Spring Budget—out with non-dom status, in with the FIG and TRFs

Following the Chancellor stepping up to the despatch box this afternoon and delivering his Spring Budget, private client partner Rebecca Fisher weighs in on the key announcements and the impact on the private wealth sector. 

From 6 April 2025 there will be a new four-year foreign income and gains (FIG) regime for individuals who become UK tax resident after a period of ten tax years of non-residence. No UK tax will be payable on FIG arising in the first four years and can bring these funds to the UK free of any additional charges - in effect, removing remittance-based taxation. Importantly, there will also be no tax on non-resident trust distributions. Just as is currently the case, anyone qualifying for the FIG regime will pay tax on UK income and gains. This overhaul will serve to hugely simplify the non-dom/remittance tax rules.

In addition, the protection from taxation of FIGs within trust structures will also be removed for non-doms and deemed ‘dom’ individuals who do not qualify for the FIG status.  Any FIG arising on non-resident trusts will be taxed on the settlor or transferor.

The transitional arrangements for those that will not be eligible for the FIG regime will pay tax at 50% on their foreign income (not foreign chargeable gains). From 2026-27, tax will be payable in the same way as for UK taxpayers; everything is in the net.

Those that benefit from remittance basis taxation will be able to elect to pay tax at a reduced rate of 12% on pre-6 April 2025 FIG under a new Temporary Repatriation Facility which will be available for 2025/6 and 2026/7. TRFs will not apply to trust structures.

There are big changes for Inheritance Tax (IHT) too. Albeit subject to consultation, from 6 April 2025 the IHT regime will move from domicile-based regime to residence-based regime. The headlines are that when a person has been resident for ten years they will be subject to IHT on a worldwide basis.

There will also be a ten year ‘tail’ for those that leave the UK. The new rules will also apply to trusts, although there is some comfort that the treatment of non-UK assets settled by a non-dom settlor prior to 6 April 2025 will not change. Will this lead to a big move of assets into trusts prior to the deadline? Quite possibly. 

Rebecca Fisher is in the private client team, working with both UK and international clients, including families, family businesses and entrepreneurs, trust companies and family offices. She regularly advises international clients on the inheritance tax and capital gains tax of property ownership in the UK, as well as advising individuals and family lawyers on the tax implications of separation and divorce.