FIG Regime: Smart Reporting or Compromise?

For a lot of Kiwis and Australians, moving to the UK means settling into a new life, and – for the first time – living in a country where they also still have financial ties back in their home country. Often for the first time they are having to think about tax residency and paying tax on income in two countries. That’s why the idea of paying UK tax on income earned from “back home” often comes as such a shock.

Most of the people I speak to have never had to think about this before. In fact, 90% of the Kiwis and Australians I talk to believe that if their (NZ / Aus) income is already taxed back home, they don’t need to worry about it while living in the UK. From their perspective, if it’s taxed already, it’s all good.

Under the old non-dom rules, many were actually complying with UK tax rules without even realising it. If you were a UK non-dom, had foreign income under £2,000, and didn’t bring it into the UK, you were fine – no UK reporting required. That’s why I say many were “accidentally compliant”: they didn’t know the rules, but as it turned out, they didn’t need to report anyway.

But in 2025, the non-dom rules are out, and the new Foreign Income & Gains (FIG) regime is in. Now, if you earn a bit of income f back home, and you live in the UK, you’ll need to declare it on a UK tax return.

If you’re a regular PAYE employee in the UK, there’s normally no requirement to file a UK return. But now, for the sake of a little bit of foreign income, you could find yourself having to start filing – and that’s not ideal.

So, with that rather long intro, let’s look at some real-world scenarios that show when the new FIG regime works for you – and when it really doesn’t.

What Is the FIG Regime?

From April 2025, the UK replaced the old non-dom system with something called the Foreign Income & Gains (FIG) regime. The rules are brand new, and while they’re simpler in some ways, they also bring a few nasty surprises for anyone with overseas income.

At its core, the FIG regime gives certain new UK residents the ability to completely exclude their foreign income and gains from UK tax for a limited time – regardless of whether they bring that money into the UK or not.

Here are the key points:

1. It’s only available for up to four tax years from the point you become UK tax resident.
2. You must claim FIG on your Self-Assessment return each year you want it – it’s not automatic.
3. If you choose FIG, you lose your UK personal allowance (currently £12,570), the CGT annual exempt amount, and (if applicable) Marriage Allowance, Married Couple’s Allowance, and Blind Person’s Allowance for that year.
4. After the four-year period ends, all your worldwide income and gains become subject to UK tax.

The decision of whether to use FIG is usually pretty simple – the key question becomes will you pay more tax in the UK if you report your foreign income, or will you pay more tax in the UK if you exclude your foreign income and lose your allowances. For most people working and earning in the UK, the loss of the personal allowance is usually worse that reporting the foreign income, but we’ll give you some scenarios here to consider.

Who Can Use the FIG Regime?

Not everyone moving to the UK can claim the FIG regime – it’s designed for new UK residents and has a strict time limit.

You can use FIG if:

1. You’ve been non-UK tax resident for the past 10 tax years before arriving (so if you’ve been in and out of the UK in recent years, you’ll need to check the exact dates).
2. You’re still within your first four UK tax years of residence (including the year you arrive).

If you meet these conditions, you can choose FIG for up to four tax years in total. After that, the UK will tax your worldwide income and gains as normal. Note that the four years counts from when you arrive. If you arrived on 01 Jan 2023, then the eligible tax years are 2022/23, 2023/24, 2024/25, and 2025/06. FIG only came in from 06 April 2025, so you get to use it for the just the 2025/26 tax year. If you arrived in the UK on 01 May 2025, you have the current tax year, plus the next 3, to claim FIG.

Scenario Comparisons – Does FIG Work for You?

Scenario 1 – The KiwiSaver & Small Interest Earner

UK situation: Sam works full-time in the UK, earning £65,000 a year through PAYE.

Back home in NZ:

1. KiwiSaver account earning £2,500 in income/gains per year which is taxed in tax at 28%.
2. Small NZ investment fund paying £1,000 in interest income taxed at 15%.

First let’s address the KiwiSaver. If Sam doesn’t withdraw anything from KiwiSaver, there’s no UK tax on that growth in practice. Under FIG, it’s excluded anyway. Without FIG, UK treatment of KiwiSaver can be technical, but for most readers’ purposes: no UK tax until money is drawn. (If withdrawals are made, that’s a separate analysis.).

If Sam uses FIG

1. The £1,000 of NZ-sourced income is completely ignored for UK tax purposes.
2. BUT Sam loses the personal allowance (£12,570), so his £65,000 UK salary is taxed from the first pound.
3. This adds roughly £5,000 extra UK tax compared to having the allowance.

