The income tax rules changed big time starting on 6th April 2025 for people moving to the UK. If you’re someone who lived in the UK and maybe wasn’t born there, you might remember the old ‘remittance basis’ system. It was a bit of a maze, honestly.
This article breaks down what that old system was all about, what’s different now, and why these changes even happened. It’s all about getting a clearer picture of how things work, especially if you’ve filed taxes in the UK before.
Key Takeaways
| Topic | Old Rules (Remittance Basis) | New Rules (FIG Regime – from 6 Apr 2026) | What This Means |
|---|---|---|---|
| How foreign income/gains were taxed | Only taxed in the UK if the money was remitted (brought into the UK) | Taxed on worldwide income and gains as they arise, regardless of where the money sits | No more sheltering foreign income offshore to avoid UK tax |
| What counted as a remittance | Moving money to a UK bank, buying UK property with foreign funds, spending overseas funds in the UK (even via a foreign credit card) | Remittance concept abolished | Actions previously “safe” offshore now irrelevant — tax applies anyway |
| Annual charge for long-term residents | £30,000 or £60,000 annual Remittance Basis Charge (depending on years of residence) | Abolished — no annual charge under the FIG regime | Long-term residents no longer pay the remittance charge |
| Non-dom eligibility rules | Based on domicile status and years of UK residence | FIG regime applies to all UK-resident individuals, regardless of domicile | Domicile becomes irrelevant for most income/gains taxation |
| Start date of new system | The remittance basis continued until it was abolished | The FIG regime fully replaces the remittance basis | Applies from 6 April 2026 (some transitional rules from 2025–2026) |
| Overall effect | Allowed non-doms to keep foreign wealth untaxed if kept offshore | Everyone resident in the UK is taxed on worldwide income & gains automatically | Major increase in tax exposure for former non-doms |
Understanding the Remittance Basis UK Before 2025
Before 2025, if you were living in the UK but weren’t considered ‘domiciled’ here, you had a special tax option called the remittance basis. It was a bit of a game-changer for folks with money or assets outside the UK. Basically, it meant you only paid UK tax on the foreign income and gains you actually brought into the country. Your worldwide income wasn’t automatically taxed here.
What Was the Remittance Basis?
The remittance basis was a tax treatment available to individuals who were resident in the UK for tax purposes but not domiciled here. Think of it as a way to shield your foreign earnings from UK tax, as long as you keep them offshore. If you earned money from investments in, say, Australia, and left it in an Australian bank account, you wouldn’t owe UK tax on it. It was a pretty sweet deal for many expats, especially those with significant overseas wealth.
| Category | Examples of What Counts as a Remittance | Why It Counts |
|---|---|---|
| Direct transfers | Moving money from an overseas account to a UK account; withdrawing cash abroad and bringing it into the UK | Foreign income/gains are physically brought to the UK |
| Buying UK assets with foreign funds | Paying for a UK house via the seller’s overseas account; buying UK company shares using foreign funds through an overseas broker | The asset or benefit is located in the UK, so foreign income is treated as used in the UK |
| Paying for UK services | Using foreign income to pay a UK trader; buying return flights to the UK using foreign funds | Foreign income is used to meet a UK cost or UK-related service |
| Using a foreign credit card in the UK | Paying for UK hotels, UK online purchases, or goods/services in the UK with a card linked to a foreign bank account | The UK expenditure is effectively funded by foreign income |
| Bringing foreign-purchased assets into the UK | Shipping a foreign-purchased car, artwork, jewellery, furniture, etc. into the UK | The foreign income used to buy the item is treated as remitted when the asset enters the UK |
| Third-party remittances | Giving foreign funds to a spouse who brings them to the UK; paying an adult child’s UK bank account with foreign income | A connected person brings or uses the foreign income in the UK—still treated as your remittance |
| Disposal of foreign property then bringing proceeds to the UK | Buying a foreign villa with foreign income, later selling it, then transferring sale proceeds to the UK | Both the original foreign income and foreign capital gains become taxable when brought to the UK |
| Core principle | Any foreign income/gains or anything derived from them used, received, enjoyed, or brought into the UK | HMRC applies a “benefit in the UK” test—direct or indirect, for you or a connected person |
Eligibility for Non-Domiciled Residents
So, who could actually use this system? You had to be a UK resident, meaning you spent a certain amount of time here each tax year. But crucially, you also had to be ‘non-domiciled’. Domicile is a bit trickier than residency; it’s about where you consider your permanent home to be, often tied to your upbringing or long-term intentions. For many Americans living and working in the UK, their domicile remained in the US, making them eligible for the remittance basis.
