For generations the British tax system asked a question no other major jurisdiction asked in quite the same way. Not where a person lived, but where they belonged. Domicile was a concept of the general law borrowed into taxation, and it produced results that looked eccentric from outside. A man who had lived in London for thirty years, whose children were born there, could still be taxed as though his real home were the country his father had left. The remittance basis followed: foreign income and gains stood outside the charge until the money arrived.
That question is no longer asked of the years that matter now. The tests that decide exposure to United Kingdom tax are residence tests, counted in years and recorded on a return. The change is usually described as the abolition of non-dom status. It is more accurate to say that domicile was removed from the machinery going forward, and a calendar was put in its place, while domicile continues to decide questions about periods before 6 April 2025.
What ended, and on what date
Section 40 of the Finance Act 2025 carries a heading of unusual bluntness. The remittance basis is not available after tax year 2024-25, and the operative words are that it is not available for 2025-26 or any subsequent tax year. From 6 April 2025 an individual cannot claim it, whatever their domicile and however recently they arrived. The claim provision itself survives only for the past: section 809B of the Income Tax Act 2007 now applies only where the tax year is 2024-25 or earlier. Sections 44 and 45 take the domicile test out of the excluded property rules for inheritance tax, for property held outright and for settled property, and put a long-term residence test in its place. Section 44 states its own commencement, 6 April 2025, in its final subsection rather than leaving it to a separate instrument.
What did not end is the tax on the past. Subsection (2) of section 40 preserves the remittance provisions for income and gains that were subject to the remittance basis in earlier years. They remain taxable when the money reaches the United Kingdom, and the mixed fund ordering rules in section 809Q still govern what is treated as arriving, now with designated capital taking first place in the order. HMRC puts the same point plainly in its manual on the repatriation facility. A client who has stopped being a remittance basis user has not stopped having a remittance problem.
This is the first place where experienced advisers go wrong. The instinct is to treat 6 April 2025 as a line under which everything is ruled off. It is not a line. It is a change of regime for what arises after it, and the accumulated balance is dealt with separately, by transitional provisions with their own deadlines.
The four year relief and who qualifies for it
Sections 37 and 39 of the Finance Act 2025 create the replacement. Section 37 inserts a new chapter into the Income Tax (Trading and Other Income) Act 2005 giving relief on qualifying foreign income to a qualifying new resident, and section 39 inserts a new Schedule D1 into the Taxation of Chargeable Gains Act 1992 doing the equivalent for foreign gains. Within its scope the relief is complete rather than partial: the qualifying foreign income is deducted in calculating net income and the qualifying foreign gains are deducted from the chargeable gains of the year. The symmetry runs the other way too, because section 16 of the 1992 Act makes qualifying foreign losses of that year unallowable, and section 845C denies relief, in that year and in every other, for a loss from a trade, profession, vocation or property business carried on wholly outside the United Kingdom.
The definition of a qualifying new resident sits in section 845B. An individual qualifies for a tax year if they are United Kingdom resident for it, were not United Kingdom resident for each of the ten tax years before it, are at least ten years old at the start of it, and are not a member of the House of Commons or the House of Lords for any part of it. The next three tax years also qualify, on the same residence and membership conditions. The result is four years of relief and, for anyone who cannot show ten clear years of non-residence, none at all.
The regime has a start-up rule that matters most to the people most likely to be reading about it. A tax year from 2022-23 to 2024-25 counts as the qualifying tax year if it would have qualified had section 845B been in force then, so an individual who became resident in one of those years can use whatever remains of the four year run from 2025-26 onward. Nothing in that rule relieves foreign income or gains that arose before 6 April 2025. HMRC works through the arithmetic at RFIG44000.
The ten year condition is the part that surprises clients. The arithmetic is mechanical, and a single tax year of United Kingdom residence inside the preceding decade removes the relief entirely. The test is stated in whole tax years of non-residence and is either met or not.
The relief also has to be claimed and quantified. Under section 845A the claim goes in a personal return and must be made before the end of the period of twelve months beginning with the 31 January after the end of the tax year. The claimant has to identify the income concerned. Nothing is relieved by silence, and a year in which no claim is made is not added to the end: the three following years run from the qualifying year whether or not they are used.
