The death of the remittance basis

Time for a quick history lesson. In 1799 Pitt the Younger introduced the remittance basis into UK tax law. Since then, successive governments have tweaked the rules, but the general principal has remained unchanged.

The latest (and possibly last) iteration of the rules applies to taxpayers who are resident but not UK domiciled or deemed domiciled. Under the rules, a remittance basis “user” is only subject to UK tax on:

• their UK income and gains
• overseas income and gains that they “remit” to the UK

This allows res / non-doms to ring-fence their non-UK income and gains from UK tax.

After over 225 years, the remittance basis is due to be scrapped from 6 April 2025.

From 6 April 2025, almost all UK residents will be subject to UK tax on their worldwide income and gains. This is known as the “arising” basis of taxation. For taxpayers used to paying tax on the remittance basis, the rule change could result in a significant increase in UK tax.

A special regime will apply to new arrivers during their first 4 tax years of residence. This is known as the “foreign income and gains” (or FIG) regime. During this time, overseas income and gains will not be subject to UK tax and can be brought to the UK tax free. Unlike the remittance basis, the FIG regime will be available for ex-pats returning to the UK. They will be one of the only winners from the rule changes.

However, the FIG regime comes with a significant string attached. In order to claim the FIG regime, you will need to disclose details of your overseas income and gains to HMRC in your tax return. HMRC will therefore have access to far more information on taxpayers’ financial affairs than under the current regime.

Whilst the remittance basis is being abolished for future tax years, the rules will remain relevant for many years to come. The rules will continue to apply to overseas income and gains that have previously been subject to the remittance basis. Former remittance basis payers will therefore need to continue to ensure that they do not inadvertently remit funds to the UK.

If you are a former remittance basis payer, you may want to read our article on the Temporary Repatriation Facility.