Navigate the UK's New Foreign Income & Gains (FIG) Regime and Temporary Repatriation Facility

Navigating the New UK Tax Landscape: The Foreign Income & Gains (FIG) Regime and Temporary Repatriation Facility (TRF)

The UK’s tax landscape for internationally mobile individuals is undergoing its most significant shake-up in decades.  Effective from 6 April 2025, the long-standing concept of domicile as a primary determinant for tax liability has been largely abolished and replaced by a residence-based system.  This seismic shift introduces the Foreign Income and Gains (FIG) regime and a time-limited Temporary Repatriation Facility (TRF), fundamentally altering how non-UK domiciled individuals, and indeed many other international residents, are taxed in the UK.

This article delves into the intricacies of these new provisions, explaining who is affected, what the changes mean in practice, and the crucial planning considerations for those navigating this new era of UK taxation.

The End of the Remittance Basis: A Paradigm Shift

For over two centuries, the UK’s tax system offered a significant advantage to non-UK domiciled individuals: the remittance basis of taxation.  Under this regime, foreign income and gains (FIG) were only subject to UK tax if and when they were “remitted” to the UK.  This allowed many individuals to accumulate substantial wealth offshore, free from UK tax, provided they kept those funds outside the UK.

However, this era of “non-dom” tax status has been drawn to a close.  The new rules, introduced as part of the Finance Act 2025, establish a default “arising basis” of taxation for all UK residents.  This means that from 6 April 2025, almost all UK residents will be taxed on their worldwide income and capital gains as they arise, regardless of where that income or gain originates or whether it is brought into the UK.  This fundamental change aligns the UK more closely with many other developed nations that operate a worldwide basis of taxation.

Introducing the 4-Year Foreign Income and Gains (FIG) Regime

While the remittance basis has being abolished, the government has introduced a new, more streamlined relief for certain new arrivals to the UK: the 4-year Foreign Income and Gains (FIG) regime.  This is a key component of the new residence-based system, designed to maintain the UK’s attractiveness to highly skilled individuals and investors.

Who Qualifies?

The FIG regime is available to “qualifying new residents.”  These are individuals who become UK tax resident after a period of at least 10 consecutive tax years of non-UK residence.  Crucially, eligibility for the FIG regime is based purely on tax residence history, not on domicile, nationality, or any previous use of the remittance basis.

How Does it Work?

If an individual qualifies and makes a claim under the FIG regime, they will not pay UK tax on their foreign income and gains that arise during their first four tax years of UK residence.  This exemption applies whether or not the foreign income and gains are brought into the UK.  This is a significant departure from the remittance basis, where bringing funds to the UK would typically trigger a tax charge.  Under the FIG regime, eligible foreign income and gains can be freely remitted to the UK without incurring an additional tax liability.

Key Features and Considerations

• Four Consecutive Years: The regime is available for a maximum period of four consecutive tax years, commencing from the first tax year an individual becomes a UK resident after the 10-year non-resident period.  If an individual leaves the UK temporarily within this four-year period, they can still benefit from the regime for any remaining qualifying years upon their return.  However, the total period of benefit cannot exceed four years.
• No Tax-Free Allowances: A critical trade-off for claiming relief under the FIG regime is the forfeiture of certain UK tax-free allowances.  These include the personal allowance for Income Tax and the annual exempt amount for Capital Gains Tax, as well as allowances like Married Couples Allowance, Marriage Allowance, and Blind Person’s Allowance if otherwise eligible.  This means that UK-sourced income and gains will be fully taxable from the first pound.
• Claim Required: The FIG regime is not automatic.  Individuals must make an active claim for the relief within their Self Assessment tax return for each year they wish to benefit.
• Worldwide Reporting: Even when claiming relief under the FIG regime, individuals are still required to quantify and report all their foreign income and gains on their Self Assessment tax return.  This is a change from the remittance basis, where unremitted foreign income and gains generally did not need to be reported in detail.
• Types of Eligible FIG: The relief generally applies to foreign income such as profits from a trade carried on wholly outside the UK, overseas property business profits, dividends from non-UK resident companies, and interest from foreign bank accounts.  It also applies to foreign capital gains.
•  Impact on Trust Structures: For individuals benefiting from the FIG regime, the protection from taxation on future income and gains arising within trust structures established by them (or from which they benefit) will be removed after the four-year period.  This means that income and gains arising in such trusts will be taxed on the settlor or transferor if they are UK resident for more than four tax years.
•  Strategic Planning: The four-year window presents a significant opportunity for eligible individuals to structure their affairs and potentially repatriate foreign wealth tax-efficiently.  Careful planning is essential to maximise the benefits and understand the implications once the four-year period expires.

The Temporary Repatriation Facility (TRF)

The abolition of the remittance basis has left many individuals with substantial accumulated foreign income and gains (FIG) offshore that were never remitted and therefore never taxed in the UK.  To address this, and to encourage the bringing of these funds into the UK economy, the government has introduced the Temporary Repatriation Facility (TRF).

What is the TRF?

The TRF is a time-limited opportunity for individuals who previously claimed the remittance basis to remit pre-6 April 2025 foreign income and gains (FIG) to the UK at significantly reduced tax rates.  It is available for three tax years, from 6 April 2025 to 5 April 2028.

Who Can Use It?

