for the 4-year FIG regime mentioned above (i.e. at least ten consecutive years of UK non-residency before acquiring UK residence). This means that individuals who do not qualify for the FIG regime will not be able to benefit from OWR during their first four years back in the UK.

Despite the name of OWR not changing, there are some key differences between the old and new versions:

New OWR requires a foreign employment election under the FIG, and a foreign employment relief claim, vs the old OWR claim.
New OWR relief is capped at the lower of:
30% of relevant qualifying income, OR
£300,000

There was no cap under the old regime

New OWR will continue to provide relief from UK income tax on foreign earnings, it will not apply to National Insurance contributions (NICs). As with the current rules, NICs will still apply to earnings, and the usual rules for determining NICs liabilities will remain in place.
Earnings excluded under a new OWR claim should be remittable without suffering UK tax. This means that – under the new OWR regime the offshore earnings can be paid into a UK bank account, where under the old rules, this would likely be a taxable remittance.

There are other complexities for those who were part-way through the pre-6 April 2025 OWR and therefore are eligible for the new OWR.

Temporary Repatriation Facility (TRF)

As mentioned, the old taxation model for new UK residents was based on the domicile of the individual and non-domiciled individuals could benefit from the remittance basis. For those under the remittance basis, the income and gains arising in a year of residence and untaxed due to the remittance basis claim were taxable upon remittance. Therefore, if such income/gains were remitted, they would be taxed at income (up to 45%) or capital gains (up to 24%) rates, depending on the source of funds remitted. This is the case whether or not the remittance basis was claimed for the year the remittance was made. As mentioned earlier, this could lead to the need to track these income and gains, including transfers between offshore accounts, in case some was eventually remitted to the UK. This could be an extremely involved and complex exercise.

As the rules change from the old domicile/remittance basis to the new FIG regime, the UK government has created a new facility to allow those that used the remittance basis to remit their foreign income at a more favourable rate, but only for a set period of time.

Under the Temporary Repatriation Facility (TRF), taxpayers will be able to designate and remit foreign income and gains that arose prior to the changes, and which were excluded from UK tax under the remittance basis, at a reduced rate. This includes unattributed foreign income and gains held within trust structures. The Temporary Repatriation Facility will be available for a limited period of 3 tax years, from the 2025/26 tax year to the 2027/28 tax year, as follows:

2025/26 – 12%
2026/27 – 12%
2027/28 – 15%

The TRF charge will apply at the time of designation, but once an amount has been designated, no further UK tax will be due, regardless of when the remittance occurs. This is an important change, as it provides greater flexibility for individuals managing their foreign income and gains (FIG). There is no requirement to remit designated amounts in the tax year they are designated, or in any subsequent tax year.

For those who used the remittance basis but cannot determine the source of funds, the designation can be made on any amounts – i.e. the TRF can be used for amounts of uncertain origin. This can lead to more certainty on the tax treatment. This can be helpful for those who would otherwise require complex and costly detailed mixed fund analysis, as they can simply designate the amounts as foreign income, pay the flat transitional rates above, and then use the funds in the UK without incurring additional UK tax. The flip side is that they could designate items that would not have otherwise been taxable in the UK. This may be somewhat mitigated by the lower temporary rates.

To use the TRF, taxpayers must make a formal designation on specific amounts of FIG, including funds derived from income or gains on which the remittance basis has already been claimed. However, it is important to understand that foreign taxes paid on these designated amounts cannot be set against the TRF charge, as designated amounts are treated as being net of tax.

Please not that untaxed offshore funds used to pay the TRF charge are not exempt from UK tax, if this is done there would be a gross-up of the amount deemed to be subject to the TRF.

Capital Gains Tax Rebasing

Those taxpayers who made remittance basis claims between 2017/18 and 2024/25 will receive an automatic rebasing of offshore assets to their value at 5 April 2017. This applies to assets:

Held at 5 April 2017
Disposed of on or after 6 April 2025
Not situated in the UK between 6 April 2024 and 5 April 2025
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This means that taxpayers may be required to obtain a valuation of assets from a number of years ago, and therefore should start that process now, particularly for high-value assets.

It may be possible to elect to disapply the rebasing, which may be beneficial in some cases, for example where assets decreased in value between acquisition and 5 April 2017.