If Sam doesn’t use FIG

1. UK will tax the £1,000 NZ income.
2. He gets taxed on this in the UK at his marginal rate of 40%, so faces a £200 tax bill in the UK (as a higher rate tax payer the first £500 in interest income is tax free).
3. He is able to claim tax relief of up to 10% of the tax paid on this income in NZ. Total tax paid in NZ for Sam was £150, and he gets to use £100 of this.
4. Overall tax effect is a tax bill for Sam of £100.

Net effect: No-FIG wins

Sam pays £100 extra UK tax on the NZ interest, instead of ~£5,000 extra UK tax from losing the allowance under FIG.

Scenario 2 – The High Earner with Aussie Rental

UK situation: Priya earns £130,000 in the UK through PAYE.

Back home in Australia:

1. One rental property showing £5,000 profit per year under UK rules.
2. No Australian tax paid on this because, under Australian rules, the property is loss-making.

If Priya uses FIG

1. The £5,000 Aussie rental profit is ignored for UK tax.
2. There’s no personal allowance anyway (fully tapered out above £125,140), so there’s no downside from losing it.
3. FIG therefore saves the UK tax that would otherwise apply to the rental (~£2,250 at 45%).

If Priya doesn’t use FIG

1. The £5,000 rental profit is added to UK income and taxed at 45%.
2. No DTA credit is available because no Australian tax was paid.
3. Additional UK tax bill: ~£2,250.

Net effect: FIG wins

No personal-allowance downside (it’s gone already), and FIG avoids ~£2,250 of UK tax. Priya just needs to claim FIG on her UK Self-Assessment.

Scenario 3 – The Part-Timer with NZ Income

UK situation: Alex works part-time, earning £5,000 a year.

Back home in NZ:

1. Has savings/investments generating £6,000 a year in interest and dividends.

If Alex uses FIG

1. £6,000 NZ income ignored for UK tax.
2. But loses personal allowance, so the £5,000 UK income is fully taxed (about £1,000 of tax).
3. FIG saves tax on the NZ income but creates tax on the small UK salary.

If Alex doesn’t use FIG

1. £5,000 UK salary + £6,000 NZ income = £11,000 total – still under the £12,570 personal allowance.
2. No UK tax at all.

Winner: No-FIG

Alex keeps his UK tax allowance, his total income from all sources does not exceed the personal allowance, so zero UK tax.

Scenario 4 – The Aussie Super Fund Cash-Out

UK situation: Chris earns £85,000 in the UK.

Back home in Australia:

1. Super fund worth £250,000 (about AUD $500k) – plans to liquidate and bring the funds to the UK.

If Chris uses FIG

1. The £250,000 super withdrawal is ignored for UK tax (so long as Chris is within his FIG window).
2. Losing the £12,570 personal allowance adds roughly £5,000 of extra UK tax on the salary.
3. But that’s a tiny price compared with the tens of thousands of UK tax potentially avoided on the super cash-out.

If Chris doesn’t use FIG

1. Withdrawal taxed in UK as foreign income/gain – potentially £100,000+ UK tax bill at higher/additional rate, depending on treatment.
2. Even after DTA relief, this could be substantial.

Winner: FIG

For UK residents, cashing out Australian (or NZ) pension/super funds is usually highly undesirable from a UK-tax perspective. In a qualifying FIG period, exempting that foreign payout is, frankly, a lifesaver.

Note: The UK treatment of Australian super (and KiwiSaver) is technical and fact-specific (e.g., fund type, components, timing, residency history). FIG neatly sidesteps most of that – but only if Chris is eligible and claims it for that year on his Self-Assessment.

Summary – FIG: A Tool, Not a Default

The FIG regime isn’t automatically a win. It’s a niche tool that works brilliantly in the right circumstances – and can cost you thousands if used in the wrong ones.

From the scenarios above, a few patterns stand out:

1. FIG tends to work best for high UK earners who’ve already lost their personal allowance, or those expecting a large one-off overseas payout (like cashing in a super or KiwiSaver).
2. FIG is usually worse for people with modest UK income and small overseas income – the loss of the personal allowance can outweigh any UK tax saved on foreign income.
3. If your UK income is low enough to fit under the personal allowance, FIG can actually create a UK tax bill where there wasn’t one before.

The decision is less about “can I claim FIG?” and more about “will FIG leave me better off this year?” – and that means running the numbers both ways before you file.

If you’re not sure which route to take, get advice early in the tax year. A short conversation with us at No Worries Accounting, and a few calculations, can be the difference between a smart tax move and an expensive mistake.