The Government is set to abolish non-dom status over a multiple-year transition period.
From 6 April 2025, the concept of domicile will be replaced by long-term residency.
Looking back over a 20-year period, if someone is resident for income tax purposes in the UK for 10 out of those 20 years, then they will be treated as being a long-term resident for Inheritance Tax (IHT) and taxed accordingly on the value of their worldwide assets.
The aim of this system change is to bring foreign earnings into the UK IHT system, thus increasing the Treasury’s total tax revenue.
To manage the changeover from a domicile system to a residence-based system, the Government has introduced a Temporary Repatriation Facility.
Here’s what non-doms need to know about the scheme.
Temporary Repatriation Facility
This will enable non-doms with historic (prior to April 2025) untaxed foreign income and gains (FIG) to pay reduced tax as a one-off payment on some or all the amount, meaning it can be brought into the UK without further income or capital gains liabilities.
A new Temporary Repatriation Facility will be available for individuals who have previously claimed the remittance basis.
They will be able to designate and remit at a reduced rate foreign income and gains that arose prior to the changes.
This includes unattributed foreign income and gains held within trust structures.
The Temporary Repatriation Facility will be available for a limited period of three tax years, from the 2025/26 tax year up to and including the 2027/28 tax year.
The Temporary Repatriation Facility rate will be 12 per cent for the first two years (2025/26 and 2026/27) and 15 per cent in the final tax year of operation (2027/28).
Individuals will not be able to claim income tax relief on chargeable overseas earnings for income earned on or after 6 April 2025.
These earnings will continue to be taxable on the remittance basis if brought to the UK after 6 April 2025 and are eligible for the Temporary Repatriation Facility.
Is it right for me?
Bringing FIG into the UK under the Temporary Repatriation Facility is not necessarily appropriate in all circumstances.
Therefore, it is essential to seek guidance from an international tax adviser who can determine whether the Temporary Repatriation Facility is in your best interests from a mathematical perspective.
Take control of your taxes with SMCO
Getting to grips with the new residence-based system and the Temporary Repatriation Facility can be daunting – but it doesn’t have to be.
Our chartered tax advisers can help you understand the new rules, choose your next steps, and make an effective tax plan that minimises your liabilities and secures your financial future.
