What the 2025 UK Budget Means for Expat Taxes

Navigating life as an expat is a journey filled with incredible highs and the occasional, let's be honest, bureaucratic headache. If you're anything like me, the words "UK Budget" often fall into the latter category, bringing a familiar mix of curiosity and slight dread. You hear the headlines on the news, see the chatter in expat forums, and the big question starts to form: "What does all this political noise actually mean for my wallet?"

Well, the latest UK budget announcements for 2025 aren't just noise. They represent one of the most significant overhauls of the UK tax system for international residents in a generation. The long-standing "non-dom" regime is officially on its way out, and a brand-new system is taking its place.

So, grab a coffee. Whether you're a recent arrival in London, a long-term resident weighing your options, or a Brit living abroad, this guide will break down exactly what the 2025 UK budget means for your expat taxes, without the jargon and political spin.

The End of an Era: Farewell to the 'Non-Dom' Regime

For decades, the UK's "non-domiciled" tax status has been a defining feature of its appeal to international talent and wealth. In simple terms, if you were a UK resident but your permanent home or "domicile" was abroad, you could elect to be taxed on a "remittance basis." This meant you only paid UK tax on your UK income and gains, and on any foreign income and gains that you brought into (or "remitted" to) the UK.

It was a complex but often highly beneficial system for many expats. However, effective April 6, 2025, this entire regime is being abolished.

This isn't a minor tweak; it's a fundamental shift. The government's goal is to simplify the system and ensure that long-term residents of the UK are taxed in a similar way, regardless of their domicile status. For anyone who has structured their financial life around the non-dom rules, this change requires immediate attention.

Meet the New System: The 4-Year Foreign Income and Gains (FIG) Regime

Replacing the non-dom framework is a new, simpler residency-based system. It's called the Foreign Income and Gains (FIG) regime, and it's designed to be a soft landing for new arrivals.

Here’s how it works:

• Who is it for? Newcomers to the UK. To qualify, you must have been non-resident in the UK for at least 10 consecutive tax years before arriving.
• What are the benefits? For your first four years of UK tax residency, you will not pay any UK tax on your foreign income and gains. You can bring this money into the UK without incurring a tax charge.
• What happens after four years? Once you enter your fifth year of UK tax residency, the FIG regime benefits cease. You will then be taxed on your worldwide income and gains, just like any other long-term UK resident.

This new system is radically different. It's a clear, time-limited incentive rather than an indefinite status.

To make it clearer, here’s a comparison:

For those planning a move to the UK, this provides a predictable, albeit shorter, window to manage your global finances.

"I'm Already a Non-Dom in the UK. What Happens to Me?"

This is the multi-million-pound question for thousands of current expats. If you're already in the UK and using the remittance basis, you will lose access to it from April 6, 2025. You won't be eligible for the new 4-year FIG regime if you've already been a UK resident for four or more years.

It sounds daunting, but the government has introduced several transitional provisions to ease the shift. Think of these as a temporary bridge to the new reality.

1. The 50% Foreign Income Reduction (2025-2026 only)

For the tax year 2025-2026, existing non-doms who are moving to the worldwide basis of taxation will only have to pay tax on 50% of their personal foreign income. This is a one-off measure to soften the immediate financial blow. Note that this reduction does not apply to foreign capital gains.

2. The Temporary Repatriation Facility (TRF)

This is a big one. For two years—from April 6, 2025, to April 5, 2027—you will be able to remit foreign income and gains that arose before April 2025 to the UK and pay a reduced tax rate of just 12%.

Normally, remitting this "old" money would trigger tax at your marginal rate (up to 45%). This two-year window offers a unique opportunity to clean up complex offshore account structures and bring capital into the UK at a much lower cost. This could be incredibly useful for funding a property purchase, investing in the UK, or simply simplifying your financial affairs.

3. Capital Gains Tax (CGT) Rebasing

If you're an existing non-dom and you personally hold a non-UK asset that you acquired before April 5, 2019, you can elect to "rebase" its value to what it was on that date. This means that when you eventually sell it, you'll only pay UK CGT on the growth in value since April 2019, not on the entire gain since you first bought it. This could significantly reduce your future tax bill on long-held investments.

A Seismic Shift for Inheritance Tax (IHT)

The changes don't stop at income and gains. The UK government is also planning a complete overhaul of Inheritance Tax (IHT).

Historically, IHT has also been based on domicile. If you were a non-dom, your non-UK assets were generally outside the scope of UK IHT. This was a major advantage for long-term estate planning.

The plan is to move IHT to a residence-based system from as early as April 6, 2025. The current proposals (which are still under consultation, so details could change) suggest:

• Entry Rule: Your worldwide assets will fall into the UK IHT net once you have been resident in the UK for 10 years.
• Exit Rule (The "Tail"): After you leave the UK, your worldwide assets will remain subject to UK IHT for a further 10 years.

This is a dramatic change. The "tail" provision means that a clean break from the UK tax system will take a full decade of non-residence. Furthermore, the protected status of offshore trusts set up by non-doms will also be impacted, exposing their assets to IHT in a way they weren't before. If you have an offshore trust or a long-term estate plan, reviewing it with a specialist is now a critical, time-sensitive task.

What About UK Expats Living Abroad?

If you're a Brit living in Dubai, Singapore, or elsewhere, you might be breathing a sigh of relief. The headline changes to the non-dom regime won't directly affect you if you are non-resident for UK tax purposes. The Statutory Residence Test, which determines your tax status, remains unchanged.

However, the proposed IHT changes are highly relevant. If you plan to return to the UK in the future, you could become subject to worldwide IHT after 10 years of residency. This could impact the inheritance plans you've made while living and accumulating wealth abroad. It's another reason to keep a close eye on the final IHT rules as they are confirmed.

Practical Steps & Your Expat Tax Checklist

These changes are significant, and doing nothing is not an option. Here are some actionable steps to take right now:

1. Review Your Residency Timeline: Pinpoint your arrival date in the UK and calculate how many years of residency you will have as of April 6, 2025. This determines whether you get any of the new FIG regime benefits and how the transitional rules apply to you.

2. Model Your Future Tax Liability: If you're moving to the worldwide basis, calculate your expected UK tax bill for 2025-26 and beyond. Factor in the 50% income reduction for the first year. Understanding the numbers is the first step to planning for them.

3. Assess the Temporary Repatriation Facility: Look at your offshore funds. Is there capital you've wanted to bring to the UK? The 12% rate is a compelling incentive. You have a two-year window to take advantage of it.

4. Re-evaluate Your Estate Plan: The IHT changes are a game-changer. Your existing will and trust structures may no longer be fit for purpose. This requires an urgent conversation with an estate planning or tax advisor.

5. Seek Professional Advice: I cannot stress this enough. This article is a guide to help you understand the landscape, but it is not a substitute for personalized financial advice. The rules are complex, and your personal circumstances are unique. A qualified tax advisor who specializes in expat taxes is an essential partner in navigating this new world.

The Final Takeaway

The 2025 UK budget marks the end of a tax system that has defined the UK's relationship with its international residents for over two centuries. The new framework is simpler and, in some ways, more transparent, but it is also less generous for long-term residents.

The key takeaway is this: the landscape has changed for good. For new arrivals, there is a clear four-year window of opportunity. For existing residents, there is a set of temporary tools to manage the transition. For everyone, there is a need for proactive planning. By understanding these changes and taking considered, professional advice, you can ensure your expat journey in the UK continues to be a successful and prosperous one.