In October 2024, the Chancellor confirmed in the Autumn Budget that the government will abolish the tax rules for non-UK domiciled individuals, replacing them with a residence-based regime from 6 April 2025.
The new regime moves away from the concept of domicile to the more direct determination of residence to define an individual’s UK tax status. Part of the significant changes means that new UK residents do not pay tax on foreign income and gains for four years. Following that period, they will pay the same tax on their foreign income and gains, regardless of their domicile status. There are also significant changes that impact trusts and Inheritance Tax that will require a detailed review for both existing and future residents. However, individuals already in the UK may have been managing their affairs under the “remittance basis” rules, which allowed for assets to be retained offshore and not attract UK taxation.
Please see our guide on the formerly used Remittance Basis which no longer applies but serves as a reminder for those rules.
While there are now new rules in place (detailed in our Introduction to the Foreign Income and Gains Regime), individuals with offshore income and gains held offshore under the old rules still need to be mindful of considerations such as situs and remittance. Such untaxed offshore income and gains or accounts with “mixed funds” where offshore income and gains remain would still attract UK tax if remitted to the UK. Therefore, maintaining practices such as offshore custody, non-UK situs investing and income segregation remains just as important for such assets now as they did historically.
If you need to or want to consider bringing such offshore income and gains into the UK, you may want to consider utilising the announced Temporary Repatriation Facility (TRF). This is a unique and time limited opportunity for remittance basis users who accumulated offshore income and gains before 6 April 2025 to have a significantly lower tax rate applied to these funds. To do so, an individual must designate funds and pay the relevant TRF charge as part of their self-assessment tax return. Assets designated under the TRF do not need to be remitted to the UK immediately, but the facility to allow designation is only available for three years.
Tax Rates Under the TRF:
Paying the TRF might not be suitable or tax efficient for everybody and in all circumstances. As provisions within this area are complex, it is essential to seek expert advice to maximise your tax efficiency. Our international team can help you navigate through the rules and advise in building and maintaining your personal plan,
For over 20 years, Partners Wealth Management has helped their clients understand the concept of tax residence and have advised on beneficial planning opportunities. Our specialist International team has the knowledge, experience and professional connections to support you in optimising your personal financial planning. Please contact any of our International team for a no-obligation introductory meeting to discuss how we can help you with your international financial considerations.
In our Introduction to Remittance Basis guide we explain what it is and who can use it, as well as reviewing some of the rules and consequences of claiming the remittance basis.
On 6 April 2025 the new Foreign Income and Gains (FIG) Regime was introduced, replacing the previous system based on domicile. Our guide outlines the new rules applicable to both existing and new UK residents.
Following the Budget, clients have been looking at alternative methods to shield their investment portfolios from ongoing taxation. In this article, we look at the role offshore bonds could play as part of their investment strategy.
For further information on how we can help you build and protect your wealth, please contact us.
