From 6 April 2025, the UK introduced one of the most significant changes to the taxation of internationally mobile individuals in decades. This is the new, residence-based tax regime.
The old system, which relied heavily on the concept of domicile, has largely been replaced by a residence-based regime. This affects income tax, capital gains tax and inheritance tax, and may be relevant if you have moved to the UK, are planning to leave the UK, or hold assets overseas.
Whilst Chiltern Wills LLP does not provide international tax advice, these changes may have implications for your UK estate planning, including your Will, trust arrangements and inheritance tax planning.
Goodbye Domicile, Hello Residence
Historically, an individual’s UK tax position depended on both their residence status and their domicile status.
Many UK resident but non-UK domiciled individuals were able to claim the ‘remittance basis’, allowing foreign income and gains to remain outside the UK tax net provided they were not brought into the UK.
From 6 April 2025, the focus shifts largely to residence rather than domicile.
The New Foreign Income and Gains (FIG) Regime
The remittance basis has been replaced by the Foreign Income and Gains (FIG) regime.
The FIG regime is available to individuals who:
- Become UK resident after at least 10 consecutive tax years of non-UK residence; and
- Are within their first four tax years of UK residence.
For those who qualify, most foreign income and gains can be received free from UK tax during that four-year period.
Importantly, unlike the old remittance basis, qualifying foreign income and gains can generally be brought to the UK without triggering a UK tax charge.
This may create valuable planning opportunities for individuals relocating to the UK and for returning British expatriates.
Timing Matters
The FIG regime is only available for a limited period.
Once the four-year window has expired, an individual will generally become subject to UK tax on their worldwide income and gains in the same way as any other UK resident taxpayer.
For those affected, early planning is often far more effective than trying to restructure affairs once worldwide taxation begins.
Offshore Trusts
The new, residence-based tax regime rules also contain provisions affecting offshore trusts.
In certain circumstances, qualifying foreign income and gains arising within offshore trust structures may continue to receive favourable treatment where either:
- The settlor is a qualifying new resident; or
- A qualifying new resident beneficiary receives distributions.
The rules are complex and specialist tax advice should always be sought before distributions are made or trust arrangements are altered.
The Temporary Repatriation Facility
One of the more welcome transitional measures is the Temporary Repatriation Facility (TRF).
Many individuals still hold foreign income and gains accumulated under the old remittance basis regime. Ordinarily, bringing these funds to the UK could trigger tax charges.
The TRF allows certain historic foreign income and gains to be designated and taxed at reduced rates before being brought to the UK.
For some internationally mobile families, this may provide an opportunity to simplify longstanding offshore arrangements.
New Inheritance Tax Rules
The inheritance tax changes are arguably even more significant than the income tax changes.
The old domicile-based inheritance tax system has been replaced by the Long-Term Residence (LTR) regime.
Broadly speaking, an individual becomes a Long-Term Resident if they have been UK resident for at least 10 out of the previous 20 tax years.
Once LTR status is reached, their worldwide estate may become subject to UK inheritance tax.
Before reaching Long-Term Residence status, exposure is generally limited to UK-situated assets.
For individuals arriving in the UK, this creates a potentially valuable planning window before worldwide assets become exposed to UK inheritance tax.
The Inheritance Tax “Tail”
The new rules also introduce what is sometimes referred to as an inheritance tax tail.
Even after leaving the UK, an individual may continue to be treated as a Long-Term Resident for inheritance tax purposes for a number of years.
The length of this period depends on how long they were resident in the UK and can be as much as ten years.
This means that leaving the UK may not immediately remove exposure to UK inheritance tax.
Why This Matters for Estate Planning
Although these changes are primarily tax measures, they may affect wider estate planning decisions.
For example, individuals may wish to review:
- Existing Wills
- Trust arrangements
- Ownership of overseas assets
- Inheritance tax planning
- Cross-border succession issues
- Powers of Attorney where assets are held in multiple jurisdictions
A review may be particularly worthwhile following a move into or out of the UK.
Frequently Asked Questions
What replaced the non-dom regime?
The remittance basis has been replaced by the Foreign Income and Gains (FIG) regime for qualifying new UK residents.
How long does the FIG regime last?
Up to four tax years for qualifying individuals who have been non-UK resident for at least ten consecutive tax years before arriving in the UK.
What is a Long-Term Resident (LTR)?
Broadly speaking, someone who has been UK resident for at least 10 of the previous 20 tax years.
Does the new regime affect inheritance tax?
Potentially, yes. The new rules determine when worldwide assets may become subject to UK inheritance tax.
Do I need to update my Will?
Not necessarily, but anyone with overseas assets, trusts or international connections may benefit from reviewing their existing estate planning arrangements.
How Chiltern Wills Can Help
The new residence-based tax regime is a specialist area of international tax law. Chiltern Wills LLP does not provide international tax advice and anyone affected by these changes should seek advice from an appropriately qualified tax adviser.
However, these changes may have important implications for your UK estate planning, particularly if you:
- Have moved to the UK from overseas
- Are planning to leave the UK
- Own assets in more than one country
- Have a trust as part of your estate planning
- Need to review an existing Will following a change in your circumstances
At Chiltern Wills LLP, we assist clients across Buckinghamshire and beyond with UK Wills, Lasting Powers of Attorney, probate and estate administration, and can work alongside your accountant or tax adviser where specialist tax advice is required.
If you would like help reviewing your UK Will or estate planning arrangements, please contact us to arrange an appointment.