The Non Dom status in UK has been changed with effect from the start of the tax year 2025/26, that is 6^th April 2025. The detail has not yet been published, but we share below below a summary of what is expected to be in the regulations.

New arrivals

• Regardless of domicile status, new arrivals to the UK will be able to benefit from 100% UK tax relief on foreign income and gains (FIG) for the first four tax years that they are UK resident, providing they have had ten consecutive tax years of non-UK residence immediately preceding the year of arrival. For the purposes of the test, treaty non-residence and split year treatment shall have no bearing.
• Additionally, no UK tax will be payable on FIG arising in those first four years, should it be remitted to the UK.
• Where a claim is made to be assessed under the FIG regime, taxpayers will lose their entitlement to the personal allowance and capital gains tax annual exempt amount. • The claim is to be made each year and taxpayers can opt in or out in each year of eligibility.
• After four years of UK residence, individuals will be taxed on worldwide income and gains.
• Overseas workdays relief (OWR), currently available to UK resident non-dom employees for their first three years of UK residence, will continue to be available to those who make a claim to be assessed under the FIG regime. The three-year limit will remain, but relief will be provided even if overseas earnings are remitted to the UK, which is a significant benefit compared to the current rules.
• If 2023/24 is the first year of eligibility for OWR, taxpayers can continue to claim it for the full three years.

Current UK residents claiming non domicile status.

Existing UK tax residents who will have been resident for fewer than four years from 6 April 2025 are also eligible if they were non-UK resident for ten consecutive years prior to their arrival.

• Transitional provisions have also been announced for existing UK resident non-doms who have previously benefitted from the remittance basis of taxation:
• Foreign income arising in the 2025/26 tax year will benefit from a 50% reduction, for those losing access to the remittance basis on 6 April 2025 and not eligible for the FIG regime. There is no equivalent relief for capital gains.
• Individuals who are neither UK domiciled, nor deemed UK domiciled on 5 April 2025 may elect, on an asset by asset basis, for non-UK situs capital assets to be rebased to their value on 5 April 2019 for disposals taking place from 6 April 2025, providing they were personally owned on 5 April 2019.
• A ‘temporary repatriation facility’ will allow non-doms previously benefitting from the remittance basis to remit personally received pre-6 April 2025 FIG to the UK at a tax rate of 12%, during the two-year period ending 5 April 2027, providing a particular benefit for those who have already become deemed UK domiciled. There will also be a ‘relaxation’ of the mixed fund ordering rules.
• Remittances of pre-6 April 2025 income and gains after the two-year window will be taxed at normal rates, but business investment relief is to continue to be available for qualifying investments.

Inheritance Tax (IHT)

The government also announced the intention to transition IHT to a residence-based system. However, acknowledging that introducing such a regime presents different challenges, there will be a consultation on the best way to introduce it.

Offshore Trusts.

Protections for offshore trusts, which currently prevent anti-avoidance rules attributing FIG to UK resident settlors, will be abolished and FIG arising to trusts from 6 April 2025 will be taxable upon settlors who do not make a valid claim to be assessed under the FIG regime.

• Income arising before 6 April 2025 will not be attributed to the settlor unless distributions or benefits are provided to UK residents who do not benefit from the FIG regime. Modifications will also be made to the ‘onward gift’ rules which currently apply to distributions from trusts which are not immediately taxable but where a UK resident benefits.
• FIG arising within a trust cannot benefit from the temporary repatriation facility.
• There is no election to rebase capital assets which are held by a trust on 5 April 2019.
• While the government will consult more widely on the introduction of a new IHT regime, it was confirmed that non-UK assets settled into an offshore trust by non-UK domiciled individuals prior to 6 April 2025 will retain their ‘excluded property’ status and will not fall within the scope of the new IHT regime.

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