What the relief costs
The new regime is not the remittance basis with a different name. Part of the price is set out in section 845E of the 2005 Act. An individual who claims loses the personal allowance and the blind person’s allowance, the married couple’s and civil partner’s reductions, the transferable tax allowance and relief on certain life insurance premiums. Section 1K of the Taxation of Chargeable Gains Act 1992 removes the annual exempt amount for the same year. The loss rules described above sit alongside those, and pension relief is restricted as well.
Those are modest sums measured against a large foreign portfolio. The personal allowance is £12,570, withdrawn at one pound for every two pounds of adjusted net income above £100,000 and so exhausted at £125,140, and it is held at that figure through 2030-31. The annual exempt amount for capital gains tax is £3,000. For a client with substantial United Kingdom employment income and little foreign income the arithmetic can go the other way, and the relief can be worth less than the allowances surrendered to obtain it.
What matters more is that there is no equivalent of the old remittance basis charge, no toll for continued access and no cliff edge at seven or twelve or fifteen years. There is a four year window, and at the end of it the individual is taxed on worldwide income and gains at the ordinary rates. The main rates of income tax for 2026-27 are 20, 40 and 45 per cent; dividend income carries its own rates of 10.75, 35.75 and 39.35 per cent from that year; and the main rates of capital gains tax are 18 and 24 per cent. Planning that used to be spread across a decade now has to be done before the fifth year begins.
Employment income, and the cap that was added
Section 38 recasts overseas workday relief as an election and claim under a new chapter of the Income Tax (Earnings and Pensions) Act 2003. The relief survives for qualifying new residents, but it is no longer open ended in amount. Section 41R provides that the limit is the lesser of 30 per cent of the relevant qualifying employment income and £300,000.
The cap changes the profile of the arriving executive. The old relief was constrained by the remittance requirement, so the money had to stay offshore. It can now be brought in, which is a genuine liberalization, but the relievable amount is bounded and the bound bites early. An executive on a seven figure global package will exhaust the cap on the first tranche of foreign workdays and pay in full on the rest.
The limit attaches to the qualifying year rather than to the year of the claim. Employment income earned for one qualifying year is often taxed in a later one, and when relief is claimed then, the limit for that qualifying year is reduced by relief already given for it, so the ceiling operates cumulatively across returns. HMRC sets out the mechanics and the worked examples at EIM43600. Workday records therefore matter for a different reason. They used to establish the proportion; they now establish it up to a ceiling, beyond which the record keeping adds nothing.
There is a transitional class on whom the cap does not bite at all, and describing the new rules alone gets these people wrong. Part 3 of Schedule 8 disapplies section 41R for an individual who met the old three year non-residence requirement in 2023-24 or 2024-25 and was on the remittance basis for that year, for qualifying years running up to 2027-28. The same Part works in the opposite direction for those who arrived in 2022-23 and were on the remittance basis: they are treated as not being qualifying new residents for the employment relief in 2025-26, even where they qualify for the foreign income and gains relief. HMRC illustrates both sides at EIM43605.
The two transitional windows
Section 41 and Schedule 10 create the temporary repatriation facility. An individual subject to the remittance basis for at least one tax year before 2025-26 may designate qualifying overseas capital by election in a personal return for 2025-26, 2026-27 or 2027-28, and only for a year in which they are United Kingdom resident. The charge is 12 per cent of the designated amount for the first two of those years and 15 per cent for the third. The money does not have to cross the border inside the window to secure the rate, and once designated and paid the capital can be brought in later without further charge. No credit is available for foreign tax against the charge itself.
Against income tax rates that reach 45 per cent on remitted foreign income, a 12 per cent toll on a fund that would otherwise sit offshore for a generation is a rare thing in British tax: a published rate with a published expiry. The window closes at the end of 2027-28, and the step from 12 to 15 per cent makes the cost of waiting visible.
Section 42 and Schedule 11 provide the second window, and it is not a relief to be claimed but a rule that applies of itself unless it is switched off. Where an individual was not domiciled in the United Kingdom, deemed domicile counted, at any time in a tax year before 2025-26, and claimed the remittance basis under section 809B for at least one tax year from 2017-18 to 2024-25 in which it did not apply automatically, an asset held on 5 April 2017 and disposed of on or after 6 April 2025 is treated as acquired on 5 April 2017 for its market value on that date, provided it was not situated in the United Kingdom at any time between 6 March 2024 and 5 April 2025. The individual may make an irrevocable election for that treatment not to apply to a particular disposal.
