The end of the remittance basis regime in the UK

In the 2024 Budget, the UK government announced the end of the resident non-domiciled (RND) regime with effect from 6 April 2025. This is to be replaced by a new foreign income and gains (FIG) regime.

At this stage, only the broad outlines of the reform proposal have been unveiled, and uncertainties remain over both the technicalities of the reform and its practical application in this UK general election year.

The new FIG regime will now be based on the concept of residence, determined according to the statutory residence test already in force. The main measures of this system have been communicated by the administration:

• The regime will benefit individuals who have not been UK tax residents for the last 10 financial years;
• During the first four years of tax residence, impatriates will only be taxed on their UK-source income. Foreign income will be exempt, with the possibility of repatriating it to the UK tax-free, a major distinction from the former RND regime;
• The FIG regime will be cumulative with the overseas workday relief (OWR) regime, which limits the taxation of a UK resident's professional remuneration to his/her activity on British soil, for the first three years of his/her arrival in the UK.

Current RND taxpayers will no longer be able to benefit from the remittance basis from 6 April 2025. However, transitional measures will be put in place:

• For the 2025/2026 financial year, former beneficiaries of the remittance basis will be taxed on only 50% of their foreign income (capital gains remaining fully taxable);
• Rebasing relief will be introduced, i.e. an increase in the cost price of non-UK assets, held personally, to their market value on 5 April 2019;
• A temporary repatriation facility (TRF) will be granted for the 2025/2026 and 2026/2027 financial years. This will make it possible to repatriate historic foreign gains regardless of their nature (interest, dividends, capital gains, etc.), subject to a fixed rate of 12%.

The inheritance tax (IHT) regime could also be significantly modified, with the concepts of non-UK domiciled and deemed UK domiciled being abandoned. Only residence will now be taken into account. Individuals who have been resident in the UK for at least 10 years will be liable for inheritance tax on their worldwide assets, and will remain liable for 10 years after leaving the UK. Lastly, the trust regime will be adjusted, with trusts set up on or after 6 April 2025 no longer qualifying as excluded property trusts under IHT.

Although this reform is still only at the proposal stage, it seems necessary for RND taxpayers to start thinking now about their asset situation, and about possible adjustments to be considered, both from the point of view of maintaining residence in the UK, and with a view to a possible move abroad.

In this election year, it is interesting to note that Labour (currently in a minority) has already reacted favourably to this proposed reform. Labour is even considering a more rigorous reform of the regime, as well as transitional measures.

We are at your disposal to provide any help you may need, and will ensure we keep you informed of future developments on this subject.