Non-Dom vs. Resident: UK Tax Status for Expats in 2025

Navigating the labyrinth of UK taxes can feel like a full-time job, especially when you’re an expat. You’ve mastered the Tube map, you know your ales from your lagers, and you’ve even started to understand the national obsession with the weather. But then someone drops the terms "non-dom" or "resident" into a conversation, and suddenly, you feel like you’re back at square one.

If that sounds familiar, you're in the right place. For years, the UK's "non-dom" regime was a legendary, if complex, system that attracted professionals and high-net-worth individuals from around the globe. But hold onto your hats, because as of April 2025, everything is changing. The rulebook is being completely rewritten, and what you thought you knew about your UK tax status might be out of date.

This guide will break down the monumental shift from the old non-dom system to the new 2025 framework. We'll explore what "resident" and "domicile" actually mean, what the new rules are, and most importantly, what it all means for you, the expat living and working in the UK.

The Core Concepts: Residence vs. Domicile

Before we dive into the new world order, let's get the fundamentals straight. These two terms are the bedrock of the UK tax system, and they are not interchangeable.

• Residence: This is all about where you physically live and spend your time during a tax year (which runs from April 6th to April 5th in the UK). It's determined by a set of objective rules called the Statutory Residence Test (SRT). If you spend enough time in the UK, you are a UK resident for tax purposes. It's relatively straightforward.

• Domicile: This is a stickier, more subjective concept from general law. It's about where your permanent home is—the country you consider your long-term "homeland." You can live in the UK for decades and still be domiciled elsewhere. Your domicile is typically inherited from your father at birth (your "domicile of origin"), and changing it requires proving you have severed ties with your home country and intend to live in a new one permanently.

For years, this distinction was crucial. You could be a UK resident but non-domiciled (a "non-dom"), which unlocked a special tax treatment.

A Quick Look Back: The Old "Non-Dom" Regime (Pre-April 2025)

Under the old system, if you were a UK resident but non-domiciled, you could elect to be taxed on the remittance basis.

In simple terms, this meant:

• You paid UK tax on all your UK-sourced income and gains (e.g., your UK salary).
• You only paid UK tax on your foreign income and gains (e.g., profit from selling shares abroad, rental income from a property back home) if you brought (or "remitted") that money into the UK.

This was a significant benefit, but it came with a cost. After a certain number of years of residency, non-doms had to pay a hefty annual charge to continue using the remittance basis:

• £30,000 after being a UK resident for 7 of the past 9 tax years.
• £60,000 after being a UK resident for 12 of the past 14 tax years.

After 15 years of residency, you became "deemed domiciled" for all tax purposes, meaning the remittance basis was no longer available, and you were taxed on your worldwide income and gains.

The Game Changer: What's New from April 6, 2025?

The UK government has abolished the remittance basis of taxation. It's gone. In its place is a new, simpler, but much more time-limited system for new arrivals.

This new regime is called the Foreign Income and Gains (FIG) regime.

Here’s the headline: If you become a UK resident after a period of at least 10 consecutive years of non-UK residence, you will not pay any UK tax on your foreign income and gains for the first four years of your UK residency.

During this four-year period, you can bring that foreign money into the UK without any tax charge. After those four years are up, you will be taxed on your worldwide income and gains, just like any other UK resident.

Let's break that down in a simple comparison:

The key takeaway? The new system is incredibly generous for the first four years but offers no benefits beyond that. The long-term planning that the old 15-year system allowed for is a thing of the past.

What About Expats Already in the UK? The Transitional Rules

This is a critical question for any non-dom currently living in the UK. The government has introduced some transitional provisions to help manage the change. These are complex, but here are the highlights:

1. 50% Foreign Income Reduction (2025/26 only): For existing non-doms who lose access to the remittance basis on April 6, 2025, and are not eligible for the new 4-year FIG regime, there's a one-year relief. In the 2025/26 tax year, only 50% of their foreign income will be subject to UK tax. (Note: This does not apply to foreign capital gains).

