Remittance Basis: A Complete UK Tax Guide

The remittance basis is a UK tax regime that allows certain individuals to be taxed only on foreign income and gains that they bring into the UK. It has historically been used by non-domiciled individuals to limit their UK tax exposure on overseas wealth. However, from 6 April 2025, the remittance basis is being phased out and replaced by the foreign income and gains (FIG) regime. Understanding both the current rules and the transition is essential.

Who Can Claim the Remittance Basis

To claim the remittance basis, you must be UK resident but not domiciled in the UK, or a Commonwealth citizen or a citizen of the Republic of Ireland with ordinary residence outside the UK. Domicile is a complex common law concept distinct from residence or nationality. Your domicile is generally the country you consider your permanent home. If you were born in the UK with a UK domicile of origin, you cannot use the remittance basis unless you have acquired a domicile of choice elsewhere.

The remittance basis is claimed through your self assessment tax return. If your unremitted foreign income and gains for the tax year are less than £2,000, it applies automatically with no claim required and no additional charge.

The Remittance Basis Charge

If you have been UK resident for at least 7 out of the previous 9 tax years, claiming the remittance basis costs £30,000 per year. This charge rises to £60,000 if you have been resident for at least 12 out of the previous 14 tax years. These charges are payable in addition to any tax on UK-source income and on any foreign income you do remit to the UK.

The charge is a fixed amount — it does not vary with the level of your unremitted foreign income. This means the remittance basis is most valuable when you have substantial overseas income and gains that you can keep outside the UK tax net. If your unremitted income is relatively small, the charge may outweigh the tax saving.

What Constitutes a Remittance

A remittance occurs when foreign income or gains are brought into the UK by any means. This includes transferring money to a UK bank account, using foreign funds to settle a UK debt, bringing physical assets into the UK, or using foreign funds to purchase property or goods in the UK. The rules are deliberately broad and capture indirect remittances, such as using foreign income to pay for a holiday in the UK.

Careful planning is needed to avoid accidental remittances. Keeping foreign income in a separate offshore account and not using it for UK purposes is critical. HMRC has extensive powers to trace the source of funds, particularly where mixed funds are involved.

Mixed Funds

Mixed funds are offshore accounts that contain a mixture of capital, income, and gains from different sources. HMRC applies complex ordering rules to determine what has been remitted when you transfer money from a mixed fund to the UK. Generally, income and gains are treated as remitted before capital, and the most recently arising income is remitted first. This can cause substantial unintended tax charges if the account is not structured correctly.

To mitigate this, many advisers recommend maintaining separate accounts for capital, income, and gains, and using segregated portfolios to track each component. The clean capital concept allows you to remit capital that has already been taxed or that was held before you became UK resident without triggering a remittance charge.

The De Minimis £2,000 Rule

If your unremited foreign income and gains are £2,000 or less in a tax year, you do not need to pay the remittance basis charge. You are treated as automatically taxed on the remittance basis, meaning you only pay UK tax on foreign income you actually bring into the UK. No claim is needed — simply report your foreign income on your tax return and note the amount remitted.

This rule is particularly useful for individuals with small overseas investment portfolios or modest foreign pension income who want to keep their UK tax compliance simple.

Transition to the New FIG Regime

The non-dom regime was abolished from 6 April 2025. For the 2025/26 tax year, a 50% reduction in foreign income charged to tax is available for certain individuals. From 2026/27, a four-year FIG regime applies, after which worldwide income and gains are taxed on an arising basis regardless of domicile. If you are currently claiming the remittance basis, you should review your position urgently to understand how the transitional rules affect you.

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