Since Jeremy Hunt announced significant changes to the UK's non-dom regime in the March Budget, Head of UK Private Client Services, Richard Thomson-Curtis has been digging into the details and impacts of these changes.

We thought it would be useful to share the answers to some of the most common questions we have encountered from clients and their advisors. Should you have a question relating to your own situation or future plans, please get in touch with rtc@sanctoras.com

Will these rules affect me if I am planning to move to the UK?

Yes. If you move to the UK for the first time on or after 6 April 2025, you would no longer be able to elect to be taxed on the remittance basis, but rather will be able to elect to be taxable on the Foreign Income and Gains (“FIG”) basis.

Any FIGs arising in the year an election is made will not be taxable in the UK, regardless of whether, or when they are brought to the UK. There will be no charge to access the FIG basis of taxation.

Taxpayers will be able to elect for the FIG basis of taxation for the first four tax years after their arrival to the UK. From the fifth year onwards, taxpayers will be taxable on their worldwide income and gains.

I have been a UK resident before, does that affect my ability to claim the FIG basis?

To be considered to be coming to the UK for the first time, an individual must not have been resident in the UK for at least 10 years.

As draft legislation has not yet been released, we do not know if this 10 year period must be consecutive, or whether those who have only been in the UK for short periods will have some relief (e.g., 10 of the last 12 years must not have been a year of UK residence) 

I’m in the UK already, and file on the remittance basis. What should I do?

If you have been in the UK for fewer than 4 years, you will be able to benefit from the FIG regime until your 4th year of residence.

If you have been in the UK for more than 4 years, you will not be able to benefit from the FIG regime, and will be taxable on your worldwide income and gains.

Based on current announcements made by Jeremy Hunt, there will be some transitional measures put in place to enable individuals who were previously taxable on the remittance basis to remit previously protected income and gains to the UK at a lower tax rate of 12% in 2025/26 and 2026/27. 

Additionally, foreign income arising and brought to the UK in 2025/26 will be subject to a 50% discount on the amount subject to tax, thereby lessening the immediate impact.

I’m in the UK already, and am deemed domiciled in the UK. What do I do?

You should be able to benefit from the transitional rules, and therefore bring previously shielded income and gains to the UK at a lower tax rate of 12% for two years.

Depending on how long you have been resident in the UK for, you may be domiciled in the UK for the purposes of the new proposed IHT legislation, and therefore subject to UK IHT on your worldwide assets.

I will leave the UK prior to 6 April 2025. Will these rules still affect me?

The UK only charges UK income tax and capital gains tax on certain income and gains. Usually this is limited to UK rental income, some UK employment income, and gains realised on UK property (both residential and commercial).

Depending on how long you have been resident in the UK for, you may remain domiciled in the UK for the purposes of the new proposed IHT legislation, and therefore subject to UK IHT on your worldwide assets for a period.

What will the changes mean for the trusts of which I am a settlor or beneficiary?

Settlors of settlor-interested trust who have been resident in the UK for under 4 years (and claim the FIG basis of taxation), will not be subject to tax on the income and gains of a settlor-interested trust. It is not yet clear whether income and gains would be added to the stockpiled income and gains pools.

Settlors of settlor-interested trusts who have been resident in the UK for over 4 years will be taxed in full on the income and gains of the settlement. Income and gains would not be added to the stockpiled income and gains pools.

Beneficiaries of trusts will continue to be taxable on the benefits they receive from the trusts to the extent that they are matched to the stockpiled income and gains of the trust.

Considerations should be made as to whether the settlor of the trust may be excluded from benefiting from the trust (including their spouse and any minor children). This can switch off the income tax anti-avoidance rules, however further exclusions would need to be made to switch off capital gains tax anti-avoidance rules.

Will Labour keep these rules?

As we have discussed in one of our most recent articles, the Labour Party were likely to enact significant changes to the remittance basis if elected.

Rachel Reeves has suggested that the party agrees with “most” of the changes introduced, however would seek to amend some of the transitional rules introduced by Jeremy Hunt (namely the 50% discount on 2025/26 foreign income would be removed), and remove the UK IHT exemptions granted to excluded property trusts (broadly non-UK trusts settled by non-UK domiciled individuals with non-UK situs assets).

What about Inheritance Tax?

Given the inexorable link between domicile and IHT (i.e., that UK domiciled individuals are subject to IHT on their worldwide assets), changing legislation around domicile was going to have a significant impact on IHT.

In his Budget in March, Jeremy Hunt announced a consultation on proposed changes to IHT. The Budget documents suggested that a person would be subject to UK IHT on their worldwide assets after being resident in the UK for 10 years.

Any changes to IHT are not expected to be introduced before 6 April 2026.

It is not expected that there will be any changes introduced regarding IHT on UK situs assets, and that any UK situs assets will continue to be subject to UK IHT, regardless of the domicile of the owner.

What should I do?

To the extent that they haven’t already, non-doms must start considering their options as a priority. Get in touch with your usual Sanctoras contact, or any of the team, for an initial confidential discussion.