How Businesses and Investors Can Navigate Tax in the UK After Non-Dom Abolition

Introduction to the New UK Tax Landscape

As of 6 April 2025, the UK has abolished the non-domicile (non-dom) tax regime, a significant shift in its tax system after over 200 years. This change, introduced in the Autumn Budget 2024, replaces the non-dom system with a residence-based tax regime, aligning the tax treatment of all UK residents. For businesses and investors, the new Foreign Income and Gains (FIG) regime and transitional measures offer opportunities to manage tax liabilities effectively. This guide explores how to navigate the new tax rules in the UK, tailored for businesses and investors.

Understanding the New FIG Regime

The non-dom regime, which allowed UK residents with a foreign domicile to avoid tax on foreign income and gains unless remitted to the UK, ended on 6 April 2025. It has been replaced by the Foreign Income and Gains (FIG) regime, a residence-based system that offers tax exemptions for qualifying new residents.

Key Features of the FIG Regime

• Four-Year Tax Exemption: Individuals who become UK tax residents after at least 10 consecutive years of non-UK residency can claim a 100% exemption on foreign income and gains for their first four years of UK residency. This applies to both new arrivals and returning British expats.

• Election Required: You must elect to use the FIG regime each tax year, nominating specific sources of foreign income and gains. However, electing FIG means forgoing personal allowances and capital gains tax exemptions.

• No Remittance Basis: Unlike the non-dom regime, the FIG exemption allows foreign income and gains to be brought into the UK without tax during the four-year period. After this period, worldwide income and gains are taxed as for any UK resident.

  
  

To maximise these benefits, consult a reputable accounting firm like Foundry Accounting to assess eligibility and create a tailored tax strategy.

Top Strategies to Manage Tax in the UK

Here are three key strategies for businesses and investors under the new tax regime:

1. Leverage the FIG Regime

If you qualify as a new UK resident (non-UK resident for the prior 10 years), elect the FIG regime to avoid tax on foreign income and gains for up to four years. This is ideal for investors with significant overseas assets or businesses with international operations. Ensure proper documentation to comply with HMRC requirements.

2. Utilise the Temporary Repatriation Facility (TRF)

For those who previously used the non-dom remittance basis, the TRF allows you to bring pre-6 April 2025 foreign income and gains into the UK at a reduced tax rate: 12% for 2025/26 and 2026/27, and 15% for 2027/28. This is a time-limited opportunity, requiring an election in your tax return. Seek advice to determine if TRF is cost-effective for your situation.

3. Benefit from Double Taxation Treaties

The UK’s double taxation treaties remain crucial to avoid paying tax twice on the same income or gains. These agreements ensure you pay tax only in one jurisdiction—either the UK or the country where the income was earned—making them essential for businesses with global operations or investors with international portfolios.

Preparing for Tax Compliance in the UK

To navigate the new tax regime effectively, follow these steps:

1. Consult an Accountant: Work with experts like Foundry Accounting to confirm your residency status and eligibility for the FIG regime or TRF. They can help you navigate HMRC’s complex requirements and optimise your tax strategy.

   
   

2. Segregate Funds: Maintain separate accounts for pre-6 April 2025 foreign income, investment proceeds, and UK-based earnings to simplify tax reporting and ensure compliance with TRF rules.

   
   

3. Plan for Inheritance Tax (IHT): The IHT system is now residence-based. If you’ve been a UK resident for 10 out of the last 20 years, your worldwide assets are subject to IHT, with a 10-year “tail” after leaving the UK. Consider setting up trusts before 6 April 2025 to protect non-UK assets, as some pre-existing trust protections remain.

   
   

4. Review Offshore Trusts: Protections for non-UK trusts have been removed unless you qualify for the FIG regime. UK-resident settlors may now face tax on trust income and gains. Consult an adviser to restructure trusts if needed.

   
   

Why the UK Remains Attractive for Investors

Despite the non-dom abolition, the UK remains a hub for businesses and investors due to its robust financial infrastructure and double taxation treaties. The FIG regime provides a four-year tax holiday for new residents, and transitional reliefs like the TRF ease the shift to the new system. However, careful planning is essential to comply with HMRC regulations and minimise tax liabilities.

Conclusion

The abolition of non-dom status marks a significant change, but businesses and investors can still manage taxes effectively under the new residence-based system. By leveraging the FIG regime, TRF, and double taxation treaties, you can optimise your tax strategy. Contact a trusted accounting firm, such as Foundry Accounting, to develop a personalised plan tailored to your needs.

Ready to navigate the UK’s new tax regime? Contact Foundry Accounting today for expert advice on minimising your tax burden legally and effectively.