The FIG Regime: A Four-Year Window for New UK Arrivals

As part of Rachel Reeves’s first budget in October 2024, the UK’s tax treatment of non-domiciled changed fundamentally from April 2025. The reforms abolish the concept of domicile and introduce a residence-based tax system. The old remittance basis system has been abolished and replaced with the new Foreign Income and Gains (FIG) regime. 

For individuals relocating to the UK after a long period abroad, the new regime offers significant tax benefits during the first four years of residence. However, it operates very differently from the old rules and understanding how it works is essential for anyone considering a move to the UK.

In this guide, we explain the old remittance basis system, who qualifies for the FIG regime, how it works, the benefits and trade-offs, and what happens when the four-year window expires.

Overview of the old remittance basis system

Prior to 6 April 2025, non-domiciled individuals who were UK tax resident could elect to be taxed on the remittance basis. Under this system, UK source income and gains were taxed as they arose in the normal way, but foreign income and gains were only taxed if and when they were brought (or "remitted") to the UK.

In some cases, the remittance basis applied automatically – for example, where unremitted foreign income and gains were below £2,000, or where the individual had limited UK income. In most cases, however, a formal election was required on the individual's self-assessment tax return.

Long-term UK residents faced an annual charge simply to access the remittance basis:

• £30,000 if resident in the UK for at least 7 of the previous 9 tax years

• £60,000 if resident for at least 12 of the previous 14 tax years

The New FIG Regime

From April 2025, all UK residents are taxed on the arising basis of assessment on their worldwide income and gains. However, the FIG regime provides qualifying new UK residents with a complete exemption from UK tax on their foreign income and gains for up to four tax years. This includes income such as overseas employment earnings, rental income from foreign properties, dividends from non-UK companies, and capital gains on the disposal of non-UK assets.

Unlike the old remittance basis, there is no charge to access this relief.

Perhaps most significantly, individuals claiming FIG relief can bring their exempt foreign income and gains into the UK without triggering any UK tax liability. Under the old remittance basis, bringing foreign income or gains into the UK would have resulted in an immediate tax charge. This fundamental change makes the new regime far more flexible for those funding a new life in the UK.

Who Qualifies?

To qualify for the FIG regime, an individual must meet the following conditions:

1. Non-UK resident for at least 10 consecutive tax years immediately before the tax year in which they become UK resident

   
   

2. Become UK tax resident under the Statutory Residence Test (SRT)

   
   

3. Be within the first four tax years of UK residence

The four-year clock starts from the first tax year of UK residence. If you become UK resident in 2025/26, you can claim the FIG regime for 2025/26, 2026/27, 2027/28 and 2028/29. After that, you will be taxed on your worldwide income and gains as they arise, regardless of whether funds are kept offshore.

Example

James has never been resident in the UK and moves to the UK for the first time on 1 May 2025, he is UK resident under the SRT for the 2025/26 tax year. 

As James is UK tax resident under the SRT and has been non-UK resident for the previous tax years, he is a qualifying resident and can claim for the FIG regime in the first four tax year up to the 2028/29 tax year. 

What Income and Gains are Exempt?

When claiming FIG relief, the following foreign income and gains are exempt from UK tax:

• Foreign employment income

• Foreign self-employment and business profits

• Overseas rental income

• Dividends from non-UK companies

• Interest from overseas bank accounts and investments

• Foreign pension and social security benefits

• Capital gains on disposal of non-UK assets (e.g. foreign property, shares in overseas companies)

UK source income and gains remain taxable in the normal way. The exemption applies only to income and gains arising outside the UK.

The Trade-Offs

While the FIG regime offers substantial benefits, there are important trade-offs to understand:

Loss of Personal Allowances: In any tax year where FIG relief is claimed, you lose your income tax personal allowance (currently £12,570) and the CGT annual exempt amount (currently £3,000). This means your UK income and gains are taxed from the first pound.

Foreign Losses Cannot Be Used: Any losses arising on foreign income or gains during a FIG year cannot be set against other income or gains. This includes both foreign trading and property losses. These losses are essentially wasted.

Full Reporting Required: You must still declare all worldwide income and gains on your UK tax return, even though the foreign elements will be exempt. HMRC requires full disclosure.

Year-by-Year Election: You don't have to claim FIG relief in every eligible year. In some cases, it may be beneficial not to claim, for example, if your foreign income is low in a particular year and you want to preserve your personal allowances for UK income.

Worked examples

While the FIG regime is an attractive provision for new residents, every individual circumstances are different and whether the regime is beneficial depends on your individual circumstances. A detailed review of your income and gains, assets and objectives should be done proactively. 

For example, assuming an individual relocates to the UK after twenty years abroad. They have the following income: 

• Foreign consultancy income: £200,000

• Foreign rental income: £50,000

• Foreign dividend: £30,000

• UK bank interest: £5,000

If he were not to make the FIG claim, the tax on his foreign income would be approximately £115,000. With the FIG claim, his UK tax liability would be nil, with the only liability arising on the UK bank interest, which would be taxed regardless.

The loss of the personal allowance would be irrelevant for this individual, as he would lose it regardless as he is an additional rate taxpayer.

The annual savings would be approximately £115,000 each year, which would compound to about half a million if he were to make the claim each year. 

The benefit is that the individual can bring all of this exempt income into the UK to fund their lifestyle without any additional tax charge.  

Planning for Life After FIG – what happens after the first four tax years?

The four-year window passes quickly, and planning should begin well before the relief expires. From year five onwards, you will be taxed on worldwide income and gains as they arise.

Key planning considerations include:

Realise Gains During the FIG Period: If you hold foreign assets with significant unrealised gains, consider whether to dispose of them during the four-year window while gains remain exempt. Once the window closes, any gains realised will be fully taxable.

Restructure Investments: Review your investment portfolio and consider whether any restructuring would be beneficial before year five. This might include consolidating holdings, crystallising gains, or repositioning assets.

Understand the IHT Position: From 6 April 2025, inheritance tax is based on long-term UK residence rather than domicile. An individual becomes subject to UK IHT on worldwide assets after being UK resident for 10 out of the previous 20 tax years. The FIG regime does not provide any relief from IHT, so estate planning should be considered alongside income tax planning.

Consider Leaving Before Year 10: Individuals who leave the UK before becoming long-term resident can escape the IHT net entirely on non-UK assets. However, there is a 10-year 'tail' , because once you become long-term resident, you remain within scope of UK IHT for 10 years after departure.

Transitional Rules for Former Remittance Basis Users

Individuals who previously used the remittance basis have access to certain transitional reliefs, including:

• Temporary Repatriation Facility (TRF): Allows previously accumulated foreign income and gains to be brought to the UK at reduced tax rates during a transitional window.

• Rebasing of Foreign Assets: Certain foreign assets may be rebased to their April 2017 values for CGT purposes.

Conclusion

If you are considering relocating to the UK, have recently arrived, or are a former remittance basis user navigating the transitional rules, we can help.

At ASWATAX, we provide comprehensive advice on the FIG regime, including an assessment of your residence status under the SRT, international restructuring, IHT planning and long-term planning after the relief period ends. 

Please contact ASWATAX for a confidential chat and bespoke advice.

Email: taxadvisory@aswatax.co.uk