Autumn Budget 2024: key changes for non-doms
Substantial changes to the taxation of non-UK domiciled individuals were confirmed in the Budget on 30 October.
From 6 April 2025, any UK resident individual is required to report and pay tax on their worldwide income and gains in the UK, regardless of domicile status. The reliance on domicile status by the UK tax system will be removed entirely from 6 April 2025, with more weight being given to an individual’s tax residence status.
UK tax residency is governed by the Statutory Residence Test (SRT) which has been in effect since 2013. An individual is also UK tax resident in any year which they meet the conditions for split year treatment.
Carpenter Box can help you to review your tax residency status and provide guidance on the Statutory Residence Test.
Removal of the Remittance Basis (RB)
From 6 April 2025 the RB of taxation will be abolished. This means that it will no longer be possible for non-UK domiciled individuals to shelter their non-UK income and gains from UK tax simply by keeping them offshore.
Regardless that the RB is being abolished, any income or gains which previously benefited under the RB will continue to be taxed under the RB rules, i.e. taxed as the top slice of your income or gains, when they are brought to the UK. Therefore, it is important to keep any existing records of funds which benefited from the RB.
Foreign Income and Gains (FIG) regime
The Budget introduced FIG, a new exemption from UK tax for individuals in one of the first four years of UK residency after 10 years as a non-UK resident.
Under FIG, individuals can sacrifice their personal allowance (Income Tax) and annual exemption (Capital Gains Tax) and exempt their non-UK income and gains from UK tax. All income and gains must be disclosed on the UK return, but in the first four years of residency, non-UK income may be exempted.
These exempted funds can be brought to the UK without incurring additional tax charges which is a significant change to the RB rules.
Resident for 5 years or more
If you arrived to the UK in 2021/22, then by 5 April 2025 you will have been UK tax resident for 4 tax years – 2021/22, 2022/23, 2023/24, and 2024/25 – meaning you will not benefit from FIG. Your worldwide income and gains will be reportable AND taxable in the UK from 2025/26, with your first balancing payment becoming due for payment by 31 January 2027.
Credit relief will be available against your UK liability for any overseas tax charged in line with any relevant tax treaties in place.
Temporary Repatriation Facility (TRF)
For individuals who have previously claimed the RB, the opportunity to designate any non-UK income and gains which have previously benefitted under the RB and incur a maximum 12% tax rate is available between 6 April 2025 and 5 April 2027. From 6 April 2027 and 5 April 2028, this tax rate increases to 15%. The TRF is set to be withdrawn from 6 April 2028.
The TRF will allow taxpayers the opportunity to bring their previously unremitted income and gains to the UK at an effective 12% (or 15%) tax rate in the UK, whilst the TRF is in operation. In contrast, remitted funds would be taxed as the top slice of income and gains if remitted to the UK not under the TRF. This represents a maximum possible saving of 33% if remitted funds are taxed at 12% opposed to a possible 45% for additional rate taxpayers.
Remittances of clean capital will continue to be exempt from UK tax.
Budget Hub
Carpenter Box would be pleased to review your tax position and identify any savings you may be able to make under this rule change. For further guidance on, please do not hesitate to contact our team on 01903 234094.
