Non-dom status: what changed after the 2025 abolition

Moving to the United Kingdom as an international professional involves navigating a new financial landscape. From 6 April 2025, the government updated the tax system, and understanding these changes will help you manage your wealth effectively. This guide explains the new rules in clear, simple terms. If you feel unsure about your situation, do not hesitate to search for a tax solicitor to guide you, or read more about how UK tax residency and remittance rules actually work in practice.

Key takeaway: Is non-dom status abolished in the UK?

Yes. From 6 April 2025, the United Kingdom completely abolished non-dom status and the remittance basis of taxation. The government replaced it with a fairer system based strictly on tax residence.

Discover below how these changes directly impact your overseas income and long-term financial planning.

UK non-dom reforms: The shift to a residence-based tax regime in the UK

• The Old System: The former domicile framework allowed individuals with a permanent home outside the United Kingdom to receive favourable tax treatment.
• The New Focus: Tax residence is now the sole factor determining your UK tax obligations, based entirely on the number of days you spend in the country.
• The Objective: This residence-based system aims to attract international talent while ensuring long-term residents contribute to public services.

Scenario:

Clara moved from Italy to London six years ago. Under the old rules, she used her Italian domicile to shield her foreign income. Under the new system, because she has resided in the country for more than four years, she must now pay UK tax on her worldwide income.

Remittance basis abolished: Old rules versus the new foreign income and gains regime

The abolition of the remittance basis means individuals can no longer keep foreign earnings offshore to avoid United Kingdom taxes. It is replaced by the Foreign Income and Gains (FIG) regime, which offers 100 per cent tax relief on overseas income and capital gains during your first four years of UK residence.

To qualify and bring these funds into the country tax-free, you must:

• Have been a non-UK tax resident for the previous ten consecutive tax years.
• Actively claim the relief for each relevant tax year.

To help you understand the transition, here is a comparative table:

Fictional scenario:

Lucas, a software engineer from Brazil, relocates to Edinburgh in May 2025. Because he has never lived in the United Kingdom before, he qualifies for the new regime. For his first four years, he can freely transfer his Brazilian rental income into his Scottish bank account without paying a single penny of tax on it.

Transitional rules and non-dom tax changes for existing residents

The abolition of the old rules represents a significant shift for existing residents who previously claimed the remittance basis. To ease this transition, the government introduced the Temporary Repatriation Facility (TRF).

This limited-time scheme allows you to bring historically untaxed foreign income and gains into the United Kingdom at a reduced tax rate over three years:

• Tax years 2025/26 and 2026/27: A reduced tax rate of 12 per cent applies.
• Tax year 2027/28: The rate increases to 15 per cent for the final year.

The impact of non-dom tax rules on overseas trusts and capital gains

The recent changes drastically alter how the United Kingdom treats overseas trusts and capital assets.

• Offshore Trusts: From April 2025, tax protection for offshore trusts is removed unless you qualify for the four-year regime. Trust income and gains are now taxed immediately.
• Rebasing Relief: Former remittance basis users can reset the cost base of foreign assets to their market value on 5 April 2017.
• The Benefit: You only pay tax on asset growth accumulated since April 2017, rather than from the original purchase date, preventing retroactive taxation.

Clarifying common misconceptions:

Many people believe offshore trusts established before 6 April 2025 will continue to benefit from the old non-dom tax protections.

Reality:

This is incorrect. From 6 April 2025, the tax protection for income and gains arising within settlor-interested offshore trusts has been removed for individuals who do not qualify for the new 4-year Foreign Income and Gains (FIG) regime, regardless of when the trust was established.

Non-dom inheritance tax: The new 10-year residence test

The most permanent change is the introduction of a residence-based inheritance tax system, which replaces the traditional domicile test and now applies on top of the existing UK Inheritance Tax threshold rules.

• The Ten-Year Test: Inheritance tax is now based entirely on your length of residence in the United Kingdom. You become a long-term resident once you have lived in the country for at least ten out of the last twenty tax years.
• Worldwide Assets: Once you reach this ten-year milestone, your entire worldwide estate becomes subject to United Kingdom inheritance tax at the standard rate.
• The Departure Tail: If you choose to leave the country after becoming a long-term resident, your estate will remain within the scope of United Kingdom inheritance tax for a period of between three and ten years after your departure.

Fictional scenario:

Omar relocated to Manchester twelve years ago. Under the previous regime, his overseas properties in Egypt were safe from inheritance tax. Under the new non-dom status rules, because he has lived in the United Kingdom for more than ten years, his Egyptian properties are now fully subject to United Kingdom inheritance tax.

FAQs

What happens to the foreign income I earned before the April 2025 changes?

Foreign income and gains arising before 6 April 2025 remain subject to the old remittance basis if brought into the UK. However, the Temporary Repatriation Facility allows eligible individuals to remit these funds until 2028 at reduced tax rates of 12 per cent for the first two years and 15 per cent in the final year.

What replaced non-dom status after April 2025?

The government replaced it with a strict residence-based system. Specifically, new arrivals can benefit from the four-year foreign income and gains regime, which offers full tax relief on overseas money for their first four years of residence.

What happens to my offshore income if I have lived in the UK for five years?

If you have been a tax resident for more than four years, you no longer qualify for any special exemptions. You must declare and pay tax on your worldwide income and capital gains as they arise, exactly as a British citizen would.

The abolition of non-dom status marks a major change to UK tax law. The new residence-based system changes how foreign income, capital gains, trusts and inheritance tax are treated, making it essential to understand how the rules apply to your circumstances.

This guide provides general information only and does not constitute legal advice.

If you need advice on the new rules or restructuring your tax affairs

Qredible’s network of specialist solicitors can help you protect your wealth and remain compliant.

KEY TAKEAWAYS:

• A strict new residence system:The old remittance basis is gone, replaced by a modern framework where your tax obligations depend entirely on how many years you have lived in the country.
• A four-year tax-free window:New arrivals who have not lived in the country for the past ten years can bring their foreign income in completely tax-free for their first four years.
• Global inheritance tax after ten years:Once you have lived in the United Kingdom for ten out of the last twenty years, your entire worldwide wealth becomes subject to inheritance tax, even after you leave.