All change for the taxation of non-doms (and UK doms) - key considerations before 6 April 2025

The new regime for the taxation of non-UK domiciled individuals (non-doms) will come into effect on 6 April 2025. The proposed changes are described in our note here.  

Currently, the Finance Bill is making its way through Parliament, and further amendments may be made.  Last month, there were reports that the Chancellor may make some concessions to ease some of the more restrictive aspects of the new rules, notably in relation to the proposed new Temporary Repatriation Facility (TRF).

In the meantime, however, individuals who may be affected need to plan for the introduction of the new regime based on the rules as we understand them now.  There are only a few weeks to implement any planning required before the end of the tax year, so in this note we focus on what needs to be considered pre-6 April 2025. 

WHO SHOULD REVIEW THEIR POSITION BEFORE 6 APRIL 2025?

• Non-doms who are currently resident in the UK.
• UK domiciled individuals (UK doms) who have left the UK.
• Settlors of trusts holding non-UK situated assets if they are non-doms, or UK doms who are no longer resident in the UK.  Such settlors should review options for their trusts with their trustees.
• Individuals planning to move to the UK.

WHAT ACTION MAY BE ADVISABLE BEFORE 6 APRIL 2025?

Foreign income and gains (FIG) - personally owned property

• Anyone coming to the UK for the first time, or returning after 10 consecutive tax years of non-residence, will be entitled to claim the foreign income and gains (FIG) regime from 6 April 2025.  This will apply to both non-doms and UK doms.
• If you qualify for the FIG regime, you will be entitled to claim 100% tax relief on most types of foreign income and gains (FIG) arising in your first 4 tax years of UK residence, including income distributions and other benefits received from trusts.  In this case, where possible you may wish to delay realising FIG until the new tax year.
• If you will not qualify for the FIG regime, current or former non-doms may instead qualify for the Temporary Repatriation Facility (TRF) if you were a remittance basis user in this or an earlier tax year.  In this case, you may wish to realise as much FIG as possible before the end of the tax year to take advantage of the reduced tax rates on any pre-6 April 2025 FIG you designate under the TRF (12% in 2025/26 and 2026/27 and 15% in 2027/28).
• You may also qualify for CGT rebasing if you have claimed the remittance basis in at least one tax year from 2017/18 onwards.  If so, you may be able to rebase your personally held foreign capital assets to their value at 5 April 2017.  In this case, it may be a good idea to retain qualifying assets until at least 6 April 2025 to take advantage of this concession.

Foreign income and gains - trusts 

• If you are a non-dom settlor of a discretionary trust, and will not qualify for the FIG regime, from 6 April 2025 FIG arising in the trust will be taxed on you as settlor, as is the case already for UK dom settlors.  You may wish to review with your trustees possible ways to mitigate your position, perhaps by the trustees realising and distributing as much FIG as possible before the end of the tax year, and if appropriate, by excluding yourself and relevant members of your family from benefit as of 6 April.
• The TRF may also be available to non-doms who are former or current remittance basis users, whether settlors or beneficiaries, in respect of unremitted FIG you have received, benefited from or that is attributed to you, from an overseas trust or other offshore entity before 6 April 2025, or that  is "matched" with benefits you receive during the 3-year TRF period.  Again, you should review with your trustees whether there is any action that may be taken before 6 April 2025 to maximise your ability to take advantage of the TRF.

Inheritance tax – personal assets

• Whether you will be within the scope of UK IHT in respect of your personally owned assets will in future depend on your residence status rather than your domicile status. 
• Both UK doms and non-doms should determine whether you will be long term resident (LTR) from 6 April 2025. If you will not be, your personally owned non-UK assets will be outside the scope of IHT unless and until you acquire LTR status in the future.
• UK resident non-doms will acquire LTR status on 6 April 2025 if you have been resident in the UK for at least 10 of the last 20 tax years immediately preceding the relevant one (in this case 2025/26). From this point, your overseas assets will be within the scope of UK IHT.  Accordingly, if appropriate, you may wish to consider giving away foreign assets to e.g. non-UK based family members before that date so they remain outside the IHT net. 

Inheritance tax – non-dom settlors

• For non-doms, if you will be LTR from 6 April 2025, and are a settlor of an excluded property trust in which there is no life interest, it will fall within the relevant property regime from 6 April 2025. 
• Consider with your trustees whether there is any action that may be taken to avoid assets falling into this regime, and the potential tax charges that will apply going forward. Such actions might include distributions to non-UK beneficiaries, or even winding up the trust. 

Inheritance tax – UK dom settlors

• If you are a UK dom who will not be LTR from 6 April 2025, and are the settlor of a relevant property trust (one in which there is no life interest) holding non-UK assets, those assets will become excluded property on that date, potentially giving rise to an IHT exit charge. 
• Individuals in this position should review with your trustees before 6 April 2025 whether there is any action that may be taken to mitigate, or at least plan for, such a charge.  This might involve winding up the trust, or there may be alternative options to consider.

INDIVIDUALS PLANNING TO COME TO THE UK 

• Anyone who is considering coming to the UK on or after 6 April 2025 either for the first time, or after a period of non-residence of any length, should take advice as soon possible before doing so to ensure that you take up or resume UK residence as tax-effectively as possible. 
• Individuals who are settlors or beneficiaries of trusts should also liaise with your trustees to consider how the new rules may apply to you and your trusts both in the short and longer term.

FINAL POINTS

This note focuses only on the most high level points that individuals (including settlors and beneficiaries) should consider ahead of the introduction of the new rules on 6 April 2025.  The rules are complex and detailed advice will be required taking into account people's specific circumstances.  Once the new regime is in force, we will write further on its application. 

In the meantime, anyone who may be affected by the changes should consider taking advice as soon as possible to ensure that you are able to plan effectively, whether you are leaving the UK, moving here or already resident and intending to stay for the longer term.