Changes in Taxation for Non-Domiciled Individuals in the UK (from April 6, 2025)

What Changes in Taxation for Non-Domiciled Individuals in the UK?

Starting April 6, 2025, the current taxation regime for non-domiciled individuals (non-doms) in the UK will be replaced by a residence-based system. The key changes include:

• Introduction of a 4-Year Foreign Income and Gains (FIG) Regime, offering a 100% exemption for new qualifying residents.

• New Temporary Repatriation Facility (TRF) for individuals previously taxed under the remittance regime, with reduced tax rates on undeclared FIG.

• Retention of Overseas Workday Relief (OWR) for qualifying employees.

• Replacement of the domicile-based system for inheritance tax (IHT) with a residence-based system.

Who Qualifies for the 4-Year FIG Exemption Regime?

Individuals who become UK tax residents from April 6, 2025, and have not been tax residents in the previous 10 tax years.

What is the Temporary Repatriation Facility (TRF)?

The TRF allows individuals previously taxed under the remittance regime to bring undeclared foreign income and gains (FIG) into the UK at a reduced tax rate:

• 12% for the first two years (2025-2027)

• 15% in the third year (2027-2028)

• The individual must be a UK tax resident in the relevant years.

How Will the New Inheritance Tax (IHT) System Work?

Inheritance tax (IHT) will be based on residence, replacing the domicile criteria. An individual will be subject to IHT on foreign assets if they have been a UK resident for at least 10 of the last 20 tax years.

What Changes in Overseas Workday Relief (OWR)?

OWR will remain available for qualifying employees, allowing foreign employment income from the first four years of UK tax residence to be tax-exempt. However, an annual limit will be introduced:

• £300,000 or

• 30% of the employee’s qualifying income, whichever is lower.

How Will These Changes Affect the Taxation of Foreign Employment Income?

From April 6, 2025, foreign employment income will no longer be eligible for exemption under the residence-based regime. However, employees will still be able to deduct travel expenses for work in the UK under the Statutory Residence Test rules.

What Will Be the New Notification Process for PAYE on Reduced Earnings?

From April 6, 2025, Section 690 of the Income Tax (Earnings and Pensions) Act 2003 will be amended. Employers will need to notify HMRC of the proportion of global employees’ income that should not be taxed under PAYE. A new online form will be available for this, with immediate confirmation from HMRC.

How Can Mosaico Tax Help?

Our team of international tax experts provides personalized analysis of these changes and assists in tax planning for a strategic transition. For many, this is an ideal time to repatriate funds and income from Brazil to the UK, supporting objectives such as purchasing property, investing in pension funds, and more.

Would you like to speak with one of our specialists and understand how these changes may apply to your case? Click here to schedule a consultation!