Reform of Remittance Basis for Non-UK Domiciled Individuals

For a very long time the UK has operated a remittance basis of taxation for tax residents who are not classed domiciled because their permanent home is outside the UK. The remittance basis enables non domiciles to be taxed on their foreign source income and capital gains only so far as these are brought into the UK. The regime has become less generous in recent years and it now only applies to individuals who have been resident here for less than 15 years and there is an annual remittance basis charge.

The government had flagged its intention to abolish the remittance basis and now seems set to proceed with this. The Conservatives had also made similar proposals so this had ceased to be a party political issue. The change will come in from 6th April 2025 unless there is a change of heart. Many tax experts had hoped there would be because of the large number of non-domiciles who have been planning to actually leave the UK, something which didn’t happen much with the previous changes.

There are some concessionary type measures:

• People who have been resident in the UK for less than 4 years will still be able to use a form of remittance basis, known as the Foreign Income and Gains, or FIG, regime provided they had not been UK resident in any of the 10 tax years prior to their arrival here. This is said to be internationally competitive but certain countries offer more attractive arrangements to new arrivals.
• UK resident individuals who have previously used the remittance basis and have held assets offshore since April 2017 can for the tax years from 2025/26 select the value of the assets at April 2017 as the cost for calculating the gain on any disposal.
• Individuals who have untaxed foreign income and gains from previous years, having used the remittance basis, will be entitled to bring the proceeds into the UK in the tax years 2025/26 and 2026/27 at a tax rate of 12% and in 2027/28 at a tax rate of 15%. This is designed to encourage people to bring in money which would otherwise be likely to stay outside the UK while they remain UK resident.

The first two of the above concessions relate to income and assets held personally by the UK resident taxpayer. The third concession extends to distributions to beneficiaries of offshore trusts.

The removal of the remittance basis seems consistent with changes to inheritance tax where instead of liability being based on domicile it will now be based on residence. The sometimes nebulous concept of domicile seems set largely to disappear from the UK tax regime.