- You needed to be a UK tax resident.
- Your domicile had to be outside the UK.
- You had to actively claim the remittance basis on your tax return each year.
How Foreign Income Was Taxed
Under the remittance basis, your UK-sourced income and gains were taxed as normal. But for your foreign income and gains, the UK tax man only came knocking if you ‘remitted’ those funds to the UK. This could be as simple as transferring money from your foreign bank account to your UK account. It could also involve using those foreign funds to buy property in the UK, pay off a UK mortgage, or even just using a foreign credit card for expenses while you were in Britain. The key was whether the foreign money or its benefit made its way into the UK.
The rules around what constituted a remittance could get quite detailed. It wasn’t just about cash transfers; using foreign income to acquire assets that were then brought to the UK, or even to pay off debts in the UK, could be seen as a remittance. This complexity meant many people sought professional advice to make sure they weren’t accidentally triggering a tax bill.
URGENT: Key Actions You Must Take Before 5 April 2025
Time is running out to take advantage of transitional relief before the new regime fully takes effect. Here’s your essential action checklist:
Immediate Priority Actions:
Review your remittance basis status now. If you claimed the remittance basis in any tax year from 2017/18 onwards, you may have significant planning opportunities before the deadline. Check your tax returns from the past seven years to confirm your status.
Consider designating foreign income under the Temporary Repatriation Facility (TRF). If you have unremitted foreign income or gains earned before 6 April 2025, you can bring these into the UK at reduced tax rates of 12% (for designations made between 6 April 2025 and 5 April 2027) or 15% (between 6 April 2027 and 5 April 2028). This is substantially lower than standard UK income tax rates of up to 45%.
Assess your eligibility for the FIG regime. The four-year exemption only applies if you’ve been non-UK resident for at least ten consecutive tax years immediately before becoming UK resident. If you don’t meet this requirement, you’ll be taxed on worldwide income and gains immediately with no grace period.
Evaluate capital gains tax rebasing opportunities. If you claimed the remittance basis for any tax year from 2017/18 but cannot access the FIG regime, you may rebase your non-UK assets to their market value as at 5 April 2017. This could significantly reduce future capital gains tax liability.
Review trust structures immediately. From 6 April 2025, the protection for settlor-interested trusts ends. If you have offshore trusts, you need to understand how income and gains will now be attributed to you as the settlor, potentially triggering immediate UK tax charges.
Start gathering documentation for worldwide income reporting. Under the new rules, you must report all foreign income and gains on your Self Assessment return, even if claiming FIG exemption. This requires detailed records of foreign bank accounts, investment income, rental income, and capital transactions.
Book a consultation with a cross-border tax specialist before the April deadline. The complexity of these rules means that mistakes could cost you thousands. Professional guidance ensures you claim all available reliefs and structure your affairs correctly from day one.
Key Changes Introduced for 2025
The Old vs. New: What Changed on 6 April 2025
The transition from the remittance basis to the FIG regime represents one of the most significant tax changes for internationally mobile individuals in decades. Here’s exactly what shifted:
| Aspect | Old Rules (Remittance Basis) | New Rules (FIG Regime – from 6 Apr 2025) | What This Means |
|---|---|---|---|
| How foreign income/gains are taxed | Only taxed in the UK if remitted (brought into the UK) | Taxed on worldwide income and gains as they arise, regardless of location | No more sheltering foreign income offshore to avoid UK tax |
| What counted as a remittance | Complex rules covering money transfers, UK purchases, credit card use, and asset imports | The remittance concept was abolished entirely | Previous “safe” offshore strategies no longer reduce tax exposure |
| Eligibility | Based on domicile status and years of UK residence | Based purely on residence history: must be a non-UK resident for 10+ consecutive years | Domicile becomes irrelevant; the strict residence test applies |
| Duration of relief | Available indefinitely (with increasing costs) | Four-year exemption only, then full worldwide taxation | Time-limited benefit creates urgency for planning |
| Annual charge for long-term residents | £30,000 (after 7 years) or £60,000 (after 12 years) | No annual charge under the FIG regime | Lower upfront cost, but no long-term option |
| Personal allowance and CGT exemption | Forfeited when claiming remittance basis | Lost when claiming FIG exemption (£12,570 and £3,000 respectively) | Similar cost for using the exemption |
| Reporting requirements | Only remitted amounts needed detailed reporting | All foreign income and gains must be reported, even if exempt under FIG | Significantly increased compliance burden |
| Trust protections | Settlor-interested trusts protected from attribution | Trust protections ended from 6 April 2025 | Major impact on offshore trust structures |
Alright, so 2025 is a pretty big year for tax changes in the UK, especially if you’re someone who’s been living here but wasn’t born here (non-domiciled, as they say). The old way of doing things, the remittance basis, is getting the boot. It’s being replaced by something new called the Foreign Income and Gains (FIG) regime. This is a pretty significant shift, and it’s going to affect how many people handle their taxes on income earned outside the UK.
