What Has Changed With The Non-Domicile Tax Status in the UK?

The UK’s non-domicile (non-dom) regime was once a key feature that attracted international investors, professionals, and globally mobile individuals. But as of 6 April 2025, the landscape has changed dramatically. 

The long-standing tax privileges once available to non-doms have now been abolished, with the government introducing a new residence-based regime that applies to both income and gains.

Whether you’re an existing UK resident or planning a move, it’s essential to understand how the changes affect your personal or business finances.

What’s changing in the non-dom regime?

The non-dom regime previously allowed foreign nationals living in the UK to pay tax only on their UK income and gains, and on overseas income only if it was brought into the UK (remitted). 

This was known as the remittance basis, and it provided considerable tax savings for wealthy individuals who kept their global earnings offshore.

However, following growing political pressure and public criticism, the government abolished this regime in April 2025. The new rules mean:

• UK tax residents are now taxed on their worldwide income and gains regardless of where they arise or whether they are brought into the UK.
• The concept of domicile has been removed from the income and capital gains tax rules entirely.
• A new system based solely on UK residence history has replaced the old structure.

This shift marks one of the most significant changes in UK tax law for internationally mobile individuals in decades.

Who qualifies for the 4-year foreign income and gains exemption

To soften the impact for newcomers, the government introduced the 4-Year Foreign Income and Gains (FIG) Exemption. This applies to individuals who become UK tax residents after 10 consecutive years of non-residence.

Those who qualify will benefit from:

• A 4-year window during which they will not pay UK tax on foreign income and gains, provided these funds are not brought into the UK.
• The ability to freely use their offshore wealth for global investments or expenses without triggering UK tax.
• A clear timeline: once the 4 years expire, they will become fully taxable on a worldwide basis.

It’s worth noting that this relief is not automatic—a claim must be made, and strict residence criteria must be met. Also, individuals who were previously UK residents within the last 10 years will not qualify.

For globally mobile professionals or international entrepreneurs moving to the UK for the first time, this relief can provide valuable breathing room to plan ahead.

What transitional rules apply to existing non-doms?

For individuals who previously claimed non-dom status and were UK residents before April 2025, the government introduced a set of transitional rules to ease them into the new system. 

These measures apply only for the 2025/26 tax year and include:

• A 50% reduction on foreign income tax liability for one year only, providing temporary relief from the full impact of worldwide taxation.

• A rebasing option that allows qualifying individuals to revalue their foreign assets as of 5 April 2019, meaning only gains arising after that date will be taxed if those assets are sold.

• A Temporary Repatriation Facility (TRF), which enables people to bring certain historic foreign income and gains into the UK during a limited period at favourable tax rates (12% or 15%).

These reliefs are time-sensitive and come with strict conditions. In particular, the rebasing option is only available for individuals who were non-domiciled and not deemed domiciled as of April 2017. 

The TRF, meanwhile, offers a one-off chance to clean up offshore accounts without the full tax exposure.

If you fall into this group, acting quickly is essential. Once the transitional window closes, no further leniency is expected.

What it means for trusts, inheritance and exit planning

Non-dom status once offered significant protection in the realms of estate planning and trust structuring, particularly for those looking to keep offshore wealth outside the UK tax net. 

The new rules change that.

Key developments include:

The end of trust protections: Settlements made by non-doms before they became deemed domiciled were previously protected from UK tax on income and gains retained in the trust. These protections are now gone unless very specific conditions are met.

A new focus on length of UK residence: Inheritance Tax (IHT) exposure is now determined by whether someone has been a UK resident for 10 of the last 12 years, rather than domicile.

UK residents with more than 10 years of residency will now be subject to IHT on their worldwide estate, even if assets are held in offshore structures.

If you’ve used offshore trusts or have significant overseas wealth, you may now face UK tax on gains or distributions in ways that didn’t apply before. Planning for exit, whether through emigration, asset restructuring, or revised trust strategies, is now a critical consideration for many affected individuals.

Conclusion

The UK’s move to a residence-based tax system marks the end of the non-dom era. With the remittance basis abolished and tax now determined by years of residence, many individuals who once enjoyed significant reliefs will find themselves with a far higher UK tax exposure.

However, transitional arrangements and the 4-Year FIG Exemption do offer a path forward if you act promptly and plan well. 

For new arrivals, there are still planning opportunities to take advantage of, while existing residents may be able to soften the blow through timely restructuring and adviceIf you’re unsure, getting help from a specialist who understands both the rules and your personal situation is a smart move.