UK Tax

Prior to 6 April 2025, non-domiciled taxpayers with less than £2,000 of unremitted foreign income and gains for a tax year would not need to report or pay UK tax on that income. This is because the remittance basis would apply automatically.

However, this is no longer the case from 6 April 2025. If you are UK resident (confirm using the statutory residency test) and you have small amounts of foreign income or gains, and you file a self-assessment tax return, you will usually need to report these amounts on your self-assessment tax return for the year (there are some exceptions if you only have foreign gains and no UK capital gains tax to pay).

If you do not file a self-assessment tax return, you will need to consider whether you owe UK tax on the foreign income or gains in the absence of a FIG claim or election. If you do, then you should usually register to file a self-assessment tax return to report the income or gains and either pay the tax or make the claim. This is the case, however small the tax liability on the income.

If you do not owe any UK tax on the income in the absence of a FIG claim or election, then you will not need to register for self-assessment just to report the income (provided you have no other reason to file a return). This might apply if, for example, your worldwide income is within your UK personal allowance.

Depending on the source of foreign income, it may be covered by allowances or nil rate bands. For example, for small amounts of foreign interest, remember the interest may be covered by the personal savings allowance or the starting rate for savings (you should add together your foreign interest and UK interest to determine if this is the case). Similarly, foreign dividends may be covered by the dividend allowance.

Small foreign gains may be covered by the capital gains tax annual exempt amount.

In general, the only occasion you might need to pay UK tax on money which you bring to the UK is where that money represents foreign income or gains that arose in tax years (up to and including 2024/25) for which you were UK resident and taxable on the remittance basis. This is still the case even if the remittance occurs after 5 April 2025.

If you are resident in the UK after 6 April 2025 and you were previously taxed on the remittance basis, you may be eligible for the Temporary Repatriation Facility. This will allow you to remit prior year income to the UK at a special low rate of tax.

If you make a transfer to the UK from an overseas savings account which earns interest, you are likely to be deemed to remit some of the foreign interest income with any transfer to the UK from that account. This could trigger an unexpected tax liability in the UK, so you should seek advice before you do so.

Note that if you are bringing physical cash into, or out of, Great Britain and it exceeds £10,000 (or 10,000 Euros, in the case of Northern Ireland), you must declare it.

You may have received a letter saying that HMRC’s information indicates you currently have or previously had offshore income or gains, and if you have additional tax to pay, to tell HMRC using the worldwide disclosure facility (WDF).

If you have undisclosed UK tax liabilities in relation to offshore income and gains for tax years 2015/16 and earlier, and you did not disclose this to HMRC by 30 September 2018, you may be liable to penalties under the requirement to correct regime.

The new regime for foreign income and gains (FIG) applies from 6 April 2025 and replaces the remittance basis for non-domiciled taxpayers. Domicile is no longer relevant to your tax liability from 6 April 2025. Instead, the new regime is available to qualifying new residents (see heading below).

This means that some UK domiciled taxpayers may be eligible for relief under the FIG regime, even though they may not have been eligible for the remittance basis in prior years. Similarly, non-domiciled taxpayers will not be eligible for relief under the regime if the residence conditions are not met, even if they were previously eligible for the remittance basis.

The new rules mean that almost all UK resident taxpayers now need to report their foreign income and gains to HMRC if they didn’t previously. This is the case even if relief is claimed under the new regime. The only exception is where no UK tax is due on the foreign income and the taxpayer is not otherwise required to file a self-assessment tax return for the year.

If income or gains are relieved from UK tax under the new regime, then it does not matter if the income or gains are remitted to the UK.

Under the FIG regime, there are three separate possible claims:

1. A foreign income claim
2. A foreign employment election 
3. A foreign gain claim

If you are a Qualifying New Resident (QNR) for a tax year, you can choose to make any combination of the above claims or elections for that year (or none at all). However, claiming any one will mean that you are not entitled to all of the following for the year of claim:

• The UK income tax personal allowance (and blind person’s allowance, if applicable)
• A tax reduction where the marriage allowance or married couple’s allowance has been claimed
• The capital gains tax annual exempt amount

This means that, for example, the income tax personal allowance is lost for that year even if only a foreign gain claim is made and not a foreign income claim.

In addition, claiming any one of the three claims or elections will mean that foreign income losses (for example, from a foreign trade or foreign property business) and foreign capital losses cannot be claimed for that year.

The above means that making a claim or election under the FIG regime will not always be worthwhile. If you are a qualifying new resident and you have foreign income and gains, you should seek advice to determine if a claim is beneficial.

If foreign income or gains from 6 April 2025 are not relieved from UK tax under the FIG regime, they will be in scope of UK tax just like UK income and gains. Where this is the case, double taxation relief should be considered to reduce any double taxation arising.

You may claim relief under the new regime for a tax year if:

• You are UK resident for that tax year, and
• For each of the 10 years before that tax year, you were not resident in the UK.

You can also claim relief for each of the following three tax years (if you are UK resident in these years).

