FIG Regime: Should Kiwis & Aussies Use It?

Introduction

I have spent a lot of time recently talking with clients about the new Foreign Income and Gains regime. We have written before about what the FIG regime is and how it works. What I have been asked much more often in the last few months is a different question altogether: should I actually use it?

It is a fair question, and the answer is less obvious than most people assume.

The default info you will find online, including in quite a lot of expat advice, is that FIG is a gift to new arrivals from New Zealand and Australia. Four years of relief on foreign income and gains, simpler reporting, why would you not? But the more returns we have worked through, the clearer it has become that FIG is not a one-size-fits-all answer. For some clients it saves a meaningful amount of tax. For others, electing in would actually cost them more in tax than it saves.

The difference usually comes down to what is happening in that specific tax year. FIG is not a four-year decision, it is four separate annual decisions, and the right answer can shift from one year to the next depending on what foreign income and gains you actually have.

This blog is a practical walk-through of how to think about that decision. We will look at the trade-off at the heart of FIG, work through four real-world scenarios drawn from conversations I have had with clients this year, and flag the situations where the maths flips one way or the other.

The Trade-off at the Heart of FIG

Before we get into who should and should not use it, it is worth being clear about what you are actually trading.

If you qualify and you elect into FIG for a given tax year, you do not report eligible foreign income and gains in the UK for that year. That can include overseas rental income, foreign dividends and interest, capital gains on foreign assets, and certain pension and trust receipts. In return, you give up two things for that year: your UK personal allowance (£12,570) and your capital gains annual exempt amount (currently £3,000 for 2025/26).

For a basic rate taxpayer, losing the personal allowance costs roughly £2,500 in extra UK tax. For a higher rate taxpayer, the cost rises to roughly £5,000. If you are already earning above £125,140, your personal allowance has already been tapered to nil, so giving it up costs you nothing.

That is the core of it. The question you need to answer each year is whether the UK tax you would otherwise pay on your foreign income and gains is more than the cost of the allowances you give up. If yes, FIG is worth electing into. If no, you are better off filing normally and claiming foreign tax credits where available.

It sounds simple, and in some years it is. In others, the maths is genuinely close, and small changes in the numbers or the type of income can flip the answer.

Who Can Even Use FIG?

Before working through the decision, check whether you are eligible at all. The rules are strict:

1. You must be resident in the UK for the relevant tax year.
2. You must not have been UK tax resident in any of the ten preceding tax years.
3. The relief is available for your first four years of UK tax residence, and no longer.
4. You need to make a claim on your Self Assessment return for each year you want to use it.

The ten-year look-back trips a lot of returning Kiwis and Aussies up. If you lived in the UK on your big OE in your twenties and are coming back now, you may still qualify, but only if the gap has been at least ten full UK tax years. If the gap is shorter, FIG is off the table entirely.

Assuming you are eligible, the real work starts.

Four Client Scenarios

Over the last few months I have had client discussions that map almost perfectly onto four different decision profiles. The names are anonymised and the numbers are rounded, but the situations are real. If you can see yourself in one of them, the answer for you is probably similar.

Scenario 1: The Modest Foreign Income Case (Usually Do Not Elect)

The first scenario is the most common. Picture a Kiwi couple who moved to the UK in early 2024, both working full-time on UK salaries, with a former family home back in New Zealand now being rented out. The property runs at a small loss in New Zealand, mainly thanks to chunky mortgage interest payments. In the UK, after stripping out depreciation (not allowed in the UK) and adjusting the mortgage interest treatment (the Uk treatment is not as generous as NZ), the same property shows a modest profit of a few thousand pounds. There is also a small amount of interest from a New Zealand savings account, maybe a hundred pounds a year.

For this couple, the total foreign income in the UK comes to something like £2,000 each. At the higher rate of 40%, the UK tax on that income would be around £800 per person, before foreign tax credits. If the property is running at a loss under NZ tax rules, there will be no NZ tax credit available to help reduce any UK tax bill.

Electing FIG here would cost them each around £5,000 in lost personal allowance (they are both higher rate taxpayers). The foreign income simply is not big enough to justify giving that up. They are far better off filing normal returns, claiming any foreign tax credits available, and paying the modest UK top-up.

