- From 6 April 2025, the existing remittance basis system of taxing non-UK domiciled individuals on foreign income and gains will be abolished. Instead, individuals will be exempt from UK taxation of foreign income and gains for the first four tax years of residency. Individuals must have been non-UK resident throughout the previous ten tax years to be eligible for the new regime.
- Transitional arrangements are to include:
- A “Temporary Repatriation Facility” from 6 April 2025 to allow foreign income and gains received pre-6 April 2025 to which the remittance basis applies to be subject to a reduced tax rate on remittance for a limited time period. The government will set the rate and the length of time that the facility will be available “to make use as attractive as possible”.
- Current and past remittance basis users will be able to rebase the value of foreign capital assets owned personally to a specific rebasing date for capital gains tax purposes on disposal. The government are considering an appropriate rebasing date.
- The government will retain a form of overseas workdays relief and will engage with stakeholders on the design principles for this tax relief.
- The current domicile-based inheritance tax system is to be replaced with a new residence-based system from 6 April 2025. Individuals who have been UK resident for ten years prior to the tax year in which the chargeable event (including death) arises will be subject to inheritance tax on worldwide assets.
- Changes will also be made to the taxation of trusts settled by non-UK domiciled individuals. These are to include:
- Removal of the existing regime for taxing income and gains received by trusts (the protected trust regime) for individuals who have settled assets on trusts from which they can benefit who are not eligible for the new four-year regime for foreign income and gains, and
- Extension of inheritance tax to non-UK assets held in trust, to the extent these are not already taxable. The detail of how the new rules will apply and transitional arrangements are to be determined.
- The government intends to conduct a review of offshore anti-avoidance legislation, including the transfer of assets abroad and settlements legislation, to “modernise the rules and ensure they are fit for purpose”.
- Timing: ‘Insight gathering sessions’ will be held during August 2024 on the overseas workdays relief and inheritance tax changes. More information on the new regimes is to be made available in due course, in most cases on Budget Day on 30 October 2024. The new residence-based taxation regimes will apply from 6 April 2025. It is not anticipated that any transfer of assets abroad or settlements legislation changes will be implemented before the 2026/27 tax year.
Resources (click to open)
- Domicile: Changes to the taxation of non-UK domiciled individuals (Deloitte, 7 August 2024)
- Non-UK domiciled individuals (HMRC policy paper, 29 July 2024)