Abolition of the Remittance Basis Regime
Starting 6th April 2025, the remittance basis system will no longer exist. For years, this allowed individuals who weren’t domiciled in the UK to only pay UK tax on their foreign income and gains if they actually brought that money into the UK. If you kept it offshore, it was generally safe from UK tax.
This system was complex and, frankly, a bit of a headache for many. The government is getting rid of it to simplify things and, they say, make the tax system fairer.
Introduction of the Foreign Income and Gains (FIG) Regime
So, what’s taking its place? The new Foreign Income and Gains (FIG) regime. This is a pretty big deal. Under FIG, individuals who have been in the UK for a certain number of years will be taxed on their worldwide income and gains, regardless of whether they bring that money into the UK or not. It’s a move towards taxing people based on their residency rather than their domicile status.
Impact on Non-Domiciled Individuals
What does this all mean for you if you’re a non-domiciled individual? Well, your tax obligations are changing significantly. If you’ve been relying on the remittance basis to manage your foreign income and gains, you’ll need to get to grips with the new FIG rules.
This means you’ll likely be paying UK tax on a much broader range of your foreign earnings and profits going forward. It’s a move that shifts the focus from where you’re from to where you live. Expect to see more detailed guidance from HMRC as the year progresses, but the core change is that the old system is ending, and a new, more straightforward (in theory) system is taking over.
The government’s aim with these changes is to create a more modern and equitable tax system. By removing the remittance basis, they’re trying to close loopholes and ensure that everyone living in the UK contributes to the tax system in a more consistent way, based on their residency status rather than their place of origin.
Here’s a quick rundown of some other related changes happening around the same time:
| Area of Change | What’s Changing | When It Happens | Impact / Reason for Change |
|---|---|---|---|
| Overall Tax Policy Direction | Abolition of the remittance basis; move to the Foreign Income & Gains (FIG) regime | From 6 April 2026 | Creates a more consistent, residency-based tax system and closes long-standing non-dom loopholes |
| Capital Gains Tax (CGT) on Asset Sales | Potential increase in CGT rates, especially for individuals claiming Business Asset Disposal Relief (BADR) or Investors’ Relief | Expected from April 2025 | Raises additional revenue and aligns capital gains more closely with income tax rates |
| Carried Interest Taxation | Carried interest expected to be taxed at higher CGT rates | From April 2025 onwards | Targets perceived tax advantages for private equity and investment fund managers |
| Pension Lifetime Allowance (LTA) | Harder to claim LTA enhancements or protections | Phased-in from 2025 | Limits access to legacy protections, tightening pension tax rules |
| Furnished Holiday Lettings (FHL) Regime | FHL tax advantages abolished; transitional rules to assist affected landlords | From April 2025 | Removes favourable treatment that previously allowed interest relief, capital allowances, and reduced CGT rates |
Offshore Trusts Under the New Rules: Major Changes Ahead
If you’ve used offshore trust structures for tax planning, 6 April 2025 marks a fundamental shift. The protections that made these structures effective under the remittance basis have largely disappeared.
End of Settlor-Interested Trust Protections
Previously, if you were UK resident but non-domiciled and settled an offshore trust, the income and gains of that trust generally weren’t attributed to you for UK tax purposes. This “protected trust” status shielded substantial wealth from UK taxation.
From 6 April 2025, this protection ends. If you’re the settlor of a trust and you or your spouse can benefit from it (a “settlor-interested trust”), the income and gains of that trust are now attributed to you annually. This applies regardless of whether you claim FIG exemption or not.
