UK Non-Dom Tax Changes for Kiwis & Aussies
One of the headline announcements made in the Autumn Budget on 30th October 2024 related to the taxation of non-doms living in the UK. The domicile of individuals residing in the UK has been a major tax planning point since the Napoleonic Wars, and in April 2025, this taxation regime is coming to an end. These changes introduce a completely new tax planning landscape for Kiwis, Australians, and anyone else not domiciled in the UK, which needs to be understood to ensure that foreign income and gains are reported correctly in the UK.
Additionally, there are significant inheritance tax planning changes related to the taxation of non-domiciled individuals. The bottom line is that if you are a Kiwi or Australian who has lived in the UK long enough and then return back home to live permanently, your assets back home like your house, business, shares etc could continue to fall under UK inheritance tax rules for up to ten years. This is an incredibly important tax planning point for Kiwis and Australians in the UK who plan to return home in the future.
The Current Arrangement
For non-doms living in the UK who have foreign income or gains, there is a tax planning strategy available to help determine whether that overseas income or gain is taxable in the UK. Normally, a UK tax resident pays tax on all of their worldwide income. However, up until now, non-domiciled individuals living in the UK have had an option, in certain circumstances, to avoid reporting their foreign income or gains on a UK tax return.
As we’ve covered in our other blogs, if you are non-domiciled in the UK and have foreign income or gains that you don’t plan to remit to the UK, you can leave that income off your UK tax return. This strategy, known as the “remittance basis,” has drawbacks: you lose your personal allowance and your annual capital gains exemption. Also, under the current rules, if you have lived in the UK for long enough, this preferential foreign income and gains taxation option is no longer available. For those who have been in the UK for less than 15 years and have foreign income and gains that remain overseas, it can still be very useful.
A crucial point to remember is that if you have claimed the remittance basis for overseas income, you cannot bring that income into the UK without it being taxed as if you had never claimed the remittance basis; it would simply be treated as taxable foreign income.
Currently, numerous non-dom UK tax residents have used the remittance basis over several years and hold offshore wealth that has not yet been taxed in the UK. This entire setup changes from April 2025, when the concept of non-domicile will disappear altogether from the UK tax code, and the taxation of foreign income will be based purely on tax residency.
Tax Changes from April 2025
The incoming changes set to take effect from April 2025 are significant and far-reaching. I will break down the key elements that have been announced, which I believe will be the most impactful for our accounting clients.
What Does the Abolishment of the Remittance Basis Mean?
For the 2024/25 tax year, this will be the last opportunity to claim the remittance basis. From April 2025 onwards, if you come across any information about the remittance basis or the taxation of non-domiciled individuals, disregard it, as it will no longer apply to any income or gains from 6th April 2025 onward.
Who is Impacted by These Changes?
If you are a UK tax resident with foreign income or gains, you will be affected by these changes. For example, if you have a rental property in New Zealand, you’ll be impacted; if you hold investments in US stock markets, you’ll be impacted; if you receive a large payout from a family Trust in Australia, you’ll be impacted. Essentially, if you have any form of income or hold any assets overseas, these changes will affect you.
Key Dates
These changes will take effect from 6th April 2025, making the current tax year (which finishes on 5th April 2025) the final year in which non-dom individuals living in the UK can make use of the current remittance basis rules to avoid paying Uk tax on unremitted foreign income or gains.
New Rules: Foreign Income and Gains (FIG) Relief
The core change to the taxation of foreign income in the UK lies in the new FIG regime. This provides relief for UK individuals from paying tax on foreign income and gains for up to four years, starting April 2025. There are eligibility criteria and transitional arrangements, which I will cover in more detail below. From April 2025 onwards, the FIG regime will be the new method for taxing foreign income and gains in the UK.
FIG Relief Eligibility
The eligibility criteria for using the new FIG regime are straightforward. Individuals must have been non-UK tax residents for at least ten consecutive tax years immediately preceding their arrival in the UK. This means the regime is available to all newly arrived Kiwis and Australians entering the UK for the first time. It also applies to anyone (including British citizens) who has been outside the UK for more than ten consecutive tax years and then returns to the UK to live.
Runs for Four Tax Years
The FIG regime applies to the first four years of an individual’s UK tax residence, provided they meet the eligibility criteria above. A common question people have is, “I moved to the UK two years ago. Am I still eligible to use the FIG regime?” The answer is yes.
