UK Tax to include all foreign income & gains from 6 April 2025

The UK Government has, in their Spring Budget, announced how they will change how they tax UK residents and non-residents. A person’s domicile will not be the driving basis of personal taxation.

A new four-year foreign income and gains regime (FIG Regime) will bridge between the old regime and the new FIG Regime affecting both individuals and trust entities in the UK.

From 6 April 2025, notable changes of the UK Government propose to include:

  1. that UK residents and non-residents will be assessed on their income and gains they received worldwide, as opposed to income and gains from UK assets;
  2. for the tax year 2025/6, individuals will pay 50% on their foreign tax income (but excluding any gains) if they transition to arising basis from remittance basis on 6 April 2025 – such individuals will not be eligible for the four-year FIG Regime;
  3. for new UK residents that were not UK domiciled or deemed to be domiciled by 5 April 2025, these new UK residents will have their foreign assets rebasing calculated at the value held on 5 April 2019 provided that the asset was owned by the individual on such date;
  4. trust structures, with non-UK residents as beneficiaries where the entity/individual is a settlor and is a UK resident, will be taxed; and
  5. the FIG Regime will provide qualifying non-UK residents with a four-year period of foreign income and gains tax free after becoming a UK tax resident (but commencing from 6 April 2025) following a period of ten years of non-UK tax residency.

Despite the UK providing some transitional measures on the new legislation, it is a precautionary tale for UK non-residents to obtain advice as to how this may impact their respective taxable income post 6 April 2025.

Therefore, trust structures presently settled in the UK that are not being taxed due to the entitlement falling to non-residence tax beneficiaries, will find that the entity will be taxed on the settlor on the arising basis. Entities with non-resident settlors will feel the impact somewhat less but will not go unnoticed.

In addition to the broader income and gains assessment in the UK, the Government has announced that there will be amendments to the inheritance tax levy. However, no publication as to the details has been released to date. The UK Government is moving away from being a domicile-based regime to a residence-based regime for inheritance tax calculations.

Our general comments to clients connected to jurisdictions outside Australia include:

  1. avoid appointing offshore located people to the roles of attorney, trustee, director of a private trustee company or executor because of the impact of those appointments on the taxation liability of your estate;
  2. adopt a policy for your estate administration that central management control of your affairs should remain established in Australia in the event of your death or disability;
  3. understand how the impact of offshore taxation can reduce the net value after tax of the inheritance of your beneficiaries. Inheritance expectations of family and beneficiaries should be the net value of the estate after all tax and administration expenses; and
  4. be aware of your estate administration expenses that can be incurred if assets are left in jurisdictions offshore from Australia.

The information included in this article is for informational purposes only and is not to be taken to be legal advice and we acknowledge that everyone has different circumstances.

Our colleagues at Spencer West in London are able to help any of our clients who would like assistance with these issues. We can bring their assistance to our Australia located clients.

Please contact Michael Perkins if you would like to discuss the impact of these changes on your estate planning, governance, administration and succession.

HC 560 – Spring Budget 2024 (publishing.service.gov.uk)

United Kingdom: Budget 2024 – Changes announced to the taxation of UK resident non-domiciliaries – Baker McKenzie InsightPlus

End of non-dom regime: Radical reform of the UK taxation of international individuals – Spencer West (spencer-west.com)