The Spring Budget introduced significant proposals for the taxation of non-domiciled individuals, moving from a domicile-based to a residence-based system from 6 April 2025. Paul Davidoff examines the key changes.

The new Foreign Income and Gains regime

From April 2025, the remittance basis is replaced with a new Foreign Income and Gains (FIG) regime. Those who have been non-UK resident for at least 10 consecutive years before becoming UK resident may elect into the FIG regime for their first four years of UK residence. Under this election, foreign income and gains are free of UK tax — including on remittance — and distributions from non-UK trusts are exempt. Personal allowances and annual CGT exemptions are forfeited in years when the election is made.

Transitional provisions

A Temporary Repatriation Facility allows those who previously used the remittance basis to remit their previously untaxed foreign income and gains at a reduced rate of 12% during 2025/26 and 2026/27. A capital rebasing for CGT purposes is available for those eligible for the FIG regime, and half-year treatment applies for those in their first year who do not qualify.

Inheritance Tax

The domicile basis for IHT is replaced with a residence basis. Those who have been UK resident for fewer than 10 years are subject to IHT only on UK assets. After 10 years of UK residence, worldwide assets become taxable. Trusts established before April 2025 retain excluded property status under transitional rules.

What to do

There is an anticipated rush to establish or add to trusts before April 2025, when the transitional window closes. If you are affected by these changes — whether as a non-dom yourself, as a trustee, or as an adviser — please contact Paul Davidoff to discuss the implications for your specific circumstances.