Here’s a quick example: Let’s say Sharon has lived in Australia all her life, and in May 2022, at the age of 26, she decided to move to the UK. Is Sharon eligible to use the FIG regime from April 2025 onwards? The answer is yes. The FIG regime is available for the first four tax years of UK tax residence, and since Sharon was a non-UK tax resident for at least ten consecutive years before arriving, she can use the FIG regime. She was UK tax resident for the 2022/23, 2023/24, 2024/25 tax years, which means she has one year (2025/26) of the FIG regime available to her.
What Types of Income are Covered?
The types of foreign income/gains covered by the new FIG regime include dividends, interest, rental income, business profits, capital gains, and royalties.
FIG Regime Trade-offs and Considerations
Avoiding tax on foreign income and gains for four years can be particularly appealing for new UK tax residents. However, there are trade-offs when using the FIG regime. For most of our clients, the most significant trade-off is the loss of the UK personal allowance and annual capital gains exempt amount. From 2025 onwards, if you claim the FIG regime, you automatically forfeit these allowances, and whether this is beneficial depends on the scale of your foreign income.
Here’s an example:
We’re in the 2025/26 tax year, and we have a new client, Jane, who recently moved to the UK from Australia. She has a rental property in Australia that makes an annual profit of £6,000 (calculated using UK rental property tax rules). Jane also works full-time in the UK, earning £65,000 per year, which is taxed through her payroll normally.
Does Jane use the FIG regime to avoid paying UK tax on her Australian rental income or not?
Option 1: Jane chooses to use the FIG regime. In doing so, she does pay any UK tax on her Australian rental income, but she forfeits her UK personal allowance. This results in an additional tax bill of £5,028 for the year due to the increased tax resulting from her UK full-time earnings.
Option 2: Jane decides to report her Australian rental income on her UK tax return. The additional £6,000 of income generates an extra tax bill of £2,400.
In this case, Jane is significantly better off reporting her foreign income on her UK tax return and not using the FIG regime.
Here’s another example:
We are in the 2025/26 tax year, and we have a new client, Mia, who has recently arrived in the UK from New Zealand. She owns a rental property in New Zealand, which she has held for 12 years and intends to sell in a couple of months. She estimates the capital gain on the property will be £200,000. Mia is aware that, having recently become a UK tax resident, the capital gain over the entire period of ownership is taxable in the UK. Mia works full-time in the UK, earning £65,000 per year, which is taxed through her payroll normally.
Can Mia use the FIG regime to avoid paying UK capital gains tax on the sale of her New Zealand rental property?
Option 1: Mia chooses to use the FIG regime and, in doing so, does not pay tax in the UK on the capital gain related to the sale of her New Zealand property. She does forfeit her UK personal allowance, however and this results in an additional tax bill of £5,028 for the year.
Option 2: Mia decides to report the capital gain on her UK tax return. In doing do, she pays UK CGT at a rate of 28%, which generates an extra tax bill of £68,320.
In this case, Mia would be significantly better off using the Fig regime and obtaining full relief on her UK personal tax return for the foreign gain related to the sale of her New Zealand property.
Transitional Tax Rates and Rules
For non-domiciled UK tax residents who have previously used the remittance basis, this was often to avoid paying UK tax on unremitted foreign income and gains. As a result, many may hold substantial offshore investments or savings that cannot be brought into the UK without incurring a significant tax liability.
To address this, a transitional arrangement has been introduced. For the first two years of the FIG regime, any unremitted foreign income or gains can now be brought into the UK and taxed at a flat rate of 12%. This change aims to create a middle ground between the old remittance basis regime and the new FIG regime. In the third year, any remaining unremitted foreign income or gains brought into the UK will be taxed at a flat rate of 15%.
This effectively provides non-domiciled UK tax residents with a three-year low tax amnesty period to bring unremitted income or gains into the UK and pay a reduced tax rate.
Inheritance Tax Changes
New rules on inheritance tax will be introduced from April 2025 onwards. I won’t go into detail in this blog, but I wanted to highlight this change as it’s important for Kiwis and Australians to understand how it may impact them in the future. Our blog Inheritance Tax Changes for UK Non-Doms in 2025 covers this in much more detail.
From April 2025, new rules will determine if worldwide assets are pulled into the UK inheritance tax regime. Essentially, if you have lived in the UK for ten consecutive tax years or more, inheritance tax planning will become crucial. Even if you leave the UK, your worldwide assets may still fall within the scope of UK inheritance tax, which can lead to significant implications.
