Spring Budget 2024: Non-Domicile Tax Changes Explained

Non-domiciled individuals and UK residents affected by the remittance basis abolition and related reforms. Secondary notes for general UK taxpayers are included for context only.

Explains the 2025 abolition of the remittance basis, transitional arrangements, and reforms affecting foreign income, Overseas Workday Relief, and inheritance taxation for non-doms. 

Non-doms who do not understand these changes may under- or over-report foreign income, miss transitional reliefs, or misapply Overseas Workday Relief, resulting in compliance issues or unexpected tax liabilities.

Abolition of the Remittance Basis from April 2025

The Spring Budget 2024 confirmed that the remittance basis will be abolished from 6 April 2025. This change affects non-doms who currently use the remittance basis to limit UK tax on foreign income and gains.

New 4-Year FIG Regime

From April 2025, new UK residents will benefit from a 4-year period in which foreign income and gains (FIG) are not taxed in the UK. After this 4-year period, foreign income will be taxed like UK residents’ worldwide income. Accurate reporting can be supported by accountants Wimbledon.

Transitional Arrangements for 2025–26

• Some taxpayers will pay tax on 50% of foreign income in 2025–26, excluding chargeable gains.
• This ensures a gradual transition to the new full residence-based taxation regime.

Overseas Workday Relief (OWR) Reform

The Overseas Workday Relief continues for the first 3 years of UK residence, but remittance restrictions are removed. This simplifies tax reporting for employment income earned abroad during the initial years of residence.

Inheritance Tax – Future Residence-Based Reform

The government intends to move towards a residence-based inheritance tax from April 2025. Details are subject to consultation, but non-doms should be aware of this prospective change for estate planning.

Who is Affected?

• Non-doms currently using the remittance basis.
• New UK residents with foreign income or gains.
• Those currently claiming Overseas Workday Relief.

Compliance Considerations

• Understand when the 4-year FIG period applies to you.
• Ensure correct application of transitional arrangements in 2025–26.
• Review Overseas Workday Relief claims under the new simplified rules.
• Monitor future guidance on residence-based Inheritance Tax. 

Risks and Penalties

• Incorrect reporting of foreign income or misapplying transitional rules can result in HMRC penalties and interest.
• Failure to consider new 4-year FIG or OWR reforms may increase your tax liability unexpectedly.

Next Steps

If you are a non-dom with foreign income or uncertain about how these changes affect you, it is advisable to seek professional guidance to ensure accurate reporting and compliance with the new 2025 regime. Partnering with an AI accounting firm Wimbledon can help keep your records compliant and organised.