2. Capital Gains Tax (CGT) Rebasing: If you're an existing non-dom who has paid the remittance basis charge, you can elect to "rebase" the value of your personally held foreign assets to their value as of April 5, 2019. This means that if you sell those assets after April 2025, you'll only be taxed on the gain made since 2019, not the entire historical gain. This could be a significant tax-saving measure.

3. Temporary Repatriation Facility (TRF): This is a big one. For two years (from April 6, 2025, to April 5, 2027), existing non-doms will be able to bring previously untaxed foreign income and gains into the UK at a reduced tax rate of just 12%. This is a fantastic opportunity to clean up complex offshore structures and bring wealth into the UK tax-efficiently.

The Elephant in the Room: Inheritance Tax (IHT)

Previously, your liability for UK Inheritance Tax (IHT) was tied to your domicile status. If you were non-domiciled, IHT only applied to your UK assets. Your worldwide assets were only brought into the IHT net once you became "deemed domiciled" after 15 years.

The government intends to scrap this link to domicile. The proposal, currently under consultation, is to move to a residence-based system. Under the proposed rules:

• Your worldwide assets will be subject to UK IHT once you have been a UK resident for 10 years.
• You will remain in the UK IHT net for 10 years after you cease to be a UK resident (this is known as the "10-year tail").

This is a fundamental shift and could have massive implications for long-term estate planning for expats in the UK.

The Statutory Residence Test (SRT): Are You a UK Resident?

With the new system being so heavily based on your residence status and the number of years you've been here, understanding the SRT is more important than ever. It's a complex, flowchart-style test, but it boils down to three parts:

1. Automatic Overseas Tests: You are automatically non-resident if you meet any of these conditions (e.g., you were in the UK for fewer than 16 days, or you worked full-time overseas and spent limited time in the UK).

2. Automatic UK Tests: You are automatically resident if you meet any of these (e.g., you spent 183 or more days in the UK, or your only home is in the UK).

3. Sufficient Ties Test: If neither of the above applies, you look at your "ties" to the UK. The more ties you have, the fewer days you can spend in the UK before becoming a resident. These ties include:

   • Family tie: Spouse and/or minor children are resident in the UK.
   • Accommodation tie: You have a home available to you in the UK.
   • Work tie: You do substantive work in the UK.
   • 90-day tie: You spent more than 90 days in the UK in either of the two previous tax years.
   • Country tie: You spent more days in the UK than in any other single country.

Accurately tracking your days in the UK and understanding your ties is crucial for managing your tax status under the new rules.

Practical Steps for Expats in 2025

The ground is shifting, and proactive planning is essential. Here’s what you should be thinking about:

• Review Your Status: If you're new to the UK or planning a move, pinpoint exactly when your 4-year window begins and ends. If you're an existing non-dom, understand which transitional rules apply to you.
• Model the Financial Impact: How will moving from the remittance basis to worldwide taxation affect your finances after year 4? Does the Temporary Repatriation Facility at 12% make sense for you? Run the numbers.
• Re-evaluate Your Assets: For those eligible, consider whether rebasing your assets for CGT purposes is beneficial. This could save you a significant amount in the future.
• Rethink Estate Planning: The proposed changes to IHT are profound. Long-term expats will need to completely review their wills and estate plans to account for the new 10-year residence rule.

A Final Thought

The sweeping changes to the UK's tax rules for expats represent the end of an era. The new Foreign Income and Gains regime is simpler and more attractive for short-to-medium-term stays, offering a 4-year tax holiday on foreign income. However, for those looking to make the UK their home for the long haul, the path to being taxed like any other resident is now much, much shorter.

The key takeaway is clarity and timing. You now have a clear 4-year window of highly preferential tax treatment. After that, you're fully in the UK tax system. This shift demands careful, forward-looking planning. Navigating these changes can be daunting, and given the sums of money often involved, this is one area where seeking professional, qualified tax advice is not just a good idea—it's an absolute necessity. Welcome to the new UK tax landscape.