Abolition of the “non-dom” regime

April 6, 2025

With effect from April 6, 2025, the non-domicile status for UK resident individuals has been abolished and has been replaced with a new regime, which includes transitional provisions.

The non-dom regime had been a distinctive characteristic of the UK tax system for many years, enabling individuals whose place of “domicile” was outside the UK to make a claim to be taxed on the “remittance basis.” The remittance basis of taxation provided that persons would be taxed on their UK source income and gains but only taxed in the UK on their non-UK source income and gains to the extent that they were actually remitted. The status could last for up to 15 years, before they would become “deemed domiciled.” The last UK tax year in which a claim for remittance basis of taxation could be made is 2024/2025.

New rules

Under the new rules, individuals who come to the UK for the first time after April 6, 2025 will have a four-year transitional period where they are not subject to UK tax on foreign income and gains (FIG) arising on or after April 6, 2025, even if it is remitted to the UK, but will then be fully taxable on their worldwide income and gains in the usual way. A claim must be made for each tax year in which the FIG regime is to apply.

For non-domiciled individuals who are already tax resident in the UK, some may be able to benefit from the FIG regime for a period of time, depending on when they first became UK tax resident (for example, an individual who became tax resident in 2022-2023 after a 10-year period of non-residence would have been UK resident for three years on April 6, 2025, and so can claim the FIG regime for one year, being tax year 2025/2026). For others, who were not eligible for the FIG regime on April 6, 2025, they will be liable to UK tax on their worldwide income and gains, from that date. FIGs that arose to a remittance basis user before April 6, 2025 will continue to be taxed if remitted to the UK on or after April 6, 2025, subject to the application of any transitional relief under the “temporary repatriation facility” (TRF). 

From April 6, 2024, for three tax years, UK resident individuals who have previously made a claim to be taxed on the remittance basis for at least one tax year can elect to pay tax at a reduced rate on remittances of untaxed pre-April 6, 2025 FIGs. For tax years 2025/2026 and 2026/2027, the reduced rate of tax is 12 percent, and for 2027/2028 it rises to 15 percent. In order to use the TRF, the individual must make an election in their tax return for the relevant year; however, whether an election should be made to use the TRF should be considered on a case-by-case basis.

Inheritance tax rules

Separately, the UK inheritance tax rules have moved from a domicile-based regime to a residence-based regime. While the rules are complex, in simple terms, UK situs assets remain liable to UK inheritance tax regardless of the owner’s residence status, and non-UK assets are subject to UK inheritance tax only if the owner has been UK tax resident for at least 10 out of the last 20 years. A modified test applies to persons under the age of 20 immediately before the start of the relevant tax year. Transitional provisions apply where certain conditions are met.

The changes to the UK tax rules are a significant milestone in the evolution of the UK’s fiscal policy, and those affected should seek expert tax advice on a case-by-case basis.