The impact on income attribution is immediate. Any income arising to the trust from 6 April 2025 onwards can be attributed to you as UK taxable income in the year it arises. If the trust generates £50,000 in foreign dividend income in 2025/26, that £50,000 is potentially taxable on you at your marginal rate.
Gains attribution follows similar rules. Capital gains realised by the trust are attributed to you and counted against your UK CGT annual exemption and taxed at UK CGT rates. Given the loss of the annual exemption when claiming FIG, this creates a double penalty: gains are attributed and you have no exemption to shelter them.
Implications for Protected Trusts with Pre-2025 Income
If your offshore trust accumulated income and gains before 6 April 2025, those amounts may still benefit from some transitional relief. The trust’s “protected income” and “protected gains” (roughly, amounts accumulated when you were protected) aren’t immediately taxable.
However, when the trust distributes these protected amounts to you in the UK, they become taxable as income in your hands. The TRF may apply to such distributions if they meet the qualifying conditions, offering the reduced 12% or 15% rate rather than full income tax rates.
Why You Must Review Trust Structures Immediately
The end of protected trust status means many offshore structures that made sense under the remittance basis are now tax-inefficient or even counterproductive. Continuing to accumulate income in a trust that’s being attributed to you annually may create tax charges without providing any benefit.
You need to assess whether each trust should be:
- Maintained with modified distributions to minimise attribution charges
- Wound up in a tax-efficient manner, potentially using TRF for distributions
- Restructured to exclude the settlor’s benefit and prevent attribution
- Moved to beneficiaries who are non-UK resident and not subject to attribution
This is highly technical work requiring input from both UK tax advisors and trust lawyers in the jurisdiction where the trust is established. Delays risk inefficient tax charges and missed opportunities for transitional relief.
A practical example: Sophia established a Jersey trust in 2018 when she was UK resident and non-domiciled. The trust holds an international investment portfolio worth £2 million. It generates around £60,000 annual investment income and has realised capital gains averaging £40,000 per year.
Under the old rules, Sophia paid no UK tax on this income and gains as long as they stayed in the trust and she didn’t remit distributions. From 6 April 2025, the annual £60,000 income and £40,000 gains are attributed to her for UK tax purposes. At a 45% income tax rate and 20% CGT rate, this creates an annual tax bill of approximately £35,000 (£27,000 income tax + £8,000 CGT) that she must pay regardless of whether she receives any distribution from the trust.
Sophia’s options include winding up the trust and using TRF to access historical accumulated funds, restructuring the trust to exclude her interest, or accepting the ongoing attribution charges if she values the asset protection and estate planning benefits the trust provides.
What Constituted a Remittance
So, what exactly counted as ‘bringing’ your foreign money or profits into the UK under the old remittance basis rules? It wasn’t just about physically moving cash. The UK tax authorities had a pretty broad definition, and honestly, it could get complicated fast.
Direct Transfers to the UK
This is probably the most straightforward part. If you moved money from an overseas bank account into a UK bank account, that was a remittance. Simple enough, right? It also included using those foreign funds to buy property or just to pay off debts you had here in the UK.
Indirect Use of Foreign Funds in the UK
This is where things got a bit more nuanced. You didn’t have to physically bring the money over for it to count. For instance, if you used a foreign credit card to pay for a holiday in London, or bought goods online from a UK seller using funds from your foreign account, that could be considered a remittance. Essentially, if your foreign income or gains ended up benefiting you or someone else in the UK, it might trigger a tax charge.
Examples of Remitted Assets
It wasn’t just about cash, either. Bringing physical assets into the UK that were bought with foreign income or gains also counted. Think about buying a piece of art overseas with your foreign earnings and then shipping it back to your UK home. Or maybe you sold a foreign property and used all the proceeds, including any profits, to buy a place in the UK.
Here’s a quick rundown of common scenarios:
| Scenario | What Counts as a Remittance | Why It Was Taxable Under Old Rules |
|---|---|---|
| Transferring money from an overseas bank account to a UK account | Moving foreign income or gains directly into the UK | Funds derived from foreign income/gains were considered “brought to the UK” |
| Using foreign income to pay for UK services | Paying UK professionals, subscriptions, or expenses with offshore money | HMRC treated payments for UK services as money entering the UK economy |
| Buying UK property with foreign-earned money | Using overseas income or gains to purchase a home or investment property in the UK | Considered a remittance because foreign money was used for a UK asset |
| Paying off UK loans or debts using foreign funds | Settling UK mortgages, credit cards, or personal loans with foreign income | HMRC deemed the economic benefit equivalent to bringing money into the UK |
| Bringing physical assets into the UK that were purchased with foreign income | Artwork, jewellery, vehicles, furniture, etc. bought abroad and imported into the UK | Importing goods funded by foreign income is counted as remitting the value of that income |
The key idea was that if foreign income or gains, or anything derived from them, were used or received in the UK, they could be taxed. This applied whether it was for your direct benefit or for someone else’s, such as a spouse or a child under 18.
