2025 UK Residency & Non-Dom Tax Changes

The UK’s reform of the non-dom regime represents one of the most significant personal tax changes in recent years. While the remittance basis has been a central part of UK tax planning for non-domiciled individuals for decades, the government has confirmed that it will be replaced from April 2025 by a residence-based approach. Under this approach, many individuals who become UK-resident may be taxed on their worldwide income and gains as they arise unless they fall within specific transitional or arrival-based provisions.

These changes can affect expats, international entrepreneurs, overseas workers and non-UK residents who spend time in the UK. Understanding how the Statutory Residence Test applies, and how the transitional rules operate, is essential for ensuring correct reporting to HMRC.

This guide explains the reforms in general terms only. It is not tax advice and must not be relied upon to make tax decisions. Personalised guidance should always be obtained, as tax treatment depends on individual circumstances and may change with legislation.

Overview of the changes to UK residency and non-dom rules

• The remittance basis will no longer be available from the 2025/26 tax year.
• Individuals becoming UK-resident after a qualifying period of non-residence may be eligible for the proposed 4-year Foreign Income and Gains (FIG) regime.
• Outside the FIG regime, individuals who are UK-resident under the SRT may be taxed on worldwide income and gains as they arise.
• Transitional measures, such as temporary facilities for bringing historic foreign income to the UK at reduced tax rates, may apply subject to legislation.
• Proposals concerning offshore trusts and deemed domicile are expected to tighten the way certain structures are taxed.

1. A shift from domicile status to residence-based taxation

Historically, domicile played a central role in determining whether individuals could elect to use the remittance basis. However, under the proposed reforms, the primary determinant for UK tax on foreign income and gains will be UK tax residence as defined by the Statutory Residence Test.

Individuals who are UK-resident may therefore need to report worldwide income and gains, unless they qualify for specific exemptions under the FIG regime or other transitional provisions. Domicile may still be relevant for inheritance tax purposes, but its role in income tax and capital gains taxation is expected to reduce significantly.

2. The proposed 4-year Foreign Income and Gains (FIG) regime

For individuals who become UK-resident after spending the required period outside the UK (as set out in the legislative proposals), the FIG regime may offer a temporary exemption from UK tax on qualifying foreign income and gains for up to four UK tax years. UK-source income would remain taxable as normal.

Eligibility for the FIG regime depends on individual circumstances and the detailed conditions set out in legislation. Individuals considering a move to the UK should seek professional guidance to understand whether they may qualify.

3. Transitional rules for existing non-doms

Transitional measures have been proposed for individuals who have historically used the remittance basis. These may include:

• Time-limited facilities for bringing historical foreign income or gains into the UK at reduced tax rates.
• Asset rebasing provisions for certain individuals, enabling gains to be calculated using a later valuation date.
• Changes to the treatment of some offshore trusts where the settlor or beneficiaries become UK-resident.

These rules are complex and subject to legislative detail. Each individual’s circumstances—including mixed-fund situations, historic remittances and offshore structuring—may produce different reporting outcomes.

4. Common challenges individuals may face

a) Determining tax residence correctly

The Statutory Residence Test is a detailed set of rules that can produce different results depending on days spent in the UK, accommodation, work patterns and family connections. It is possible for individuals with internationally mobile lifestyles to become UK-resident unintentionally, which may trigger UK tax obligations.

b) Increased worldwide reporting obligations

Under the new rules, UK-resident individuals who are not within the FIG regime may need to report most foreign income and gains. This may include income or gains arising overseas even where the funds remain outside the UK or where the assets are illiquid.

c) Understanding the interaction with double tax treaties

Some individuals may be entitled to relief under double taxation agreements between the UK and other countries. Whether relief is available depends on treaty wording and personal circumstances. This area requires careful analysis.

d) Changes affecting offshore structures

Proposed changes could affect the UK tax treatment of offshore trusts and companies, particularly where income or gains arise while a settlor or beneficiary is UK-resident. Individuals with such structures should obtain specialist advice.

e) Administrative complexity during the transition

Transitional facilities—such as those for repatriating historical funds—often require detailed tracing of bank accounts and careful review of documentation. Incorrect treatment may lead to unintended tax liabilities or compliance issues.

5. How Accusolve Accountants can help

Accusolve Accountants is AAT-regulated and provides UK-compliant tax and accounting services to individuals and businesses, including non-UK residents, expats and internationally mobile clients. We do not provide legal or investment advice, but we can assist with:

• Understanding how the Statutory Residence Test may apply to you.
• Compliance with UK tax reporting requirements, including Self Assessment.
• Reviewing your UK tax position if you become UK-resident.
• Clarifying the general UK tax treatment of foreign income and gains.
• Coordinating with legal and international tax advisers where required.

Our role is to help ensure clients meet their UK tax obligations accurately and on time. We explain the rules clearly, help organise documentation and ensure compliance with HMRC requirements based on the information provided to us.