Non-Dom Changes and the impact on Australians in the UK

For Australian expats considering a move to the UK there are important new rules that will apply from 6 April 2025 which will, if enacted as announced, impact non-domiciled UK individuals. Whilst the new regime may seem restrictive when compared with the current rules, it does present an opportunity for new arrivals with foreign income and gains.

What’s Changing?

The domicile idea will be phased out starting on April 6, 2025, and replaced with a new residency-based framework. While overall, the new changes are designed to be more restrictive for non-domiciled taxpayers with foreign and income and gains, the transitional measures to provide an opportunity for new arrivals into the UK to transfer foreign income and gains into the UK with no tax.

Here are a few highlights of the new regime:

  • Individuals who have been non-residents for the past 10 years will not be subjected to UK taxation on their Foreign Income and Gains (FIGs) during the first four years of their UK residency. They can transfer their FIGs to the UK without triggering any UK tax charges.

This does present an opportunity for new arrivals from Australia into the UK to bring in foreign income and gains with no UK tax during this 4-year period. This is a change from the current regime where FIG must remain out of the UK.

  • Anyone who has been a UK resident for more than four years will be taxed on their worldwide income and gains.
  • Under transitional measures, non-doms should be able to import FIGs earned prior to April 6, 2025, into the UK at a tax rate that is advantageous—12%.
  • UK resident non-doms who have utilized the remittance basis will have the option to rebase their assets to their value as of 5 April 2019. This means that for disposals occurring after 6 April 2025, only the gain in value from 2019 will be liable for UK Capital Gains Tax.
  • The existing safeguards for non-resident trusts will be eliminated for all FIGs generated after 6 April 2025. FIGs accrued before this date will remain untaxed unless they are distributed or provided to UK residents who have been in the UK for more than four years.

Overseas Workday Relief

Overseas Workday Relief (OWR), a mainstay of the domicile regime may also be updated to better integrate with the new residency-based framework. The current rules are complex and allow non-doms claiming the remittance basis to exclude from UK income amounts earned from work performed overseas if not remitted to the UK for the first three years. In another potential benefit to new arrivals, the update may simplify the rules to include money earned overseas and remitted to the UK.

Interaction with Australian Tax

Whilst the new rules may shield non-UK income and gains from UK tax during the first 4 years of UK tax residency, where such income and gains are Australian sourced, it is important to consider the associated Australian tax implications. As a firm specialising in both UK and Australian tax we are well placed to provide integrated advice so you are clear about the tax outcome in both countries.

Further updates are anticipated in late October with the Autumn Budget.

Please reach out if you would like to speak to one of our partners.

Email us at: info@ukautax.com