In the worst-case scenario, if you move from New Zealand or Australia and live in the UK for 20 years, then decide to move back home, all your worldwide assets could remain subject to UK inheritance tax for the next ten years. This is a critical change for Kiwis and Australians to understand.
Summary
The Autumn Budget on 30th October 2024 introduced major changes to UK tax rules for non-domiciled individuals, which will take effect in April 2025. For Kiwis and Australians living in the UK, this brings an entirely new tax planning landscape, particularly for those with foreign income, gains, or assets.
Historically, non-doms could use the “remittance basis” to avoid UK tax on unremitted foreign income. However, from April 2025, the UK will eliminate this option, requiring all UK tax residents to report their worldwide income. Instead, a new “Foreign Income and Gains (FIG) Relief” will allow qualifying new arrivals to avoid UK tax on foreign income for up to four years, though it comes with trade-offs, including forfeiting the UK personal allowance and capital gains exemptions.
Additionally, changes to inheritance tax will mean that Kiwis and Australians living in the UK for extended periods may have their worldwide assets subject to UK inheritance tax—even after they return home. For those with long-term plans to move back, this could have significant financial implications.
As this new tax landscape unfolds, it’s important for non-doms like Kiwis and Australians to understand and plan for these changes to optimize their tax positions.
Frequently Asked Questions
1. What exactly is changing for non-domiciled individuals in the UK?
From April 2025, the remittance basis, which allowed non-doms to avoid reporting unremitted foreign income is coming to an end. Instead, all UK tax residents, including non-doms, will need to report and potentially pay tax on their worldwide income. A new Foreign Income and Gains (FIG) Relief will allow eligible new arrivals to avoid tax on foreign income for up to four years, subject to eligibility.
2. Who qualifies for the new FIG Relief?
To qualify for FIG Relief, individuals must have been non-UK tax residents for at least ten consecutive tax years immediately before their arrival in the UK. This relief is available for the first four years of UK tax residency, provided these criteria are met.
3. Can I still use the remittance basis for the 2024/25 tax year?
Yes, the 2024/25 tax year will be the final opportunity to use the remittance basis, allowing non-doms to avoid UK tax on unremitted foreign income. From April 2025 onward, the remittance basis will be consigned to the annals of history.
4. How does FIG Relief affect my UK personal allowance and capital gains exemption?
Claiming FIG Relief means forfeiting your UK personal allowance and capital gains exemption. This trade-off can result in higher UK tax on your UK income, so it’s important to weigh the benefits of using FIG Relief versus reporting foreign income directly.
6. How will these changes impact my rental property or investments overseas?
If you own rental property or investments abroad, income or gains from these assets will need to be reported on your UK tax return. FIG Relief can provide temporary relief, but it may still be more beneficial in some cases to report this foreign income on your UK tax return, especially if forfeiting personal allowances and capital gains exemptions would result in higher taxes.
7. How are inheritance tax (IHT) rules changing for non-domiciled individuals?
From April 2025, new IHT rules will apply to those who have been UK residents for ten consecutive tax years or more, which means worldwide assets could fall within the UK inheritance tax regime. This impact may extend up to ten years even if you leave the UK. For Kiwis and Australians planning to return home, this change makes proactive IHT planning really important.
8. I’ve been in the UK for several years already. Am I still eligible for FIG Relief?
This is a really common question, and the answer comes down to when you first became UK tax resident. The four-year FIG relief “clock” starts ticking from the moment you become UK resident. It doesn’t reset just because the regime itself only came in from April 2025. So, if you arrived in the UK before 6 April 2022, you won’t be eligible, as you’ll already have used up your initial four-year window. However, if you became UK resident after that date, and you meet the requirement of having been non-UK resident for at least 10 successive years beforehand, you can still claim FIG relief for whatever remains of your four-year period. For example, if you arrived in the UK in late 2023, you’d be able to claim FIG relief for the 2025/26 and 2026/27 tax years, before the window closes.
9. What types of income and gains are covered under FIG Relief?
FIG Relief applies to a wide range of foreign income and gains, including dividends, interest, rental income, business profits, capital gains, and royalties.
10. Will these changes apply if I’m only staying in the UK for a short period?
Yes, any UK tax resident, regardless of the length of stay, will be affected by the end of the remittance basis and the shift to worldwide income reporting. For those planning a brief stay, FIG Relief may still apply, but eligibility requirements must be met. If you come to the UK for say 8 months, and then leave and come back two years later to live long term, you will not be able to use the FIG regime because you will not satisfy the “been non-UK tax residents for at least ten consecutive tax years” rule.