Planning with clarity
Understanding Your Position
The UK legislation surrounding residency and domicile is an extremely complex area and it is important to ensure you understand the rules in what can often be a very grey area. Mistakes can be costly and may result in any planning you have undertaken being reversed.
It is important to consider the statutory residence test, the ties test and split year treatment surrounding a move to or from the UK on either a permanent or temporary basis, the impact that the previous and current tax years have on your situation and what you need to do to ensure you are not paying tax on the same income in more than one jurisdiction.
We can assist with your residency planning by reviewing your personal circumstances, considering your intentions and the country to which you are going to or coming from and ensuring the tax treaties in force are considered. We will prepare a report based on this to give you clarity and security with recommendations where necessary to ensure you know where your income is taxable.
Remittance Basis
This tax year, 2025/26 sees significant changes to the remittance basis regime for non-domiciled individuals.
Previously, the rules were dependent on the value of your unremitted income and gains and how long you had been considered UK resident. Being a UK resident for 7, 12 and 15 years brought charges where the remittance basis was claimed.
This complex regime has now been replaced by the Foreign Income and Gains regime, where individuals who have been non-UK resident for at least 10 consecutive years, will benefit from up to four years tax-free on foreign income and gains, whether brought to the UK or not.
After these four years have ended, UK taxation on your worldwide income and gains applies.
A transitional period applies in 2025/26 and 2026/27 for individuals under the previous regime. Capital Gains Tax rebasing may also be available to you if you have previously claimed the remittance basis. We can help you to navigate the new complexities.
Inheritance Tax
Changes to the IHT regime have also changed, and will be based on residence, not domicile.
From 6 April 2025, an individual becomes a “long-term UK resident” if they have been UK tax resident for at least 10 out of the previous 20 tax years.
Those deemed long-term residents will be subject to IHT on worldwide assets upon death (or other chargeable events).
IHT Tail After Departure
If a long-term resident leaves the UK, they may continue to be liable for IHT on worldwide assets for up to 10 years after departure, depending on how long they were resident.
Transitional provisions are available for individuals who are non-UK resident during 2025–26 and previously UK resident may still be tested using the old domicile-based rules (e.g., 15 of the last 20 years) for IHT.
However, for those domiciled under common law as of 30 October 2024, the new long-term residence test applies immediately.
Taxation of trusts has also changed and will also shift from domicile to residence. The IHT status of a trust will now depend on whether the settlor is a long-term UK resident.
For existing trusts created before 6 April 2025, transitional rules or proportionate charges may apply.
