Residence, Income Tax and Capital Gains Tax Planning

When you live, work or invest across more than one country, understanding how UK Income Tax and Capital Gains Tax (CGT) applies to your income and assets is essential. Following significant reforms introduced from 6 April 2025, the rules have changed considerably, creating both new challenges and genuine planning opportunities for internationally mobile individuals. Taking early specialist advice could make a substantial difference to the amount of tax you pay.

Our Residence, Income Tax and CGT Services

Our Tax team specialises in advising individuals on their UK tax position following the April 2025 reforms. We can help you understand where you stand and put in place a plan to manage your tax position effectively. We can support you with the following services:

• Reviewing your UK residence position and explaining what it means for your income and gains
• Helping you qualify for and make the most of the new Foreign Income and Gains (FIG) regime
• Advising on tax efficient structuring of investments and assets for internationally mobile individuals
• Assisting those who were previously on the remittance basis to understand how the new rules affect them and what transitional options are available
• Reviewing existing trust structures in light of the new regime
• Registering you for self-assessment and completing your UK tax returns

What changed on 6 April 2025?

The reforms introduced on 6 April 2025 represent the most significant overhaul of the taxation of foreign income and gains in a generation:

• The remittance basis of taxation was abolished - non-UK domiciled individuals can no longer elect to be taxed only on income and gains brought to the UK.
• Domicile is no longer the primary factor determining how foreign income and gains are taxed.
• A new Foreign Income and Gains (FIG) regime was introduced in its place, based entirely on UK residency.
• Those who qualify benefit from a four year exemption on foreign income and gains  and can freely bring those funds to the UK with no additional tax charge.

What is my residence status?

UK residence is determined by the Statutory Residence Test (SRT), which looks at:

• The number of days spent in the UK during the tax year
• UK ties such as family, accommodation and work
• The pattern and frequency of visits

An individual is automatically UK resident if they spend 183 days or more in the UK in a tax year. A calculator is available on gov.uk if you are unsure of your position.

Keeping accurate records of days spent in and outside the UK is more important than ever under the new regime.

 

The Foreign Income and Gains (FIG) Regime

The FIG regime is the centrepiece of the new rules and represents a genuinely attractive opportunity for qualifying individuals:

• Available to those who become UK resident having been non-resident for at least 10 consecutive years
• For the first four tax years of UK residence, no UK tax is payable on foreign income and gains
• Those funds can be freely brought to the UK with no further tax charge which is a major improvement over the old remittance basis
• UK income and gains continue to be taxed normally throughout this period
• After four years, all worldwide income and gains become taxable on the arising basis

This is a significant and generous relief but it is only available for four years, so making the most of it from the outset is essential.

How are you taxed after the four year period?

Once the FIG exemption period ends, all income and gains are taxed on the arising basis:

Residence Status	Foreign Income & Gains	UK Income & Gains
UK Resident - first 4 years (after 10+ years abroad)	Exempt under FIG - free to remit	Taxed normally
UK Resident -beyond 4 years or not FIG eligible	Arising basis - fully taxable	Taxed normally
Non-Resident	N/A	UK source income and residential property gains only

Planning Opportunities - How to Reduce Your Tax Bill

The new regime creates a number of valuable planning opportunities. Here are some of the key strategies worth considering:

1. Make the Most of the FIG Window

If you qualify for the four year FIG exemption, the window is finite and should be used strategically:

• Consider realising foreign gains during the four year period whilst they are exempt
• Review the timing of income receipts from overseas to maximise the exemption
• Consider restructuring foreign investments during this period where it can be done efficiently

2. Timing of UK Arrival

For those considering relocating to the UK, when you arrive matters enormously:

• Arriving at the start of a tax year (6 April) maximises the four year FIG window
• Careful planning around the timing of asset disposals before arrival can significantly reduce future UK CGT exposure
• Realising gains on foreign assets before becoming UK resident means they fall entirely outside UK CGT

3. Rebasing of Foreign Assets

Transitional provisions introduced alongside the new regime include the ability to rebase certain foreign assets to their April 2017 value for CGT purposes for those who were previously non-domiciled. This can significantly reduce the gain subject to UK CGT on a future disposal and should be reviewed carefully.

4. Using Annual Exemptions and Lower Rate Bands

For those now on the arising basis:

• Both spouses should use their annual CGT exemption (currently £3,000 each) every year
• Consider transferring assets between spouses to utilise a lower rate taxpayer's CGT rate
• Spreading disposals across tax years to avoid pushing gains into higher rate bands
• Making use of ISA allowances to shelter future income and gains from UK tax

5. Timing of Departure from the UK

For those planning to leave the UK, careful timing can reduce the tax cost:

• Deferring the realisation of gains until after ceasing to be UK resident can remove them from UK CGT entirely, subject to anti-avoidance rules
• The split year rules should be reviewed to establish the earliest date non-residence can be claimed
• Be mindful that UK residential property gains remain taxable regardless of residence status

6. Pension Contributions

• Making UK pension contributions can reduce taxable income significantly, particularly for higher and additional rate taxpayers
• Contributions attract tax relief at your marginal rate and the funds grow free of UK income tax and CGT within the pension wrapper

A Note on Trusts

Trusts can still play a role in international tax planning, but the landscape has changed significantly following the April 2025 reforms:

• Offshore trusts that were previously effective in sheltering foreign income and gains for remittance basis users require careful review under the new rules.
• The tax treatment of trust income and gains now depends more heavily on the residence of the beneficiaries than their domicile.
• Trusts established before the rule changes may retain some benefits under transitional provisions but this is a complex area.
• For the right individual, trusts can still provide legitimate planning opportunities particularly around IHT but specialist advice is essential before any action is taken.

How we can help

We advise a wide range of clients on their income tax and CGT position under the new regime, including:

• New arrivals to the UK looking to maximise the FIG exemption
• Those approaching the end of their four year FIG window who need to plan for the transition to full arising basis taxation
• Long term UK residents previously on the remittance basis who need to adapt their arrangements to the new rules
• Individuals leaving the UK who wish to manage their tax exposure on departure
• Those with existing offshore structures that need to be reviewed and potentially restructured

The April 2025 reforms have created a fundamentally different landscape for internationally mobile individuals. Whether you are arriving in the UK, already here, or planning to leave, the opportunities and risks are significant. Early advice is always the most valuable as waiting until decisions have been made or thresholds crossed can be costly.

If you would like to speak to our team about your income tax or CGT position under the new rules, please contact a member of our tax planning team.