Non-domicile tax rules: what will change from April 2025?

In March 2024, Jeremy Hunt announced in his spring budget speech that the government would scrap the UK’s current non-dom tax regime and replace it with something that was much fairer. The Chancellor believes his proposed “modern, simpler, residency-based system” will raise an additional £2.7bn a year by 2028/29.

To cushion the blow, “recognising the contribution of many of these individuals to our economy”, Hunt said, transitional arrangements would be put in place. So, for current non-doms and future non-doms, what will change?

The current rules for non-doms living in the UK

There are reported to be almost 80,000 non-doms living in the UK. A non-dom is someone who lives (“resides”) in the UK but whose permanent home (“domicile”) for tax purposes is another country. Non-doms do not currently pay UK tax on their foreign income or gains (FIG) if less than £2,000 in the tax year and they do not bring them into the UK, for example, by transferring them to a UK bank account.

Via a Self Assessment tax return, non-doms must report FIG of £2,000 or more or any money that they bring to the UK. They can either pay UK tax and possibly claim it back or claim the “remittance basis”, so they only pay UK tax on the income or gains they bring into the UK.

However, they can lose tax-free allowances for Income Tax and Capital Gains Tax and they must pay an annual charge of £30,000 if they’ve been living in the UK for at least seven of the last nine tax years or £60,000 if they’ve lived in the UK for at least 12 of the previous 14 tax years.

What will change for non-doms from 6 April 2025?

• From 6 April 2025, the current remittance basis of taxation will be abolished for UK resident non-domiciled individuals. It will be replaced with a new four-year foreign income and gains (FIG) regime for those who become UK tax resident after 10 tax years of non-UK residence.
• As explained by HMRC: “They will not pay tax on FIG arising in the first four tax years after becoming UK tax-resident and can bring these funds to the UK free from any additional charges. They will not pay tax on non-resident trust distributions either. They will pay tax on UK income and gains, as is the case for non-domiciled individuals now.”
• Those who on 6 April 2025 have been tax resident in the UK for less than four years (after 10 years of non-UK tax residence) can use this new regime for any tax year of UK residence in the remainder of those four years.
• Those who move from the remittance basis to the new “arising basis” on 6 April 2025 and are not eligible for the new four-year FIG regime will only pay tax on 50% of their foreign income for 2025-2026 only. Thereafter, UK tax will be due on all worldwide income in the normal way.
• From 6 April 2025, someone who is not or ceases to be eligible for the new four-year FIG regime will be taxed on foreign gains in the normal way. Transitionally, those who have claimed the remittance basis will, on a disposal of an asset they owned on 5 April 2019, be able to rebase that asset to its value at that date.
• From 6 April 2025, those who have been taxed on the remittance basis can pay tax at a reduced rate of 12% on remittances of pre-6 April 2025 FIG under a new Temporary Repatriation Facility (TRF), available for 2025-26 and 2026-27. This won’t apply to pre-6 April 2025 FIG generated within trusts and trust structures.
• From 6 April 2025, the government also intends to move inheritance tax from a domicile based regime to a residence based regime.
• For more detailed information on the changes scheduled for introduction from 6 April 2025, HM Treasury has published a policy paper called Technical note: Changes to the taxation of non-UK domiciled individuals.

GoSimpleTax is award-winning software that makes it quick and easy to complete and file your Self Assessment tax return and any supplementary pages you need to fill out. It can also prevent you from making basic tax return errors that can later cost you time and money. Many thousands of people trust and love GoSimpleTax. Find out why by starting your FREE trial today!

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.