It was a complex area, and many people found it easier to get professional advice to make sure they weren’t accidentally falling foul of the rules. Getting it wrong could mean unexpected tax bills.
Financial Implications of the Old System
Before the big changes in 2025, using the remittance basis wasn’t always a free pass. While it helped folks avoid UK tax on money earned abroad, there were costs involved, especially if you stayed in the UK for a while.
Annual Remittance Basis Charges
If you were a UK resident for a good number of years, you might have had to pay an annual charge just to keep using the remittance basis. It was like a fee for the privilege. The amounts could add up:
- £30,000: If you’d been a UK resident for at least 7 out of the previous 9 tax years.
- £60,000: If you’d been a UK resident for at least 12 out of the previous 14 tax years.
This charge was on top of any UK tax you owed on the foreign money you actually brought into the UK. For some, this annual cost made the remittance basis less attractive, especially if their foreign income wasn’t huge or they planned to live in the UK for the long haul.
Loss of Personal Allowances
Another thing to watch out for was that claiming the remittance basis often meant you couldn’t use your UK personal allowance for income tax. This allowance is the amount of income you can earn before paying tax on it. So, even if you only brought a small amount of foreign income into the UK, you might have had to pay tax on the whole lot because you lost that tax-free buffer. It really made you think twice about how much foreign money you brought over.
Impact on Capital Gains Tax
When it came to capital gains – that’s profit from selling assets like stocks or property – the remittance basis had its own set of rules. You generally only pay UK Capital Gains Tax (CGT) if you bring the proceeds of the sale into the UK. This meant you could potentially sell foreign assets and keep the profit offshore without a UK tax bill. However, if you then used that money to buy something in the UK, or transferred it to a UK bank account, that could trigger a CGT liability. It was a complex dance to avoid triggering the tax.
The old system required careful tracking of where money came from and where it went. A simple mistake, like using foreign earnings to pay for a UK holiday, could lead to unexpected tax bills. It was a system that demanded constant vigilance and often professional help to get right.
Navigating the Transition Post-2025
So, the old remittance basis system is out the door as of 6th April, 2025. This means if you’re living in the UK, you’re now taxed on all your income and gains, no matter where they come from. It’s a pretty big shift, and honestly, it’s going to take some getting used to.
The government’s calling it the Foreign Income and Gains (FIG) regime, and it’s basically a move towards taxing everyone on their worldwide earnings while they’re UK residents.
Understanding Your New Tax Obligations
This is the big one. No more choosing the remittance basis to avoid UK tax on foreign income. Now, all your foreign income and gains are potentially taxable in the UK from the moment you become a UK resident. This includes things like interest from overseas bank accounts, dividends from foreign stocks, and profits from selling foreign assets. It’s important to get a handle on what’s considered taxable income and gains under the new rules. The government has put out some guidance, but it can still be a bit dense.
| Area of Obligation | What Has Changed | What This Means For You |
|---|---|---|
| Worldwide Income Now Taxable | All foreign income and capital gains are taxed in the UK as they arise, not when remitted | Interest from overseas accounts, foreign dividends, rental income abroad, and gains from selling foreign assets all fall within UK tax immediately |
| New Reporting Requirements | All foreign income and foreign capital gains must be included on your UK Self Assessment tax return | You must track, calculate, and report all overseas earnings, even if they remain outside the UK |
| Double Taxation Risk | Income may now be taxed both in the UK and overseas | You must check double tax treaties, claim foreign tax credits, and ensure accurate cross-border reporting |
| No Access to Remittance Basis | You can no longer choose to be taxed only on funds brought to the UK | Offshore planning structures must be reviewed — previous remittance strategies no longer reduce UK tax exposure |
| Greater Need for Record Keeping | HMRC expects detailed tracking of foreign income, gains, and overseas tax paid | You need robust documentation for each source of foreign income to claim reliefs correctly |
The shift to taxing worldwide income means a more straightforward system for the UK tax authorities, but it requires individuals to be much more proactive in understanding and reporting their global financial activities.