The TRF is available to individuals who:

1. Were UK resident,
2. Previously claimed the remittance basis of taxation, and
3. Have untaxed and unremitted foreign income and gains that arose in tax years prior to 2025/26.

How Does it Work?

Reduced Tax Rates

The TRF offers preferential tax rates, designed to incentivise repatriation:

1.  12% for designations made in the 2025/26 and 2026/27 tax years.
2.  15% for designations made in the 2027/28 tax year.

These rates are considerably lower than the standard top rates of Income Tax (currently 45%) and Capital Gains Tax (currently 24% for higher rate taxpayers).

Key Features and Considerations

1.  Limited Period: The TRF is strictly time-limited to three tax years. Individuals must make their designations and pay the associated tax within this window.
2. Personal FIG Only: The TRF generally applies to personally held foreign income and gains.  It does not apply to FIG generated within non-resident trust structures, although there are specific provisions for distributions from trusts made during the TRF period to UK resident beneficiaries.
3.  Designation Process: Individuals must elect to designate the pre-6 April 2025 FIG in their Self Assessment tax returns for the relevant TRF year (2025/26, 2026/27, or 2027/28).  The tax becomes payable in that year, and the funds can then be remitted without further UK tax charges.
4.  Mixed Funds: A particularly valuable aspect of the TRF is its application to “mixed funds.”  Historically, disentangling foreign income, gains, and capital within offshore accounts could be complex and costly.  The TRF allows for the designation of all or a proportion of a source of mixed funds, even where precise analysis is difficult, simplifying the process of bringing funds onshore.
5.  Illiquid Assets: The TRF also extends to illiquid assets, meaning individuals can designate and pay tax on assets (e.g., property, shares) that were originally purchased with FIG, even if they are not readily convertible to cash.
6.  Strategic Opportunity: The TRF presents a significant opportunity for former remittance basis users to regularise their offshore financial affairs at a reduced tax cost.  It enables them to bring funds into the UK for personal use, investment, or to simplify their financial structures without incurring punitive tax liabilities.
7.  Careful Planning Essential: Given the strict deadlines and the need to determine the most advantageous timing for designation, individuals should seek expert tax advice to plan their TRF strategy effectively.  This includes assessing the quantum of pre-6 April 2025 FIG, understanding the source of funds, and considering the most tax-efficient method and timing of remittance.

Broader Implications and Planning Considerations

The combined impact of the new FIG regime and the TRF extends far beyond simply changing how non-doms are taxed.  These reforms have broader implications for wealth planning, trust structures, and international mobility.

For Incoming Individuals

1. Assess Eligibility for FIG: New arrivals to the UK should immediately assess their eligibility for the 4-year FIG regime.  Understanding the start date of their UK tax residency and their prior non-residency history is crucial.
2. Strategic Timing of Arrival: For those considering a move to the UK, the timing of their arrival, especially relative to the 10-year non-residency period, can significantly impact their tax position under the FIG regime.
3. Review Global Assets: Individuals entering the UK should review their global asset base and income streams to understand how they will be taxed under the new worldwide arising basis, or what can be excluded under the FIG regime.

For Existing UK Residents (Former Non-Doms)

1. TRF Utilisation: Former remittance basis users must carefully consider whether and how to utilise the TRF before the 2028 deadline.  This involves quantifying unremitted pre-6 April 2025 FIG and assessing the most tax-efficient approach to bringing funds to the UK.
2. Trust Structures: The changes have profound implications for offshore trust structures.  Existing protected trusts will largely lose their protection from 6 April 2025, meaning income and gains arising in such trusts will be taxed on the settlor if they are UK resident (and have been for more than four tax years).  Comprehensive reviews of existing trust arrangements are critical.
3. Inheritance Tax (IHT): While not explicitly part of the FIG/TRF changes, the broader non-dom reforms include significant shifts in Inheritance Tax.  The concept of domicile for IHT purposes will also be replaced by a residence-based test, bringing long-term UK residents (after 10 years) into the scope of IHT on their worldwide assets.  This requires holistic estate planning.
4. Asset Disposal: For those with substantial offshore assets, strategic disposal or rebasing of assets before 6 April 2025 may have been beneficial to crystallise gains under the old rules or establish a higher cost base for capital gains tax purposes under the new regime. While this specific window has passed for now, ongoing capital gains planning remains vital.

For Businesses and Employers

1. Attracting and Retaining Talent: Businesses that rely on internationally mobile talent need to understand these tax changes to accurately advise prospective employees and ensure competitive remuneration packages.
2. Payroll and Reporting: Employers may need to adjust their payroll and reporting mechanisms to account for the new tax treatments of foreign income and gains for their UK-resident employees.

Conclusion: A New Era of UK Taxation

The introduction of the Foreign Income and Gains (FIG) regime and the Temporary Repatriation Facility (TRF) marks a transformative moment in UK tax legislation.  The abolition of the remittance basis, while significant, is balanced by the new FIG regime for new arrivals and the temporary opportunity presented by the TRF for former remittance basis users.

At Spherical we combine our knowledge and experience to help private clients i.e., individuals and their families with their income tax, capital gains tax and inheritance tax advisory and compliance needs.  We are known for our expertise in taxation of individuals including property taxes, cross-border taxation and income from trusts and estates.  However, each client requirements are different, and we would be happy to discuss your unique requirements with you. Please, get in touch via email at info@sphericaltax.co.uk or by calling our offices on 020 7859 4047.