The British tax reform took effect on April 6, 2025. Notable changes include the elimination of the "non-domiciled" status and an overhaul of the inheritance tax system.
Elimination of the Remittance Basis Tax
The UK tax reform eliminates the "non-domiciled" status and the associated remittance basis tax, previously reserved for individuals residing in the UK without being considered domiciled. This system allowed for taxation only on UK-sourced income, with foreign-sourced income taxable only when brought into the UK.
Under the new "Foreign Income and Gains" (FIG) regime, qualifying new admissible residents will be taxed only on their UK income. Foreign income will not be taxed, regardless of whether it is repatriated. This exemption lasts for four years. To qualify, individuals must not have resided in the UK for ten consecutive tax years as of April 6, 2025. The reform simplifies and streamlines the taxation process.
Revised inheritance tax rules
The inheritance tax (IHT) system has been revised, shifting the basis from domicile to residence. Under the new system, foreigners who qualify as "long-term residents" are subject to IHT. A long-term resident is defined as someone who, as of April 6, 2025, has been a tax resident in the UK for at least 10 years. These individuals will be taxed not only on their UK assets but also on their worldwide wealth.
The IHT rate is set at 40%, one of the highest in the world. Provisions will be made for non-domiciled individuals currently residing in the UK to transition under these new rules.
Expats are strongly advised to consult with tax professionals to reassess their financial and tax positions. Newcomers may find benefits in the temporary advantages offered by the FIG regime, whereas long-term residents may face more significant financial implications. Special attention should be given to pensions and the risk of double taxation on inheritance rights, as many bilateral tax treaties do not cover specific provisions on inheritance tax.