Record Keeping for Past Filings
If you were using the remittance basis before April 2025, keeping good records is super important. You’ll want to have details of how you were taxed, any remittance basis charges you paid, and how you structured your finances. This information might be relevant for a few reasons, like understanding any transitional rules or if you need to refer back to previous tax years for any reason. It’s not just about the past, though; it’s about having a clear picture of your financial history.
Seeking Professional Tax Advice
Look, tax rules can be complicated, and this change is a big one. Trying to figure it all out on your own might lead to mistakes, and nobody wants to pay penalties or miss out on legitimate reliefs. Talking to a tax advisor who specialises in international tax and the new FIG regime is probably a really good idea. They can help you understand exactly how these changes affect you personally, how to report your foreign income and gains correctly, and how to structure your affairs going forward to be as tax-efficient as possible. It’s an investment that could save you a lot of hassle and money down the line.
| Aspect of Change | Pre-2025 (Remittance Basis) | Post-2025 (FIG Regime) |
|---|---|---|
| Taxable Income | Foreign income/gains only if remitted to the UK | All worldwide income and gains |
| Eligibility | Non-domiciled individuals | All UK residents |
| Complexity | High, due to remittance rules | Moderate, but requires global income reporting |
Understanding the Temporary Repatriation Facility (TRF)
The TRF represents a critical transitional opportunity that you cannot afford to miss. This facility allows you to bring pre-6 April 2025 foreign income and gains into the UK at significantly reduced tax rates, but only for a limited window.
TRF Tax Rates and Timeline
The TRF offers two rate periods designed to encourage earlier repatriation:
12% rate period runs from 6 April 2025 to 5 April 2027. If you designate qualifying foreign income or gains for TRF treatment during this window, you’ll pay just 12% UK tax on the amount brought to the UK. For someone who would otherwise pay 45% income tax, this represents a saving of 33 percentage points.
15% rate period applies from 6 April 2027 to 5 April 2028. The rate increases to 15%, still offering substantial savings compared to standard rates but less generous than the initial period. After 5 April 2028, the TRF closes entirely.
What Qualifies for TRF Treatment
To use the TRF, the foreign income or gains must have arisen before 6 April 2025. This includes unremitted foreign employment income, foreign interest and dividends, foreign rental income, and capital gains from disposing of foreign assets before the cut-off date.
The funds must actually be remitted to the UK during the TRF window. Simply designating them isn’t enough; you need to bring them into the UK banking system or use them for UK purposes within the relevant tax year.
You must make an election on your Self Assessment tax return for the year in which you remit the funds. This election tells HMRC you’re using TRF rates rather than ordinary income tax rates.
Strategic Considerations for TRF
Timing is everything. The 33 percentage point saving between the 12% TRF rate and the 45% top rate of income tax is substantial. If you have £500,000 in unremitted foreign income, bringing it in at 12% costs £60,000 in tax. Under normal rates, you’d pay £225,000. That’s a £165,000 saving for acting quickly.
Consider your liquidity needs. If you need to fund UK property purchases, pay off mortgages, or make substantial UK investments, using the TRF makes these transactions far more tax-efficient. Waiting until after 5 April 2028 means paying full rates.
Review your mixed fund accounts. If you have foreign bank accounts containing a mixture of capital, income, and gains accumulated over many years, the TRF rules include provisions for designating specific amounts. Professional advice is essential here to maximise the benefit and ensure compliance with the ordering rules.
Coordinate with Business Investment Relief. An individual may lend money to, subscribe for shares in, or purchase shares of a UK trading company, including one that develops or manages UK real estate, provided the funds represent foreign income or gains arising before 6 April 2025. The money must reach the company or seller within forty-five days. This allows you to invest in UK businesses without triggering an immediate tax charge, and you can later use TRF when extracting funds.
Don’t forget trust distributions. If you’re the beneficiary of an offshore trust holding pre-6 April 2025 income and gains, distributions to you in the UK may qualify for TRF treatment. This requires careful planning and coordination with trustees.
Real-World TRF Example
Consider Jules, who has £100,000 of unremitted foreign employment income in a Hong Kong bank account from 2022-2024. He wants to buy a flat in London in 2026.
