UK FIG regime takes effect: what this means for non-doms and investors

The new regime will take effect from 6 April 2025. It will be available to new arrivals in the UK, or those who have been non-UK resident for at least the previous ten tax years. It effects foreign individuals from the first tax year in which an individual becomes UK resident, if later. 

New arrivals will be exempt on their foreign income and gains for their first four years, or on distributions from non-resident trusts. These funds can be brought into the UK freely without incurring a tax charge. However, once the first four-year period is over, they will be taxed on their worldwide income and gains, and hit with a significantly higher tax burden. 

For those who have been UK resident for less than four tax years as of 6 April 2025, they are able to benefit from the FIG regime for the remainder of the four-year term. This means that the regime will be available to former UK residents who have been non-UK resident for ten years or more. 

Great attention has been placed on high-net-worth individuals (HNWs) considering their next move. A key question remains: does the four-year exemption makes the UK attractive to overseas HNW individuals?

1. For some it is not appealing

There has been a marked increase in enquiries from clients wanting advice involving Italian law.  This could be driven by Italy’s recent, more appealing, changes to its non-dom regime aimed at enticing foreign taxpayers. Specifically, individuals who transfer their residence to Italy after 10 August 2024 can opt to pay an annual flat lump sum tax of 200,000 Euros, allowing them to keep their personal income generated abroad tax-free. The Italian Flat Rate Tax Regime also operates for a maximum of 15 years, making it much more favourable to the UK’s proposed new FIG regime.

2. There has been an increase in enquiries from US-based clients

However, interest from American clients has grown in recent years, with some British expats also considering a return to the UK.  Henley & Partners, recently reported a 504 per cent increase in enquiries from American citizens over the past four years, citing changing political circumstances as a key motivator.

The UK still hold certain advantages, including strong cultural ties, a perceived safer environment to raise kids (e.g. the strict gun laws in contrast to the US), the common use of the English language and its reputation as a stable and predictable environment. 

In addition, for British expats and US citizens considering moving to the UK, they will benefit from changes to the UK’s income and gains regime with the FIG regime. For them the four-year exemption, could make the UK an attractive temporary retreat, presenting a window of opportunity that may drive an influx of new residents.

4. Others who benefit

In addition to investors and HNW individuals from the US, individuals from jurisdictions where taxes are reliant on residency rather than global income, can use the four-year window by using the UK as a base to sell their business, tax-free.