UK Tax Changes in 2025: Non-Dom Regime is Replaced - How to Protect Your Wealth?

Non-Dom Regime is Replaced

Non-dom regime is replaced.  

6 April 2025 marks the most sweeping changes since 2008 in the UK for International Taxation. International taxation signifies how does the UK tax overseas nationals in the UK.

These are the most sweeping changes since 2008 when the first UK non-dom regime took shape.

What are the most sweeping changes?

• Non-Dom Rules Replaced with Residence Rules

From 2025 UK tax rules that were based on the legal concept of domicile are now replaced with residence rules.

What is Non-Dom?

Non-dom is an abbreviation of non-domiciled person. In the UK, a non-domiciled person signifies a personal and family connection outside the UK. 

How Do Residence Rules Replace Non-Dom Rules?

From 2008 and until April 2025, non-dom rules applied to person’s income, capital gains and inheritance tax.

Now, only person’s residence matters. If the person is resident in the UK, then worldwide income and capital gains are taxed in the UK.

Extensive statutory residence test applies to determine whether the person is UK tax resident or not.

• Remittance basis of taxation is replaced with a new 4-year Foreign Income and Gains Regime (FIG)

What is Remittance Basis of Taxation?

Under remittance basis of taxation rules, an individual taxpayer was able to opt to be taxed on remittance basis for foreign income and capital gains.

Remittance basis of taxation means that the individual is taxed on foreign income and capital gains only if these are brought (remitted) to the UK.

Every year, an individual was able to opt in or opt out to be taxed on remittance basis in the UK.

What is a FIG?

FIG is the abbreviation of foreign income and gains. From April 2025, only persons who have not been resident in the UK for the last 10 years are able to benefit from FIG.

New residents in the UK may benefit from the 4-year FIG rule, which means that individuals may apply to opt out from being taxed on their foreign income and capital gains for the initial 4 years. This also applies to non-resident trust distributions.

How Do the Two Regimes Compare?

Under remittance basis of taxation, individuals where able to benefit from the regime for at least 7 years without any remittance charges.

Remittance charge was introduced after the initial 7 years of residence in the UK. If you were applying for the remittance basis of taxation after you have completed your initial 7 years of residence, remittance charge was applied to you.

Remittance charge means that you had to pay an annual charge of £30,000 to £60,000 annually depending on the length of your residence in the UK to be able to opt for remittance-based taxation.

Remittance-based taxation was limited in time. It applied to you if you were resident in the UK for 15 out of 20 years.

The last year when you can claim remittance basis of taxation is 2024 -2025.

Conclusion: if you have been resident in the UK long enough, you were no longer able to benefit from remittance basis of taxation. Its application was limited in time.

The 4-year FIG allows you to implement your UK tax planning to arrange your global affairs and prepare for your tax residence in the UK, if you a new arrival or have not lived in the UK for the last 10 years.

• Business Investment Relief

Business investment relief continues to be available for qualifying investments of pre 6 April 2025 FIG made on or after 6 April 2025 and will continue to be available for qualifying investments made prior to 6 April 2025.

• New Changes to Overseas Workday Relief

Overseas workday relief (OWR) helps to determine how overseas employees’ resident in the UK are taxed.

It is a UK tax exemption, which applies for the first 3 tax years of residence in the UK.

From 6 April 2025, as an employee you are eligible for OWR if you choose to be taxed on the 4-year FIG.

OWR provides relief on earning for employment duties performed outside the UK. The new OWR provides income tax relief on overseas earnings whether these are brought or not brought into the UK.

However, does not provide relief for National Insurance Contributions (NIC).

• What Happened to the Trusts?

Only overseas trusts non-resident in the UK formed before April 2025 remain protected and not taxed under the new UK tax regime.

The second best is to form an overseas non-resident trust during the initial 4-year FIG if applicable.

UK tax neutrality is lost for all other trusts.

Tip: Apply for specialist UK tax advice early on and ideally before you become tax resident in the UK. Please also note that setting up non-resident trusts takes the necessary time and financial investment. It is not something that you may leave for the last minute and hope that it will somehow miraculously work out.

• Capital Gains Tax Rebasing

From 2025 all individuals who are no longer eligible for the new 4-year FIG regime are taxed on foreign gains.

Transitional rules apply to individuals who have claimed remittance basis of taxation and are neither UK domiciled or deemed domiciled by 5 April 2025.

If, on or after 6 April 2025, these individuals dispose of a personally held foreign asset that they held at 5 April 2019, they will be able to elect to rebase that asset to its value as at 5 April 2019.

The conditions for this rebasing are to be set out.

• Temporary Repatriation Facility (TRF)

A new 12 % rate is introduced for remittances of FIG made in tax years 2025-26 and 2026-27 where the FIG arose to the individual personally in a year when an individual was taxed on the remittance basis and the individual is resident in the UK during that tax year.

Mixed fund ordering rules are to be relaxed to make it easier to take advantage of the TRF.

From 2027-28 remittances of pre-6 April 2025 are taxed within applicable tax rates.

• What are the Changes to UK IHT?

The fundamental change is the shift from domiciled to a residence-based taxation.

The previous rule made you deemed domiciled for UK inheritance tax (IHT) purposes if you were resident in the UK for 15 of the last 20 years.

The current rule is based solely on residence and the residence of 10 years in the UK, makes you liable for UK IHT.

The replacement of domicile tax rule to residence-based rule means that individuals who were born domiciled in the UK are no longer taxed in the UK if they have been resident overseas for the last 10 years.

UK non-domiciled tax rules remain relevant to overseas non-UK resident trusts settled before 6 April 2025.

UK Tax Changes in 2025 – Non-Dom Regime is Replaced – How to Protect Your Wealth?

If you are a new arrival to the UK or have not been resident in the UK for the last 10 years before arrival, you will still be able to benefit from some of the traditional UK tax exceptions that made UK non-dom regime world famous.

The UK tax rules are now residence based.

You still stand to benefit from early UK tax planning and UK relocation tax advice if it is done correctly.

The window of opportunity to plan and prepare is now significantly shorter.

You have now less than 4 years to prepare yourself and your family for UK tax residence while reviewing your worldwide assets, income and gains.

If you do decide to benefit from the 4-year FIG, you also need to consider the advantages of OWR for the initial 3 years of residence in the UK.

Overseas non-UK resident trusts remain powerful tools for UK tax planning and asset protection.

A concept of a trust may be counterintuitive for individuals arriving from civil law jurisdictions, but immensely beneficial solution for UK tax residence and tax planning.

If you are no longer eligible for the 4-year FIG, you may benefit from transitional rules, such as temporary repatriation facility for FIG and rebasing for capital gains tax purposes.

Perhaps, one major overlooked tool for UK tax planning is business investment relief, which is no longer available for new investments made post 2025 and being wound down by April 2028.

Consult the Expert

Book a call with me to discuss your Global Wealth Strategy, including your global assets and how UK tax applies to your circumstances.

 You may submit your enquiry here.

Saule Voluckyte, M.A.E.S, LL.B, FAIA

I have been working exclusively with UHNWI in Mayfair, London since January 2008. I built specialist knowledge and expertise required to serve ultra high net worth individuals investing, operating and relocating to the UK or Switzerland.

Within the industry, I am the single adviser who is able to traverse the different areas of expertise and bring a comprehensive approach across: global structuring, UK immigration, international taxation and FOREX to develop their global wealth strategy, while they build, grow and expand their wealth worldwide.

Previous experience as one of the senior advisors for the government, made me a go-to person when delicate and uncomfortable scenarios involving heads of state need to be handled with care and preserve privacy.