From 6 April 2025, the UK implemented a fundamental change in how it taxes foreign income and gains for individuals who are UK tax residents. The long-standing remittance basis of taxation which historically applied mainly to individuals who were UK tax resident but not domiciled in the UK was abolished and replaced by the new Foreign Income and Gains (FIG) regime.
The FIG regime introduces a residence-based approach to taxing foreign income and gains that is significantly different in structure, eligibility, period of relief, and obligations compared to the old remittance basis. The changes are among the most significant UK personal tax reforms in decades, particularly for internationally mobile individuals, expatriates, and returning UK residents.
How the Remittance Basis worked?
Before April 2025, the UK tax system distinguished between:
Arising basis taxpayers — UK residents who pay UK tax on worldwide income and gains as they arise, and
Remittance basis taxpayers — a subset of UK residents who were non-UK domiciled and who chose to be taxed on a remittance basis.
Under the remittance basis, a qualifying individual was taxed on:
UK source income and gains on an arising basis; and
Foreign income and gains only when those amounts were remitted (brought) to or enjoyed in the UK.
This meant that foreign earnings or gains could remain outside UK taxation indefinitely so long as they stayed offshore and were not used in the UK. There was no tax charge if you kept overseas income abroad.
However, claiming the remittance basis had drawbacks:
Loss of personal allowances and Capital Gains Tax (CGT) annual exemption; and
After 7 years’ residence, a charge (the remittance basis charge) applied to continue using the remittance basis. Eventually — after 15 out of 20 tax years’ UK residence — individuals became deemed domiciled and could no longer claim the remittance basis.
The result was a complex, domicile-linked regime that depended on:
a subjective concept (domicile),
careful segregation and tracking of foreign funds, and
rules determining whether an item had been “remitted” to the UK.
How does the FIG Regime work?
The Foreign Income and Gains (FIG) regime was designed to simplify and modernise offshore taxation in line with a pure residence-based assessment approach. It applies from 6 April 2025 and is effectively the successor to the remittance basis for individuals arriving in the UK after a period of residence abroad.
Core Principles of the FIG Regime
1. Residence-based, not domicile-based
Unlike the remittance basis, eligibility is not tied to domicile. Instead, it depends on UK tax residency status and prior non-residence.
2. Arising basis for worldwide income and gains
From 6 April 2025, all UK residents are taxable on worldwide income and gains on an arising basis — meaning the UK taxes foreign income and gains in the tax year they arise, even if not brought to the UK — unless relief under FIG is claimed.
3. A four-year relief window
Individuals who satisfy the FIG regime conditions may elect relief for up to four UK tax years during which their foreign income and capital gains are exempt from UK tax, irrespective of whether the funds are remitted to the UK.
4. Mandatory reporting of foreign income and gains
Even where exemption is claimed, taxpayers must report their foreign income and gains on a UK Self Assessment return and make an election for the FIG regime to apply for that year.
What are the Eligibility Requirements for the FIG regime?
To qualify for the FIG regime relief, an individual must meet certain criteria:
1. UK tax residence
The individual must be tax resident in the UK under the Statutory Residence Test (SRT).
2. Non-residence history
The person must have been non-UK tax resident for at least the previous 10 consecutive UK tax years immediately before the first year they become UK resident to which FIG applies.
3. First four years of residency
The FIG regime provides relief for up to four tax years starting from the first tax year in which the individual becomes UK resident after satisfying the non-residence condition. If someone became UK resident before 6 April 2025 (but was non-resident for 10 years prior), they can still claim FIG on eligible years in the existing four-year window.
If an individual temporarily leaves the UK during these four years and becomes non-resident again, they can still claim FIG for the remaining years on their return, but the period of absence counts towards the four-year total.
What Foreign Income and Gains Qualify?
The FIG regime broadly treats foreign income and foreign gains the same way that the remittance basis used to treat them — but with important distinctions:
Typical qualifying FIG includes:
Profits from foreign trade carried on wholly outside the UK.
Foreign rental and property business income.
Dividends from non-UK resident companies.
Foreign interest and royalty income.
Foreign capital gains on disposal of foreign assets (with certain exceptions regarding UK land-rich assets).
Categories that do not qualify for relief
Some items are excluded from FIG relief, such as:
Chargeable event gains from certain offshore insurance policies.
“Performance income” (often linked to US executive compensation regimes).
Income from trades partially carried on in the UK.
Notably, FIG relief generally applies regardless of whether the foreign income and gains are remitted to the UK — a sharp contrast with the remittance basis but similar in outcome to an arising basis with a temporary exemption.
What are the key differences Between FIG and the Remittance Basis
Here are the most significant ways the FIG regime differs from the former remittance basis:
1. Eligibility Mechanism
Remittance basis: Based on residential status and domicile status; available (with conditions and charges) to non-domiciled individuals.
FIG regime: Based solely on being a qualifying new resident after long non-residence; domicile is irrelevant to eligibility.
2. Protection Period
Remittance basis: Potentially indefinite relief as long as funds remain offshore; could be continued by paying a charge.
FIG regime: Relief is strictly limited to the first four UK tax years of residence.
3. Remittance Irrelevant
Remittance basis: Tax on foreign income and gains triggered only on remittance.
FIG regime: Relief applies regardless of remittance; funds can be brought into the UK without tax implications during the qualifying period.
4. Reporting Obligation
Remittance basis: Unremitted income often did not need to be reported on UK returns.
FIG regime: Taxpayers must report all foreign income and gains — even if exempt — and record figures under FIG claims.
5. Personal Allowances and Loss Relief
Under both regimes, claimants may lose UK personal allowances (e.g. personal tax-free allowance and CGT exemption) for the year relief is claimed, but the FIG regime removes complicated segregated fund rules and streamlines reporting.
What are the practical implications for:
New UK Residents
The FIG regime can be extremely attractive, especially for wealthy new residents who have accumulated overseas income or unrealised gains. It allows them to receive and use their foreign income and capital without immediate UK tax (up to four years), simplifies compliance relative to remittance tracking, and opens relief to all qualifying residents regardless of domicile.
Returning UK Residents
UK citizens or formerly resident individuals who have been non-resident for a sufficient period can benefit similarly — something that was not possible under the old remittance basis rules for UK-domiciled persons.
Individuals Already UK Resident
Those already UK resident as of 5 April 2025 and who have not been non-resident for 10 years will no longer have access to a remittance basis or FIG relief — they will be taxed on worldwide income and gains as they arise from the start of the 2025/26 tax year.
Conclusion
The Foreign Income and Gains (FIG) regime marks a major shift in UK personal taxation of offshore income and gains. It reflects a policy move from a domicile-based, remittance trigger system to a residence-based world-wide system with a limited relief window for new residents.
The FIG regime provides simplicity, removes need for complex remittance analysis, and extends relief opportunities beyond traditional non-doms to wider sets of international individuals. However, the relief period is shorter and requires ongoing compliance with UK reporting obligations.
Understanding eligibility, the scope of qualifying income and gains, and how the regime interacts with personal allowances is essential for anyone planning to move to or return to the UK — and professional advice from our team by emailing info@expat-tax-advice.co.uk is strongly recommended to navigate this landscape effectively.
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