Option 1: Use TRF in 2025/26 tax year
- Brings £100,000 to UK in May 2025
- Makes TRF election on his 2025/26 tax return
- Pays 12% = £12,000 UK tax
- Net proceeds: £88,000 (after TRF tax)
Option 2: Use TRF in 2027/28 tax year
- Brings £100,000 to UK in January 2028
- Makes TRF election on his 2027/28 tax return
- Pays 15% = £15,000 UK tax
- Net proceeds: £85,000 (after TRF tax)
Option 3: Wait and remit after 5 April 2028
- Brings £100,000 to the UK in 2029
- No TRF available
- Pays income tax at 45% (assuming additional rate taxpayer)
- Pays £45,000 UK tax
- Net proceeds: £55,000 (after tax)
By acting in 2025/26 rather than waiting until 2029, Jules saves £33,000 in UK tax. Even compared to using the 15% rate period, acting early saves him £3,000. These are not trivial sums.
Reasons Behind the Remittance Basis Abolition
So, why did the UK decide to ditch the remittance basis system? It wasn’t just a random change; there were some pretty solid reasons behind it. The main goal was to make the UK tax system simpler and fairer for everyone. For years, the remittance basis was a bit of a headache, creating complex situations for both individuals and the tax authorities.
Simplifying the UK Tax System
The old remittance basis rules were, frankly, complicated. They required individuals to track foreign income and gains very carefully, deciding what to bring into the UK and what to keep offshore. This often meant a lot of paperwork and, let’s be honest, confusion. By getting rid of it, the government aims to reduce this complexity. The new system, the Foreign Income and Gains (FIG) regime, is designed to be more straightforward. It means that if you’re a UK resident, your worldwide income and gains will generally be taxed in the UK, regardless of where they arise or whether you bring them into the country. This aligns the UK with many other countries and makes tax affairs less of a puzzle. It’s a big shift, and understanding the new tax obligations is key for everyone affected.
Ensuring Fairer Taxation
Another big driver for this change was fairness. The remittance basis often benefited wealthier individuals who were not domiciled in the UK. They could potentially avoid UK tax on significant amounts of foreign income and gains simply by keeping them outside the UK. This created a perception that the system wasn’t equitable, as other UK residents paid tax on their worldwide earnings. The abolition aims to level the playing field, meaning that all UK residents will now be taxed on their global income and gains. This move is intended to create a more consistent and just tax environment for all.
Modernising Tax Regulations
Tax laws need to keep up with the times, and the remittance basis was starting to feel a bit outdated. In a world where international finance is more interconnected than ever, a system that relied heavily on the physical movement of money into the UK seemed less relevant. The government wanted to update the regulations to reflect modern financial practices, ensure the UK remains competitive, and remain fair. This modernisation is part of a broader effort to make the UK tax system more robust and adaptable to future economic changes. It’s about making sure the UK’s tax framework is fit for purpose in the 21st century.
Your Step-by-Step Plan: Taking Control of Your Tax Situation
If you’re feeling overwhelmed by these changes, that’s completely understandable. Here’s a clear, actionable plan to help you navigate the transition:
Step 1: Understand the New Rules and How They Apply to You
Start by determining your eligibility for FIG. Have you been non-UK resident for ten consecutive tax years before becoming UK resident? If yes, you may qualify for the four-year exemption. If no, you’re immediately taxed on worldwide income and gains from 6 April 2025.
Review your past tax returns to see if you claimed the remittance basis in any year from 2017/18 onwards. This affects your rebasing eligibility and TRF planning.
Step 2: Review Your Current Tax Situation and Foreign Holdings
Create a comprehensive inventory of all your foreign income sources and assets. This should include bank accounts, investment portfolios, rental properties, business interests, pension funds, and trust interests.
For each, estimate the annual income or gains generated and calculate what UK tax would apply under the new rules. This gives you a baseline understanding of your exposure.
Step 3: Get Expert Advice on TRF, FIG Claims, and Restructuring
Book a consultation with a specialist in UK international taxation. Come prepared with your foreign income inventory, recent tax returns, and questions about:
- Whether to make TRF elections and for what amounts
- Optimal timing for bringing foreign funds into the UK
- Whether FIG claims make sense given your personal allowance considerations
- Trust restructuring needs
- Opportunities for rebasing capital assets
This professional guidance is the most valuable investment you can make in managing this transition.
