The UK’s non-domiciled tax regime — long a pillar of Britain’s appeal to global investors, entrepreneurs, and high-net-worth individuals — is undergoing one of its most significant transformations in decades. The Autumn Budget 2025introduces sweeping changes that will redefine how foreign income, capital gains, and remittances are treated. For many non-doms, the reform could mean a substantial increase in tax liability from April 2025.
This article explores what’s changing, who will be affected, and how to prepare — before the transitional window closes.
1. Understanding the Current Non-Dom Regime
To appreciate the scale of the reform, it’s important first to understand what the non-domiciled (non-dom) status entails.
Under the current system, UK residents who are domiciled abroad — meaning their permanent home or origin lies outside the UK — can opt for the remittance basis of taxation. This means:
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They only pay UK tax on income and gains arising within the UK, and
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Foreign income and gains are taxed only if remitted (brought) into the UK.
For years, this has allowed affluent expatriates and long-term investors to live in Britain while legally sheltering foreign wealth — provided they kept those funds offshore.
To prevent indefinite use, the remittance basis charge (RBC) was introduced:
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£30,000 per year after 7 years of UK residence
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£60,000 after 12 years
While the RBC added a cost, many high-net-worth individuals still found it worthwhile for the tax efficiency it offered.
2. The 2025 Reform: A Shift Towards Fairness and Transparency
The government has announced that, from 6 April 2025, the non-dom regime will be replaced with a new residence-based tax system. The reform aims to modernise the tax code, align it with global transparency standards, and ensure that long-term UK residents contribute fairly.
Key Changes:
a) End of the Remittance Basis
From April 2025, foreign income and gains will be taxed on an arising basis — just like UK residents — once an individual becomes UK tax resident for more than four years.
This effectively ends the practice of indefinitely deferring UK tax by keeping funds offshore.
b) Four-Year “Foreign Income and Gains” (FIG) Exemption
A new four-year exemption will apply to new UK residents who have not been resident for at least ten consecutive tax years.
During this period, they will:
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Pay tax only on UK income and gains, and
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Be exempt from UK tax on foreign income and gains — even if remitted to the UK.
This four-year window replaces the remittance basis for newcomers and offers a simpler, time-limited relief.
c) Transitional Relief for Existing Non-Doms
Existing non-doms who lose their remittance basis eligibility will benefit from certain transitional provisions. For example:
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Partial rebasing of foreign assets to April 2019 values, reducing taxable gains.
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A Temporary Repatriation Facility (TRF) allowing them to bring past foreign income and gains into the UK at a reduced 12% tax rate for a limited period.
These provisions are designed to encourage transparency and economic reinvestment in the UK.
3. The Impact: Winners and Losers
New Arrivals
For individuals moving to the UK from April 2025, the four-year FIG regime is good news. It simplifies tax planning and removes the complex remittance rules that often led to accidental liabilities. The UK remains competitive for short- to medium-term residents, especially those coming for professional or investment opportunities.
Long-Term Non-Doms
However, the biggest impact will fall on long-term non-doms — particularly those who have been resident for over a decade and relied on the remittance basis to shelter global income.
From April 2025, such individuals will face:
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Full UK tax on all worldwide income and gains;
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Ongoing reporting requirements under the arising basis;
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Potential exposure to inheritance tax (IHT) after becoming deemed domiciled.
Many may consider relocating, restructuring their assets, or establishing offshore trusts before the reforms take effect.
4. How Offshore Trusts Will Be Affected
Historically, non-doms could use excluded property trusts to keep non-UK assets outside the IHT net and defer tax on underlying income and gains.
Under the new regime:
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Trust protections will largely cease for income and gains arising after April 2025,
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Distributions to settlors or UK-resident beneficiaries will become taxable on the arising basis, and
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Anti-avoidance rules will be tightened to prevent artificial deferrals.
Existing trusts won’t escape scrutiny. HMRC is expected to issue detailed guidance clarifying how income accumulated pre-2025 will be treated, but early signals indicate that protective structures must be reviewed urgently.
5. Estate and Inheritance Tax Implications
Non-doms currently benefit from favourable inheritance tax (IHT) treatment — only UK assets are subject to IHT until the individual becomes deemed domiciled after 15 years of residence.
The Autumn Budget 2025 proposes replacing domicile with residence-based rules, meaning:
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Non-doms may become liable for UK IHT after just 10 years of residence, and
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The relief upon departure will likely take four years to unwind.
This significantly accelerates exposure and underscores the need for proactive estate planning.
6. Practical Steps to Protect Your Wealth Before April 2025
a) Review Your Domicile and Residence Status
Begin by clarifying your UK tax residence under the Statutory Residence Test (SRT).