This is probably the profile of most of the Kiwis and Aussies we speak with. If your foreign income runs in the low thousands of pounds per year, FIG is almost always the wrong answer.

Scenario 2: The Large One-off Foreign Capital Event (Usually Elect)

The second scenario is the opposite extreme. This is someone who has a single large foreign financial event in a given tax year, often a pension withdrawal, an inheritance received through a trust, or a deemed exit event.

A recent example was a client who had been looking ahead to her move to the UK and wanted to work out what to do with her KiwiSaver, which had grown to around NZD 220,000. If she brought that into the UK in a normal year, without FIG, the UK treatment could have been punishing, particularly given the mix of capital and growth built up inside the fund. Pension withdrawals from overseas schemes can easily end up taxed as income at the taxpayer’s marginal rate, which for someone already earning a UK salary could mean 40% or more on most of the balance.

Electing FIG in the year she liquidates the KiwiSaver, even at the cost of losing her personal allowance, saves tens of thousands of pounds. The sacrifice is trivial compared to the relief. This is the textbook case for using FIG: a year with a large, identifiable foreign capital event, where the tax avoided comfortably exceeds the cost of the allowances given up.

The same logic applies to several other situations we see regularly:

1. Receiving an inheritance through an overseas trust or estate distribution, where separating capital from income and gains would otherwise be a forensic exercise.
2. A lump-sum superannuation withdrawal following the FIG window start date.
3. Selling a foreign asset with a substantial accumulated gain, where the UK tax in a non-FIG year would be significant.

The common thread is that the foreign income or gain in that year is large enough that the allowance sacrifice is almost an afterthought.

Scenario 3: The High Earner with Substantial Foreign Investments (Usually Elect)

The third scenario is someone on a meaningful UK salary, typically £125,000 and up, who also has ongoing foreign income and gains from before their move. Think of a professional who relocated from Sydney to London, is earning well above £150,000 in their UK role, owns a rental property back in Australia, and has a portfolio of Australian shares that are continuing to vest as part of their remuneration package.

Two things make this person’s calculation different. First, their personal allowance has already been tapered to zero by virtue of their UK salary, so the cost of electing FIG is effectively nil on that front. The capital gains annual exempt amount is also trivial against the size of gains involved. Second, the foreign income and gains are substantial. A Sydney rental might produce a UK-adjusted profit of £10,000 or more, Australian share vesting events can easily run into six figures over four years, and dividend income from offshore holdings adds further exposure.

For this profile, FIG is close to pure upside. Reporting requirements shrink dramatically, substantial foreign tax is avoided, and the allowance cost is either zero or negligible. It is a straightforward win, though it is still worth checking each year because the profile can shift, for example if someone takes a year of lower UK income or sells down assets.

There is also an interesting sub-point for Australian shares specifically, where Article 13.5 of the UK-Australia double tax agreement can interact with FIG in ways that may result in a 0% effective UK capital gains tax rate on certain gains. That is a detailed analysis worth doing carefully, and it is the kind of planning point that is easy to miss if you are not looking for it.

Scenario 4: The Messy Records Case (Elect Pragmatically)

The fourth scenario is less about pure tax arithmetic and more about total cost. Sometimes FIG is the right answer not because the tax savings are dramatic, but because the alternative is weeks of reconstruction work that still leaves you exposed to HMRC challenge.

A good example is a client who received a distribution from a family estate that had been sitting in a New Zealand investment fund for several years. The original capital share was around NZD 90,000, and by the time the estate wound up, his share had grown to around NZD 170,000. To report this without FIG, we would have had to separate the distribution into capital, income, and gain components, apply the UK’s complex offshore trust rules to each element, and potentially restate historic figures that the New Zealand trustees had never needed to track in UK-compatible form.

Even if we had done all that work, the UK tax outcome would likely have been worse than electing FIG, and the accounting fees alone would have run into the thousands. FIG let us sidestep the whole analysis. He paid the cost of giving up his personal allowance for one year, and that was the end of it.

This is a valid reason to use FIG in its own right. If reconstructing the foreign income and gains picture is going to be expensive, uncertain, or both, the regime can be worth using even in years where the pure tax calculation would be close.