The FIG regime is therefore available for a maximum of four consecutive tax years immediately following a period of non-residence for at least 10 consecutive tax years.

Individuals who became resident in the UK prior to 6 April 2025 may still claim relief for tax years 2025/26 onwards, provided that the residence conditions are met. For example, a taxpayer who first becomes resident in the UK in 2023/24 (year one) will be eligible to claim the relief for 2025/26 and/or 2026/27 (years three and four) if they are still resident in the UK in these years.

Claiming one or more of the three possible claims or elections under the FIG regime is made in a self-assessment tax return for the year of claim.

The deadline for each claim is 31 January in the second year following the tax return of the claim. For example, claims for the 2025/26 tax year must be made by 31 January 2028.

Where a claim is made, you must identify on the return the income or gains which are being relieved from UK tax by virtue of the claim. These amounts are then deducted from the amounts charged to UK tax when your tax liability is calculated. This is different from what was the case for unremitted income under the remittance basis, which in general, did not need to be reported on a tax return.

These deductions do not affect the calculation of your adjusted net income, which is used to work out:

• the amount of any personal savings allowance you get
• whether your personal allowance has to be reduced, where income is above £100,000 a year
• how much high income child benefit charge you have to pay
• how much married couple’s allowance you can get
• whether you are eligible for tax-free childcare

An offshore bond is a tax-efficient insurance wrapper set up that benefits from a region with a favourable tax regime. The policy owner can invest in various types of assets, including equities, fixed interest securities, property and cash deposits.

It’s important to ensure that the offshore bond is structured correctly when it’s first established, because this generally cannot be changed once the plan is created. Investment into an offshore bond can either be made by way of a lump sum payment or as regular payments. For UK tax purposes, both an offshore lump sum payment plan and a regular payment plan can be written on either a life (whole of life) assurance or a capital redemption basis: 

1. Where a plan is written on a life assurance basis, the plan will come to an end on the death of the sole or last surviving (in the case of multiple lives assured) life assured.

2. Where a plan is written on a capital redemption basis, it has a fixed term. One of the primary considerations should be the number of policies (or segments) created. When set up correctly, this can provide a large degree of flexibility over withdrawals and assignments in the future, and also creates opportunities for optimising the income tax position.

Generally, an offshore bond is outside the scope of UK tax, and therefore the investments held within the underlying portfolio can grow tax-free during the life of the bond; however, there may be withholding taxes applied by third-party countries, which are automatically deducted from income or gains at source and cannot be reclaimed. For the investor, an offshore bond will generally be outside

the scope of capital gains tax (CGT), assuming it’s not acquired for consideration, which enables the policyholder to gift the policy, or individual segments of it, without a tax charge. Life bonds are subject to an attractive regime, which provides a holder with the ability to withdraw up to 5%

of the initial sum invested each year over the course of 20 years, without attracting a UK tax charge –even if the underlying assets are standing at a gain. If for any year the 5% allowance is not used, or is only used in part, the allowance “rolls over” to the next year, increasing the effective amount of the allowance in following and future years, until 100% of the amount invested is withdrawn. If more than the 5% annual allowance is withdrawn, the individual is taxable under the chargeable event regime,

which taxes actual and deemed gains that are triggered when certain events occur, referred to as “chargeable events”. The gains are charged to income tax at the individual’s marginal rate of tax (up to 45%) in the tax year in which the chargeable event gain occurs. While not exhaustive, a chargeable event will generally arise on the following occasions: 

1. The full surrender of the policy or of individual policy segments.

2. A partial surrender of the policy or of individual policy segments, ie withdrawals from the policy exceeding the 5% cumulative tax deferred allowance in any policy year.

 3. The full or partial assignment of rights under the policy for consideration in “money or money’s worth”. 

4. The falling due of a payment under the policy eg on the death of the last life assured or on the maturity of the policy, which give rise to the death benefit becoming payable. 

5. A fundamental reconstruction of the policy eg an addition or a removal of a life assured. The chargeable event gain deemed to arise is broadly calculated based on the growth in value of the policy at the date of the chargeable event. Liability to UK tax on a chargeable event is dependent upon the residence position of the policyholder. Therefore, if an individual is non-UK resident at the time a chargeable event gain occurs, there is generally no UK tax charge. However, where an individual is UK resident at the time of a chargeable event, but has previously been non-UK resident for some time during the policy term, the resulting gain chargeable to tax is proportionately reduced. 

 Where a life policy is held by a company, the chargeable event gains will arise to the company. For a UK resident company, this will result in a corporation tax charge. For a non-UK resident company, the company itself will likely not have a UK tax charge, but the chargeable event gain may be taxed under anti-avoidance provisions. Where a life policy is held by a trust, the settlor will remain taxable on chargeable event gains arising on the policy while they are alive and UK resident, even if they cannot benefit from the trust. If the trust creator is not living or is not UK resident, then the trustees will pay the tax at the trust rate of 45% if the trust is UK resident. For non-UK resident trusts, the liability to tax falls to the UK resident beneficiaries if certain anti-avoidance rules apply and they receive a benefit from the trust.