The situs condition does the work, and it is narrower than it first reads. Paragraph 2 of the Schedule treats the asset as not situated in the United Kingdom for time spent here under the public access and repair conditions, for time when the sole or principal purpose of its presence was sale, and, in the case of clothing, footwear, jewellery or a watch, for the personal use of the individual, a spouse or civil partner, or a child or grandchild under eighteen. It also covers amounts within the small remittance rule and property that has not failed the temporary importation rule by the end of the period. Outside those cases an asset moved into the United Kingdom during that period fails permanently, and no later step repairs it.
Inheritance tax moved off domicile
The most consequential change is the one least connected to income. Section 6A of the Inheritance Tax Act 1984 makes an individual a long-term United Kingdom resident at all times in a tax year if they were United Kingdom resident for at least ten of the previous twenty tax years. Excluded property status for property held outright turns on that, not on domicile. Section 6A is modified for individuals under twenty, and a person under one at the start of the tax year is never a long-term resident.
For settled property the new section 48ZA does the same work with an exception that has to be read before the rest of it is applied. Where the settlor died before 6 April 2025, the property is excluded property if the settlor was not domiciled in the United Kingdom when it became comprised in the settlement. For that class of settlement the old domicile question still decides the answer, and it always will.
The status does not end on departure. It ends after a run of consecutive non-resident tax years whose length is set by counting the resident years among the twenty tax years ending with the last tax year for which the individual was United Kingdom resident. That count is taken once, by reference to the moment of departure, and it does not fall as the years abroad accumulate. Thirteen resident years or fewer give a tail of three tax years. From fourteen the tail lengthens one year at a time, so twenty resident years leave a worldwide estate exposed for ten tax years after the move. Ten consecutive non-resident years falling within the nineteen tax years before the year in question also end it.
There is a further rule for those who had already gone. Paragraph 46 of Schedule 13, which section 46 introduces, treats an individual as not being a long-term resident if they were not domiciled in the United Kingdom on 30 October 2024, have not been resident for any tax year from 2025-26 to the year in question, and were either non-resident for the three tax years immediately before it or resident for fewer than fifteen of the twenty immediately before it. Residence before 2025-26 is not counted by the second of those conditions, so a resident year in the old regime does not of itself break the protection. The domicile test in the first is the general law one taken alone: sub-paragraph (2) directs that deemed domicile and domicile elections be ignored in deciding where the individual was domiciled on 30 October 2024, which is the opposite of the rule that governs the rebasing window described above. For someone who emigrated before the regime began, that paragraph rather than the tail in section 6A decides the position.
For a family that has been in London for a generation this is the whole planning question, and it is not an income tax question. Four years of relief is a welcome benefit for an arriving founder. Ten years of continuing exposure of a worldwide estate after leaving is a different order of problem, and no claim on a return solves it.
What the 2026 amendments signal
The Finance Act 2026 received Royal Assent on 18 March 2026 and returned to the regime inside its first year of operation, which is itself informative. Schedule 3 provides, for 2025-26 onward, that the reliefs are deductible only against the income or gains to which they relate, closing an argument that the deduction could shelter other income. It adds the requirement that the individual be at least ten years old at the start of the tax year. It corrects the repatriation facility on the valuation of designated amounts, on foreign tax paid from other sources and on amounts derived from designated capital, and those corrections are deemed always to have had effect. It also extends the temporary non-residence rules to payments made by companies that the individual’s close company controls, and to payments to third parties, where it is reasonable to suppose the intention was to avoid a relevant distribution, for 2026-27 onward.
The pattern is consistent. The four year window is being defended rather than widened, and the transitional reliefs are being tightened as the practical questions surface.
How the planning question changed
Under the old law the central question was whether a client could sustain a foreign domicile, and the answer could be argued for decades. The central questions now are arithmetic and dated. How many of the last ten years the client was non-resident. Which four years the relief covers. Whether pre-2025 capital is designated before the rate moves. Whether the asset was outside the United Kingdom throughout the specified period. How many of the last twenty years the client was resident, and how long the tail runs.
None of those is a matter of intention or of evidence of attachment. They are facts about a calendar, established from travel records and returns. The work has therefore moved forward in time. There is little to argue about after the event and a great deal to organize before the client arrives, and again before the fourth year ends. The regime that replaced non-dom status is simpler to describe and considerably less forgiving to those who come to it late.
This article is informational and does not constitute tax advice. Each engagement is subject to scope and applicable regulation.