The impact of the new UK FIG rules for moves to the UK

April 2025 saw the introduction of the Foreign Income and Gains (FIG) regime in the UK, one of the most significant changes in UK tax law regarding the taxation of non-UK income and gains in living memory.  

The old rules 

Prior to the introduction of FIG, taxation in the UK depended on an individual’s residence and domicile status.   Many assignees moving to the UK would be considered not UK domiciled. 

An individual who was considered non-domiciled could potentially be exempt from UK tax on investment income and gains from outside the UK that were not remitted to the UK. This is known as the remittance basis of taxation.  By contrast, a UK domiciled and tax resident individual was liable to UK tax on worldwide income and gains. 

Overseas workday relief (OWR) was also available to non-domiciled individuals for the year of arrival in the UK and the next two tax years, so that income relating to days worked overseas could be exempt from UK tax in many cases. 

Domicile starts to come into focus  

The first tightening of the rules came on 6 April 2017, when the concept of “deemed domicile” was introduced. An individual was deemed to be domiciled in the UK once they had been resident in the UK for 15 out of 20 UK tax years. 

A further change introduced at the same time, meant that the advantages of being non domiciled started to reduce once an individual had been UK resident for 7 of the previous 9 tax years. After that point they could elect to continue to be taxable in the UK on a remittance basis and pay an annual charge of between £30,000 and £60,000 depending on the length of time in the UK.   

The new rules 

From 6 April 2025 the concept of domicile for income and capital gains tax is no more. Instead, all UK tax residents are taxable on their worldwide income and capital gains. 

However, relief from UK tax may be available on foreign income and gains (FIG) for the first 4 years of UK tax residence provided certain conditions are met. 

Arriving in the UK on or after 6 April 2025 

Provided the individual was not tax resident in the UK in the 10 tax years immediately prior to arrival, they can make a claim for tax relief on their foreign income and gains. Separate elections are needed for each of foreign income, gains and employment income and these can be made independently of each other. 

Individuals who arrived prior to 6 April 2025 

An individual who arrived in the UK in either 2023/24 or 2024/25, can continue to claim overseas workday relief for the remainder of the first three years and also claim an additional fourth year if they qualify for the FIG regime. 

Timing for making the elections 

The elections for relief under the FIG provisions must be made via the filing of a personal tax return, with the deadline to make the claim set at 31 January following the second tax year after the year to which the claim relates. So, for the 2025/26 UK tax year, the claim must be made by 31 January 2028. 

On the face of it, it sounds much more straight forward. However, as ever, the devil is in the detail. 

The complexities 

Differing rules for pre and post 6 April 2025 arrivals for overseas workday relief 

For the employment election, those arriving on or after 6 April will be subject to a limit on the tax relief of the lower of 30% of employment income or £ 300,000 per year. Conversely, those who arrived in 2023/24 or 2024/25 and who switch to the FIG regime for 2025/26 will not be subject to the limit. 

There are further complexities for individuals who were resident in the UK prior to 6 April 2025, who elected to pay UK tax on the remittance basis. They can choose to take advantage of the “Temporary Repatriation Facility” for the first 3 years of the new rules, allowing them to remit previously unremitted funds to the UK at a reduced rate of tax – 12% for 2025/26 and 2026/27 and 15% for 2027/28. 

Disclosing worldwide income 

Individuals will need to disclose their worldwide income on their UK tax return (something that was not previously required when claiming the remittance basis) and identify which elements of non-UK income they wish to make the claim for relief from on their tax return. 

Having to disclose worldwide income and gains will create additional work for all taxpayers with non-UK sources of income. The fact that the UK has a different tax year end to other countries means that collecting the data may not be straight forward. 

The cost of making the claim for relief 

Taxpayers who claim relief under the FIG provisions will lose their tax-free allowances for both income tax and capital gains tax purposes (£12,570 and £3,000 respectively for 2024/25). Accordingly, those taxpayers with foreign income and / or gains below these amounts may be better off not to claim the reliefs and instead pay UK tax on their worldwide income on an arising basis. 

Winners or Losers? 

High net worth individuals who have been resident in the UK for less than 15 years could see a significant increase in their overall worldwide tax liability if they choose to remain in the UK. Hence, many are considering the advantageous regimes of other countries in Europe.  

Those on “typical” 2-to-3-year assignment to the UK may not see much change in the tax treatment of their non-UK sources of income and gains whilst in the UK, although they will have to disclose these on their tax return and make a claim for relief under FIG. Those who would previously have been able to claim a personal allowance will also have to pay more tax than previously. 

The winners will include any individuals who have worked outside the UK for a significant period of time (more than 10 years) and who are returning to the UK. Under the new rules they can elect not to pay UK tax on overseas income and gains for the first 4 years after their return. 

Other winners will include overseas entrepreneurs who have also not been resident in the UK for the last 10 years. Becoming UK resident may afford them protection from any gain on the disposal of business assets in the country in which they were previously resident by virtue of a Double Taxation Treaty. This additional income coming into the UK would be a welcome balance to offset the reported money being moved offshore for those who have been UK resident for extended periods of time. 

What global mobility professionals need to do 

Communicating the changes? 

While most businesses tend to stop short of offering tax advice, the significant changes mean that they may want to alert individuals to some degree at least.  While professional advice should always be taken, there are certain categories of individual who may need to be made aware that the changes have happened: 

• Those currently in the UK who may want to take advantage of the TRF 

• Those who do not have support for tax return preparation - given that HMRC can charge significant penalties for the incomplete submission of a tax return, care needs to be taken to ensure that taxpayers are aware of the new reporting requirements. 

• Those who are considering moving out of the UK – consider what advice and support you do (or do not) want to offer and make sure the individual is clear on this. 

Some companies may go as far as paying for short tax consultations for each international mover to at least assess whether they have anything to worry about. Employees are likely to be more engaged and productive if they know whether and how they may be impacted. 

Tax return preparation 

Any business supporting tax return preparation may wish to consult with their advisers about helping those in the UK with the gathering of data now that worldwide income needs to be disclosed. 

Move planning 

Split years are treated as full years for the purposes of FIG – it may therefore be worth considering pushing a move planned for late in the UK tax year into the next tax year if this is feasible. For highly compensated individuals, the £ 300,000 limit may impact budgets in a way that would not have been considered previously.