For those nearing 7 or 15 years of residence, the upcoming year presents a final opportunity to strategically time your tax status and claim remaining reliefs.
b) Consider Realising Gains or Repatriating Income Now
Before 5 April 2025, non-doms may wish to:
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Realise foreign gains to lock in pre-2025 treatment;
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Repatriate funds using the Temporary Repatriation Facility (TRF) at the 12% rate;
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Reorganise offshore structures to avoid post-reform complexity.
c) Rebase Investments to 2019 Values
Take advantage of the 2019 rebasing relief for capital assets held offshore. This allows you to reset the acquisition value, reducing taxable gains when sold later.
d) Establish or Review Trusts
While trust protections are narrowing, certain excluded property trusts may still offer limited benefits if created before April 2025.
Seek professional advice immediately — once the reforms are enacted, options will shrink dramatically.
e) Revisit Pension and Investment Strategies
Since foreign income and gains will now be taxable, consider UK tax-efficient wrappers such as ISAs and pensions to shelter income legally.
For guidance tailored to your financial profile, consult a qualified tax specialist like My Tax Accountant — experts in non-dom and expatriate tax planning.
7. Non-Dom Reforms and Global Mobility
Britain’s new framework brings the UK closer to jurisdictions like Italy and Portugal, which already offer time-limited exemptions for new residents. However, the UK’s four-year window is shorter than Italy’s 15-year flat tax regime, suggesting that some high-net-worth individuals may reconsider their long-term presence in Britain.
Conversely, the clarity and simplicity of the FIG system could attract short-term professionals and foreign investorswho previously avoided the UK due to its complex remittance rules.
8. The Treasury’s Motivation: Political and Fiscal Context
The government’s decision aligns with its broader strategy to:
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Improve fairness by taxing all UK residents on similar terms,
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Increase revenue from foreign-held wealth, and
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Reduce the perception that the UK serves as a haven for elite tax avoidance.
The Office for Budget Responsibility (OBR) estimates the reform could raise over £3 billion annually by 2027 — though critics warn that capital flight and relocation could offset much of the gain.
9. The Transitional Year (2025–26): A Crucial Adjustment Period
The 2025–26 tax year will serve as a transitional phase.
During this period:
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Existing non-doms can elect to use the TRF, repatriating foreign income at 12%;
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New residents arriving before 6 April 2025 may still qualify for part of the old regime;
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HMRC will issue guidance notes on reporting requirements and transitional elections.
Advisers recommend that affected individuals prepare their documentation early — especially proof of source for foreign funds — to avoid compliance disputes later.
10. Potential Unintended Consequences
While well-intentioned, the reforms could have side effects:
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Wealth relocation: Some long-term non-doms may move assets — or themselves — to friendlier jurisdictions.
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Reduced inward investment: High-net-worth migrants often inject capital into UK real estate and startups; their departure could dampen investment flows.
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Administrative burden: HMRC and taxpayers alike will face a surge in complex transitional filings.
That said, proponents argue that the reform strengthens the UK’s reputation as a transparent, modern financial hub, capable of balancing fairness with competitiveness.
11. Case Study: A Long-Term Non-Dom’s Dilemma
Consider an Indian entrepreneur who has lived in London since 2012, claiming the remittance basis and paying the £60,000 annual RBC.
She owns offshore investment portfolios and receives substantial dividends from overseas companies.
From April 2025:
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All foreign dividends and capital gains will be taxable in the UK;
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Her offshore trust income will be subject to annual reporting;
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She may face IHT exposure on global assets.
Her options before April 2025 include:
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Using the TRF to remit old income at 12%;
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Selling certain assets to utilise the rebasing relief;
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Restructuring her estate to limit IHT impact;
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Considering non-residence for one tax year to reset the FIG clock (if practically viable).
Without timely advice, her annual tax liability could triple.
12. What High-Net-Worth Families Should Do Now
Time is short. With less than a tax year to prepare, the following steps are critical:
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Conduct a comprehensive tax review by December 2024;
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Identify trapped foreign income eligible for the TRF;
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Document the source and segregation of clean capital;
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Review IHT exposure and succession plans;
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Coordinate with legal and financial advisers across jurisdictions.
Early planning can mean the difference between a manageable transition and a multi-million-pound tax shock.
13. Looking Ahead: The UK’s Evolving Tax Landscape
The non-dom reform represents a philosophical shift — from domicile-based privilege to residence-based equality.
While some will view it as punitive, others will welcome it as a necessary modernisation of an outdated concept.
For internationally mobile families, the message is clear: the UK is still open for business, but transparency is now the price of access.
14. Final Thoughts
The Non-Dom Tax Changes 2025 mark a pivotal moment for the UK’s tax system and its global reputation. For the wealthy, the message is unmistakable — the era of indefinite offshore shelter is ending.
However, with expert advice and timely restructuring, the transition can be managed effectively. Proper planning before 5 April 2025 may safeguard millions in wealth, ensure compliance, and preserve the UK’s appeal as a home for international talent.
If you are affected or unsure how the reform impacts your finances, consult a trusted adviser such as My Tax Accountant to build a compliant and efficient strategy tailored to your global portfolio.