Understanding the Four-Year FIG Regime

Starting from 6 April 2025, the tax rules in the UK changed for non-domiciled individuals. The previous system of taxing based on the remittance basis has been removed. Now, the focus is only on where you live, not where you are from. This change affects UK tax residents who have income and gains from sources outside the UK.

The End of the Remittance Basis

Before, if you lived in the UK but were not a UK citizen, you could choose to pay tax based on the money you brought into the UK. This meant you only paid tax on foreign income and gains if you actually brought that money into the UK. Long-term residents often had to pay a special fee for this option.

However, this system ended on 5 April 2025. Now, all UK residents—no matter their citizenship status—must pay tax on all their income and gains, no matter where that income comes from. This means that all income and gains, wherever they arise in the world, are taxable in the UK, regardless of whether they are brought into the country.

Introduction of the Four-Year FIG Regime

Starting from 6 April 2025, a new tax rule called the Foreign Income and Gains (FIG) regime will begin. This rule helps people who move to the UK after living outside the UK for at least ten years. If you qualify, you can avoid paying UK tax on your foreign income and gains for up to four years.

The regime is optional, not automatic. An individual must actively make a claim through their self-assessment tax return. The deadline to claim is 31 January in the second tax year following the tax year for which the claim is made. For example, for the 2025/26 tax year, the claim must be submitted by 31 January 2028.

Claims can be made in any of the first four years of residence. They do not have to be consecutive, and one can skip years without affecting eligibility for remaining years. Income and gains must be clearly quantified when making the claim, and only the declared amounts are covered under the relief.

Relief can be claimed separately for foreign income and foreign gains. Additionally, the relief applies on a source-by-source basis. This means individuals can choose which sources to claim for. However, if a loss arises from a particular source, making a claim would forfeit the ability to use that loss, as relief cannot be claimed on losses.

Who Qualifies?

To qualify for the FIG regime, an individual must become a UK resident on or after 6 April 2025, following a period of at least ten tax years of non-residence. Residence status is determined using the statutory residence test from the 2013/14 tax year onwards. Split years of residence count fully as years of UK residence for the purposes of this regime.

For example, if someone was non-resident from 2011/12 to 2024/25 and became resident in 2025/26, they can access FIG relief from 2025/26 to 2028/29. Even if they temporarily leave the UK during the four-year window and return, they may still be eligible to claim relief for the remaining years of the four-year period.

Once the four-year window ends, the individual is no longer eligible to claim relief under the FIG regime unless they spend another ten consecutive tax years outside the UK and return to the UK.

Temporary Repatriation Facility (TRF)

For individuals who previously used the remittance basis and have unremitted foreign income and gains, a temporary repatriation facility offers a way to bring those funds into the UK at reduced tax rates.

From 2025/26, those who elect to use this facility can remit pre-April 2025 foreign income and gains to the UK at a rate of 12% for the first two years (2025/26 and 2026/27) and 15% for 2027/28. The repatriation must be properly designated in the relevant tax year to qualify for the reduced rate. There is no additional UK tax if the designated income and gains are remitted in future years after being taxed under the TRF.

This offers a strategic opportunity for former remittance basis users to bring foreign funds into the UK with minimal tax exposure.

Capital Gains Tax Rebasing Option

If you held foreign assets before 6 April 2017, you can take advantage of a relief option. This allows you to set the value of these assets to their market value as of that date. As a result, you will only pay tax on gains made after 5 April 2017 when you sell the asset, which can lower your tax bill. To qualify, you must have previously claimed the remittance basis and not have been domiciled or deemed domiciled before April 2025.

Important Considerations

The FIG regime offers significant tax relief, but it comes with trade-offs. Claiming foreign income relief means losing the UK personal allowance (£12,570 for 2025/26) and forgoing the capital gains tax exemption (£3,000 for 2025/26). You cannot use foreign income or capital losses to reduce your tax in the same year. This means you need to plan your taxes carefully to ensure the benefits outweigh the costs. The removal of the remittance basis is an important change in how foreign income and gains are taxed. New UK residents must act promptly and comply with filing requirements to maximise transitional benefits and manage their tax exposure effectively.