Tax on Foreign Income

If you earn money abroad, whether through overseas property rentals, foreign investments, pensions, or business income, you may need to pay UK tax on that income. The rules have always been complex, but from 6 April 2025, major reforms will reshape how the UK taxes foreign income and gains. The abolition of the non-domicile regime and the introduction of the Foreign Income & Gains (FIG) regime mean many people will face new reporting obligations — and opportunities for careful planning.

What Counts as Foreign Income?

Foreign income includes:

• Wages or salary from overseas employment
• Rental income from properties abroad
• Dividends and investment income from non-UK sources
• Pensions from foreign schemes
• Business profits earned overseas

Even if you leave the money abroad and never transfer it to the UK, it still needs to be declared in most cases.

Current Rules vs 2025 Changes

Current position (before April 2025)

• UK residents pay tax on worldwide income under the arising basis.
• Non-residents are taxed only on UK income.
• Non-domiciled residents (non-doms) can choose the remittance basis, paying tax on UK income in full but only paying UK tax on foreign income when it is brought into the UK.

New position (from April 2025)

• The non-dom regime and the remittance basis are being abolished.
• All UK residents will be taxed on worldwide income as it arises, unless they qualify for FIG relief.
• Transitional rules will apply for existing non-doms with historic unremitted foreign income and gains.

The Foreign Income & Gains (FIG) Regime

From April 2025, the FIG regime will allow certain individuals to exclude foreign income and gains from UK tax for a limited period.

Who qualifies?

• Individuals who become UK residents after at least 10 consecutive years of non-residence.
• Relief lasts for up to four consecutive tax years.

Key benefits

• During this period, foreign income and gains are not taxed in the UK, even if brought into the country.
• After the four-year window ends, normal UK rules apply, and worldwide income is taxable on the arising basis.

Transitional Rules and Temporary Repatriation

For those who have previously used the remittance basis, transitional measures will apply from 2025:

• A Temporary Repatriation Facility (TRF) will allow individuals to bring in historic foreign income and gains at a reduced tax rate for a limited time.
• Rebasing options may be available for some assets, reducing capital gains exposure.

These transitional opportunities are time-limited and could provide significant tax savings if used correctly.

Practical Impact of the Changes

Here’s what different groups need to consider:

• Existing UK residents – If you have been using the remittance basis, from 2025 onwards, you will be taxed on worldwide income and gains as they arise. Consider using TRF before the window closes.
• New arrivals to the UK – If you have been non-resident for at least 10 years, you may qualify for FIG relief for your first four years of residence.
• Long-term non-doms – The end of the regime means new planning is essential, especially around offshore trusts, assets, and remittances.

Avoiding Double Taxation

One common concern is being taxed twice on the same income — once abroad and again in the UK. Relief is available through the UK’s system of double taxation relief, which allows you to offset foreign tax paid against your UK liability. Correctly applying these rules can significantly reduce your overall tax bill.

Common Mistakes with Foreign Income

HMRC frequently investigates when:

• Overseas rental income is not reported.
• Dividends or investments are left abroad and assumed to be exempt.
• Pensions from foreign schemes are wrongly treated as non-taxable.
• Non-doms often fail to follow the remittance rules correctly, resulting in unexpected liabilities.

From 2025, with the FIG regime in place, HMRC will pay even closer attention to foreign income declarations.

• Review your residency history and confirm if you may qualify for FIG relief.
• Consider the timing of foreign remittances to maximise the benefits of TRF.
• Review any assets held abroad for potential rebasing.
• Keep detailed records of all overseas income, gains, and tax paid abroad.
• Speak to a specialist tax adviser to create a tailored plan before the new rules take effect.

Learn more about our tax dispute resolution services.

From April 2025, the way the UK taxes foreign income will undergo significant changes. The FIG regime offers relief for new residents, while existing non-doms must adapt to worldwide taxation. Transitional rules such as the TRF create opportunities, but they won’t last forever.

If you earn income abroad, own overseas property, or have unremitted gains, you must act now to prepare.

Contact our specialist tax accountants today. We’ll help you navigate the new FIG regime, transitional rules, and ensure your foreign income is managed tax-efficiently under the 2025 reforms.