Step 4: Implement Your Tax Strategy and Stay Compliant
Execute the recommended strategies before deadlines pass. This might involve:
- Making TRF elections on your 2025/26 tax return for funds brought to the UK
- Remitting specific amounts to take advantage of the 12% rate
- Restructuring trust arrangements
- Establishing robust record-keeping systems for ongoing compliance
Set up calendar reminders for key dates like 31 January Self Assessment deadlines and the 5 April 2027 and 5 April 2028 TRF rate changes.
Step 5: Monitor Rules and Adjust as Circumstances Change
Tax law is constantly evolving, and your personal situation will change over time. Schedule annual reviews with your tax advisor to:
- Update your FIG claims as circumstances change
- Assess whether you’re approaching the end of your four-year FIG period
- Plan for the transition to worldwide taxation when FIG expires
- Evaluate new planning opportunities as they emerge
This proactive approach ensures you’re always optimising your position and staying ahead of compliance requirements rather than playing catch-up.
Wrapping Up: What This Means for You
So, the UK remittance basis is officially a thing of the past as of April 2025. This change means that if you’re living in the UK, you’ll now be taxed on your worldwide income, no matter where you earned it or if you brought it into the country. It’s a pretty big shift from how things used to work, especially for those who relied on the old rules to manage their foreign earnings. While it might seem like a headache, the government’s aim here is to make the tax system simpler and, they say, fairer for everyone. It’s probably a good idea to chat with a tax advisor to make sure you’re all squared away with your current tax situation, especially if you used the remittance basis before. Things are definitely different now.
Frequently Asked Questions
What was the UK remittance basis all about?
Think of the remittance basis as a special tax rule for people living in the UK who weren’t born there and didn’t consider the UK their permanent home. It meant they only paid UK tax on money they earned outside the UK if they actually brought that money into the UK. If they kept their foreign earnings in foreign bank accounts, they didn’t have to pay UK tax on it.
Who could use the old remittance basis system?
To use the remittance basis, you had to be living in the UK for tax purposes but not be ‘domiciled’ there. Domicile is a bit tricky; it’s about where you consider your permanent home to be. So, many people from other countries living and working in the UK, but still considering their home country as their permanent base, could use this system.
What counted as ‘bringing money into the UK’?
It wasn’t just about sending cash. If you used your foreign money to buy things in the UK, pay for services in the UK, or even buy a house in the UK, that counted as bringing it in. Using a foreign credit card for UK expenses could also be seen as a remittance. It was quite detailed!
Did using the remittance basis cost anything?
Sometimes, yes. If you lived in the UK for a long time (like 7 or 12 years), you had to pay an extra yearly fee, called a Remittance Basis Charge, to keep using the system. This fee could be quite high, £30,000 or even £60,000 a year!
Why did the UK get rid of the remittance basis in 2025?
The government decided to end this system mainly to make things simpler and fairer. They felt it was complicated and that wealthy people living in the UK but from elsewhere weren’t paying their fair share on all their worldwide income. So, they changed the rules so everyone living in the UK pays tax on their global income.
What should I do now that the remittance basis is gone?
Since the old system is gone, you now have to pay UK tax on all your income and money you earn, no matter where you earn it or where you keep it. It’s a good idea to keep good records of your past tax filings and talk to a tax expert. They can help you understand your new tax obligations and ensure you’re following all the rules correctly.
About Simon Misiewicz of Optimise Accountants
Simon Misiewicz FCCA ATT EA is a dual-qualified UK Chartered Certified Accountant and IRS Enrolled Agent specialising in complex US–UK cross-border taxation. As Director of Optimise Accountants and InternationalTaxesAdvice.com, Simon advises American expats living in the UK, UK nationals investing in the US, and globally mobile individuals navigating the interaction between both tax systems.
With expertise spanning US Federal taxation, UK statutory rules, double tax treaties, PFIC reporting, UK remittance reforms, and international property taxation, Simon provides high-level guidance on issues such as US/UK pension treatment, foreign tax credits, LLC/LTD structuring, residency planning, and the FIG (Foreign Income & Gains) regime.
Simon has authored technical articles for leading tax publications, delivered CPD training to professionals, and produced widely viewed videos simplifying US–UK tax for expats, business owners, and investors. His practical, calculations-based approach helps clients reduce risk, avoid double taxation, and stay compliant across jurisdictions that often conflict.
To learn more or request tailored advice, visit:
https://OptimiseAccountants.co.uk
https://InternationalTaxesAdvice.com
