INTM603625 - Transfer of assets abroad: 6 April 2025 non-UK domicile reforms: Introduction
Source: gov.uk (2025-04-07)


From 6 April 2025, the rules for the taxation of non-UK domiciled individuals will end. The concept of domicile as a relevant connecting factor in the UK tax system has been replaced by a system based on tax residence.

This will impact individuals assessable under the ToAA provisions who until 6 April 2025 were remittance basis users. From this date such individuals will be assessable on the arising basis on any income assessable on them under ITA07/S720, S727 or S731 (see INTM600640 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm600640), INTM600660 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm600660) and INTM601400 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm601400) respectively). Any foreign source income that arose before 6 April 2025 to an individual who was assessable under the ToAA provisions will remain assessable on that individual if the income is remitted to the UK; see INTM (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm601900)601900 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm601900) onwards for the remittance basis rules in relation to the transfer of assets provisions.

From 6 April 2025 the trust protections will no longer apply to trusts settled by non-domiciled individuals so from this date the income will be assessable on the transferor as it arises if the transferor is UK resident and has the power to enjoy the income of the person abroad or receives / is entitled to a capital sum. Regarding the protected foreign-source income (PFSI) and the transitionally protected income (TPI) that arose within a protected trust before 6 April 2025, this will not be taxed unless it is matched with benefits provided to a UK resident individual after 5 April 2025 (see INTM603705 (https://www.gov.uk/hmrc-internal-manuals/international-manual/intm603705) for details). Benefits provided to a UK resident transferor cannot be matched with the income of the settlement that arises after 6 April 2025 as from this date the transferor will only be subject to a benefits charge if the benefit is matched with PFSI or TPI that arose before 6 April 2025.

As part of the non-domicile reforms two new provisions have been introduced that can impact on the application of the transfer of assets abroad provisions from 6 April 2025:
- the 4-year foreign income and gains (FIG) regime (see RFIG41000 (https://www.gov.uk/hmrc-internal-manuals/residence-and-fig-regime-manual/rfig41000) onwards)
- the Temporary Repatriation Facility (TRF) (see RDRM71000 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm71000) onwards)
If an individual qualifies for the 4-year FIG regime and makes a claim for it to apply in a tax year, any foreign income that would be assessable on the individual under the ToAA provisions will be relieved from the charge to tax. This is the case if the individual is the transferor and is assessable on the foreign income of the person abroad as it arises or if the individual is a non-transferor who receives a benefit that is matched to foreign relevant income. See RFIG45400 (https://www.gov.uk/hmrc-internal-manuals/residence-and-fig-regime-manual/rfig45400) for further details as to how this provisions affects the ToAA provisions.

The TRF applies for the three years 2025 - 2026 to 2027 - 2028 and is available to individuals who have previously claimed the remittance basis of taxation. Such individuals can make an election to designate previously untaxed and unremitted foreign income and gains and pay a reduced rate of tax on what under the TRF regime is treated as “qualifying overseas capital”. An individual must be UK resident for any tax year in which they want to claim the TRF. An individual who receives a distribution from a non-resident settlement during the TRF period that is matched to the relevant foreign income of the trust structure that arose before 6 April 2025 can designate this as qualifying overseas capital and this will be taxed at the TRF rate for the year in which it is received. See RDRM72550 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm72550) and RDRM72600 (https://www.gov.uk/hmrc-internal-manuals/residence-domicile-and-remittance-basis/rdrm72600) for further details as to how the TRF applies to such distributions.