The United Kingdom recently presented the Autumn Budget 2024, which includes changes in cross-border tax matters. One highly relevant change for our clients is the removal of the current non-dom rules, which will be replaced by the new “FIG regime” (Foreign Income and Gains) starting April 6, 2025. This will primarily affect individuals who have moved to the UK since April 2022 or who plan to move there in the future.
The new FIG regime means that individuals moving to the UK can only receive tax exemption on foreign income and capital gains during the first four years of their tax residency in the UK, provided they have not been tax residents in the UK in the past ten years.
This means that the current system will be replaced with a simpler and more internationally competitive system based on tax residency. Under this system, individuals who choose to move to the UK will pay UK tax on foreign income and gains (FIG) after the first four years of tax residency, provided they have not been residents in the UK in the past ten years. Furthermore, the so-called remittance rules will be abolished, meaning that under the new regime, income exempt from UK taxation can be brought into the country without additional charges.
Individuals who have been tax residents in the UK for less than four years, after being tax residents outside the UK for ten years, can utilize the new FIG regime for each remaining year of these four years. It is important to note that the individual must apply to be covered by the FIG regime. Additionally, it should be noted that income exempt from taxation must still be included in the individual’s UK tax return to contribute to increased transparency, which was not the case with tax-free income under the non-dom rules.
The new budget also introduces new rules regarding Overseas Workday Relief (OWR), which will allow income from employment outside the UK to remain tax-free if earned during the first four years of residence in the UK. However, there is a limit of £300,000.
New rules are also introduced regarding inheritance and gift tax. Individuals who have been residents in the UK for ten or more of the last twenty years will be subject to UK inheritance and gift tax.
In summary, the new budget marks a significant change in the UK’s handling of cross-border tax matters. By replacing the non-dom rules with the new FIG regime and introducing new rules for inheritance and gift tax, the government aims to create a fairer and more competitive tax system. These changes will affect many individuals and businesses with economic interests both within and outside the UK.
Do you live in the UK or are you considering moving there? Please contact us for more information on how we can assist you or your business.
