Non-Dom Tax Changes 2025: What You Need to Know
The UK's non-domiciled tax regime was abolished on 6 April 2025, representing the most significant change to UK international taxation in a generation. The government introduced a new framework based on residence rather than domicile, designed to simplify the system while maintaining the UK's attractiveness for international talent. Understanding the new rules is essential for anyone affected by these historic changes.
The Old Non-Dom Regime
Previously, individuals who were UK resident but not domiciled in the UK could claim the remittance basis of taxation, meaning they paid UK tax on foreign income and gains only when those amounts were brought into the UK. Long-term residents faced a £30,000 or £60,000 annual charge for the privilege, and individuals became deemed domiciled after 15 of the previous 20 tax years. The regime was complex and often criticised as outdated.
The New FIG Regime
From 6 April 2025, the concept of domicile is no longer relevant for income tax and capital gains tax purposes. Instead, new UK residents benefit from a four-year foreign income and gains (FIG) regime. For the first four years of UK residence, individuals who have not been resident in the UK in the previous 10 consecutive years can elect to exclude foreign income and gains from UK tax. After the four-year period, worldwide income and gains are taxed on an arising basis regardless of domicile.
The four-year window is a significant improvement for some but a tightening for others. Short-term assignees who previously could use the remittance basis indefinitely now face a hard cap of four years before full worldwide taxation applies.
50% Reduction for 2025/26
For the 2025/26 tax year only, a transitional 50% reduction applies to foreign income charged to UK tax for individuals who were previously entitled to use the remittance basis. This reduction is designed to ease the transition to the new arising basis. Capital gains do not qualify for the 50% reduction. The reduction is claimed through the self assessment return and applies automatically to eligible individuals.
Deemed Domicile at 10+ Years
Under the old rules, deemed domicile arose after 15 of the previous 20 tax years. From 6 April 2025, this threshold is reduced to 10 years of UK residence. Once you have been UK resident for 10 or more of the previous 20 tax years, you are treated as domiciled in the UK for all tax purposes, including inheritance tax. This brings long-term residents into full worldwide taxation and IHT exposure sooner than before.
For inheritance tax, the government has also introduced a long-term residence test based on residence rather than domicile. From 2025, IHT applies to worldwide assets after 10 years of UK residence, with a 10-year tail provision after leaving the UK.
Transitional Rules
Several transitional provisions apply to help existing non-doms adjust to the new regime. These include:
- A rebasing election for capital assets held before 6 April 2025, allowing the base cost to be rebased to market value at that date for FIG purposes
- The ability to remit previously unremitted foreign income and gains at a reduced rate of 12% during a transitional period
- Protected remittance status for certain settled trusts and offshore structures
- Continuation of overseas workday relief for qualifying new residents
The rebasing election is particularly valuable. If you hold assets that have appreciated significantly while you were non-domiciled, rebasing to 6 April 2025 values means only post-2025 gains are within the UK tax net when you sell.
Planning for the Future
The abolition of the non-dom regime requires a fundamental review of your tax planning. Trust structures that relied on the settlor being non-domiciled may need restructuring. Offshore investment portfolios should be reviewed to understand the new tax exposure. If you are approaching the 10-year residence threshold, consider whether to realise gains or restructure investments before full worldwide taxation applies.
Professional advice is essential. The transitional rules are complex and the elections available require careful analysis of your personal circumstances. Many of the elections are time-sensitive and must be made within specific windows.
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