Things That Can Flip the Answer

A few factors can push a borderline decision one way or the other. They are worth thinking through each year:

Your UK marginal tax rate

The higher your UK income, the less the personal allowance is worth to you, and the cheaper FIG becomes to elect into. Above £125,140 the personal allowance cost drops to zero. Between £100,000 and £125,140 it is progressively tapered, so the cost of FIG falls as your income rises through that band. Below £100,000 the full allowance is in play, and giving it up costs the most.

The nature of the foreign income

Foreign income taxed at ordinary rates in the UK (rental income, interest, most pension withdrawals) is more likely to make FIG worthwhile than gains that might benefit from lower UK capital gains tax rates. A £10,000 rental profit taxed at 40% is very different from a £10,000 capital gain taxed at 24%.

Foreign tax already paid

If you are already paying substantial New Zealand or Australian tax on the same income, UK foreign tax credit relief often absorbs most of the UK liability. That reduces the benefit of FIG, because there was not much UK tax to save in the first place.

One-off versus ongoing income

A big one-off event in a single year is the ideal FIG scenario. Steady ongoing foreign income spread across four years is trickier, because you are making four separate decisions, and the allowance cost stacks up across all of them.

Whether you are past year four

FIG only lasts four tax years from arrival. If you are approaching the end of the window and have foreign assets you are planning to realise, the timing of that realisation can be worth thinking about carefully. A transaction pulled forward into the FIG window can be substantially cheaper than the same transaction done a year later.

What Clients Commonly Get Wrong

A few recurring patterns I see on the advice side:

The first is treating FIG as automatic. Some arrivals assume they should tick the box because they qualify, without running the numbers. For anyone in scenario one, that assumption costs real money.

The second is treating FIG as a single four-year decision. It is not. You can elect in one year and not the next, and for many people the right strategy is exactly that: use FIG in the year of a major event, and file normally in the other years to preserve the personal allowance.

The third is forgetting that the FIG window is finite. The regime closes at the end of year four, and any planning that depends on it needs to happen inside that window. Waiting until year five to liquidate a pension or realise a gain can cost you the relief entirely.

The fourth is underestimating the interaction with the home-country tax system. Electing FIG in the UK does not change your New Zealand or Australian tax position. A KiwiSaver withdrawal or a deemed disposal still needs to be handled in the home country, and the cross-border coordination is often the trickiest part of getting the outcome right.

How to Work Out Your Own Answer

In practical terms, the decision comes down to three questions you can work through each year:

First, what foreign income and gains will you have in this UK tax year? Rental profits (UK-adjusted, not home-country figures), bank interest, dividends, capital gains on foreign assets, pension withdrawals, trust distributions. Add it all up in pounds at the relevant exchange rates.

Second, what UK tax would you pay on that income without FIG, after foreign tax credit relief? This is the number to beat.

Third, what is the cost of electing FIG for you specifically? The lost personal allowance (adjusted for any tapering) plus the lost CGT annual exempt amount, valued at your marginal rate.

If the answer to question two is bigger than the answer to question three, FIG makes sense for this year. If not, file normally.

In borderline cases there is a fourth consideration: the admin and professional fee cost of preparing the non-FIG return. For straightforward situations that difference is small. For complex trust or pension cases, it can tip a close decision toward FIG on practical grounds alone.

Wrapping it all up

FIG is a useful regime and a meaningful piece of relief for the right people. But it is not a default, and it is not a blanket answer to being a new arrival in the UK. The right call depends on your specific numbers, the type of foreign income you have, and sometimes simply on whether reconstructing the foreign income picture would cost more than the relief is worth.

For most Kiwis and Aussies with modest ongoing foreign income, FIG is the wrong choice. For those with a large one-off event in a year, a very high UK salary, or a genuinely messy foreign financial history, it can be transformative. The work is in knowing which group you are actually in.

At No Worries Accounting, we spend a lot of time on exactly these decisions. We are one of the first firms actually filing FIG returns this year, because the regime is new, and the practical questions of whether and when to elect are what clients most want help with. If you are weighing up the decision for your own situation, the best thing is usually to run the numbers before the tax year ends, while there is still room to plan around the timing of any significant transactions.

If you would like help working through your own FIG decision, get in touch. We will look at your income, your foreign assets, and the timing of anything you might be planning to do, and help you work out whether electing in is the right call this year, next year, both, or neither.