Abolishing the UK non-dom regime in 2025: six key insights for advisers

From 6 April 2025, the United Kingdom’s non-domicile (non-dom) regime will be abolished, bringing about fundamental changes that will affect your clients with overseas wealth. As an adviser, you need to ensure they understand what the new tax environment will look like.

What follows is an overview of the UK Government's existing guidance and draft legislation, with some of the key points for consideration being highlighted.

1. What is happening to the UK's non-dom regime?

Announced in the Autumn Budget 2024, the UK’s non-dom regime is to be abolished.

The abolition of the non-dom regime means that foreign wealth may become subject to UK tax sooner than would otherwise be the case. There are however transitional measures, such as the Foreign Income and Gains (FIG) regime and Temporary Repatriation Facility (TRF), which may (depending on the client) offer strategic advantages if implemented correctly.

2. What is happening to the remittance basis?

Under the remittance basis, non-dom clients only incurred UK tax on foreign income and gains when those funds were remitted to the UK. This structure often led to substantial offshore tax efficiencies.

As of 6 April 2025, all taxpayers resident in the UK under the Statutory Residence Test will be taxed on any foreign income and gains when they arise, no matter where those funds are located. This fundamental shift means that opportunities (like those under the TRF) to gradually introduce foreign wealth to the UK without subjecting it to the full rate of domestic tax are limited.

3. What is the TRF for?

For non-dom clients who historically relied on the remittance basis, the TRF offers a three-year window (2025/26 to 2027/28) to bring unremitted offshore income and gains into the UK at a preferential tax rate: 12% if designated and repatriated to the UK in 2025/26 or 2026/27; and 15% if designated in 2027/28.

There are several aspects to the TRF that need to be considered before making use of it, including:

• Partial Designations: Clients can choose to designate only a portion of their offshore funds, balancing immediate cash-flow needs against potential future liabilities
  
  
• No Foreign Tax Credits: The TRF charge applies on the gross amount - no relief is given for foreign tax already paid
  
  
• Post-2028: After 5 April 2028 all 'new' foreign funds, whether remitted to the UK or not, fall under the standard UK Income Tax or Capital Gains Tax (CGT) rules. However, for foreign income and gains that was 'subject to' the remittance basis prior to 6 April 2025, different rules will apply
  
  
• Foreign tax consequences: The decision to utilise the TRF may be prompted by a desire to settle in the UK for the long term. The entrance of foreign funds to the UK via the TRF, and their corresponding exit from another jurisdiction, may crystalise tax liabilities outside the UK.

4. What is the FIG regime?

For newly arrived or returning clients to the UK, the Government will introduce the FIG regime to allow individuals to bring most (but not all) of their foreign wealth to the UK free of any tax.

The FIG regime is, strictly speaking, intended for those that are coming to the UK for the first time, or returning to the UK after an extended absence. In order to use it, an individual must be within their first four tax years of UK residence after being non-resident for 10 consecutive years.

Some of the key points to note regarding the FIG regime are:

• A claim is made on a source-by-source basis, allowing partial relief on specified foreign income or gains
  
  
• Use of the FIG means that an individual will lose both their Personal Allowance for Income Tax purposes, and Annual Exempt Amount for CGT for the year they make use of the FIG regime
  
  
• The opportunity to use the FIG regime is limited: once the four-year window closes, normal UK taxation applies.

5. How is UK Inheritance Tax (IHT) changing?

One of the most impactful changes is the shift from domicile-based IHT to a residence-based approach.

Historically, non-doms only had to be concerned with IHT on death if (1) they held UK sited assets valued in excess of the prevailing Nil Rate Band, or (2) they were classed as ‘deemed domiciled’ in the UK for IHT purposes and their worldwide estate was worth more than the Nil Rate Band. Otherwise, non-UK sited assets (regardless of value) were beyond the scope of IHT.

From 6 April 2025 IHT will only be chargeable if a deceased person, immediately prior to death, had been UK-resident for 10 out of the previous 20 tax years. In that situation, they will be deemed to have been “Long-Term Resident” and subject to IHT on their worldwide estate. This is particularly important for existing non-doms, who will shorty lose the ability to shield foreign assets from IHT on the basis that they claim to be domiciled outside the UK. It will also be important for British expats and those that have established trusts that hold foreign property.

6. Advising non-dom clients moving forward

The abolition of the UK non-dom regime represents a decisive turning point for internationally connected clients managing offshore assets and global income. This development demands that advisers act swiftly to review offshore holdings, evaluate the potential benefits of the FIG regime, and consider whether repatriation under the TRF outweighs leaving funds offshore.

By combining early engagement, detailed planning, and effective compliance strategies, advisers can ensure their clients minimise unexpected tax liabilities and retain confidence in their overall wealth plans. Proactive, holistic advice is essential to thrive in the post-April 2025 UK tax landscape.