By Tahir Mahmood and Jonathan Gold | 18 Nov, 2024
A great deal has been written since Rachel Reeves delivered her maiden budget on 30th October. Much of it has focussed on her fiscal policies for raising taxes.
Most notably for the UK-based investor community, some of the announcements focused on the non-domiciled regime of taxation have created some highly significant planning opportunities.
Opportunity Before April 2025: Navigating the Transition to the Foreign Income and Gains (FIG) Regime
With April 2025 on the horizon, the UK tax landscape is poised for significant change. The current non-domiciled (non-dom) regime and the remittance basis will give way to the new FIG regime. Alongside this transition comes a valuable opportunity: the Temporary Repatriation Facility (TRF). Understanding the FIG regime and the TRF is crucial for non-doms seeking to optimise their tax strategy before the deadline.
What Is the FIG Regime?
The FIG regime introduces a major shift in how foreign income and gains are treated for UK tax purposes. Under the FIG framework, qualifying individuals will have the option to exempt their foreign income and gains from UK taxation, regardless of whether these funds are remitted to the UK. This marks a departure from the existing rules under the remittance basis.
What Is the Temporary Repatriation Facility (TRF)?
The Temporary Repatriation Facility (TRF) provides a unique, time-limited opportunity for non-doms to bring foreign income and gains (FIG) accumulated before 6th April 2025 into the UK at a significantly reduced tax rate.
Tax Rates Under the TRF:
- 12% in the 2025–26 and 2026–27 tax years.
- 15% in the 2027–28 tax year.
This facility applies solely to personal FIG held by remittance users, and any FIG must be appropriately designated.
The Opportunity for Non-Doms: Take Action Before April 2025
For non-doms still operating under the remittance basis, the period leading up to April 2025 presents a crucial window to crystallise offshore gains without incurring UK tax liability. Any gains realised before the deadline will remain outside the scope of UK taxation under the current rules.
These gains can then be remitted to the UK after April 2025 at a reduced tax rate of 12%, taking advantage of the TRF. This represents an opportunity for a significantly lower tax burden compared to the standard income tax or capital gains rates under the new FIG regime.
Please note this opportunity is for offshore portfolios and investments only (for example based in Channel Islands or US). These will need to be reviewed with a UK lens to determine the UK tax position.
Next Steps for Non-Doms
To make the most of this opportunity:
- Assess Offshore Gains: Identify gains that can be crystallised before April 2025.
- Plan Remittance Strategy: Consider remitting these gains during the TRF period to benefit from reduced tax rates.
- Seek Professional Advice: Consult a tax professional to ensure compliance and maximise the benefits of the transition to the FIG regime.
With careful planning, the transitional period offers non-doms a rare chance to optimise their tax position before the new rules come into effect. Planning for this is extremely time sensitive. Don’t let this opportunity pass you by.
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