A new chapter for new arrivals: the FIG regime and long-term residence

Navigating the new rules for those becoming UK resident on or after 6 April 2025

For some time now, it has felt as though the tax rules in the UK have been changing at a whirlwind pace. And there have indeed been sizeable revisions over the last 10+ years, most notably the changes for foreign domiciliaries which took effect last year from 6 April 2025.

This article aims to look at some of those changes in detail, with a particular focus on individuals who are arriving in the UK on or after 6 April 2025 for the first time, or who are returners who had never previously used the remittance basis.

Back to basics: A recap of where the new April 2025 regimes came from

The first suggestion that there would be extensive changes to the UK tax rules for foreign domiciliaries came almost entirely unexpectedly in the UK’s then-Conservative Government’s Spring Budget in March 2024. It was announced that the concept of domicile, which up until then had been at the heart of the UK’s tax rules, would no longer be relevant in determining an individual’s tax liability and would instead be replaced entirely by residence-based regimes. The UK’s Labour Government came into power in July 2024 and subsequently implemented the Conversative proposals without significant amendment, as announced in their Autumn Budget on 30 October 2024.  

The remittance basis of taxation was abolished from 6 April 2025 and has been replaced with a special, short regime for new UK residents – post-5 April 2025 non-UK income and gains are, in the right circumstances, now completely exempt from UK tax for 4 years. This is known as the “FIG regime” (FIG = foreign income and gains), which entirely replaces the previous resident non-domicile regime. For inheritance tax, the old regime is also gone – in its place is the “LTR regime” (LTR = long term resident), with long term UK residency being the key for worldwide inheritance tax exposure.  

Several transitional provisions have been brought into effect to ease the transition into the new rules for those who were in the UK at the time of the first announcements and on 6 April 2025. The remittance basis is not gone forever: although it does not apply to new FIGs arising on or after 6 April 2025, it still applies to FIGs arising before this date which were sheltered from UK tax via a remittance basis claim. These points are not discussed in any further detail here.

A little more detail – firstly, the FIG regime. Who is it for?

The FIG regime is a new regime for “qualifying new residents” (QNRs). Who is a QNR? A QNR is any individual who is becoming UK resident for the first time after a period of at least 10 consecutive tax years of non-UK residence. This is regardless of the individual’s domicile (which is still a relevant concept for general law purposes) or nationality. For example, a Swiss national who has never lived in the UK would qualify as a QNR on moving to the UK for the first time, as would a British national who leaves the UK for work and returns 20 years later; they would count as a QNR on return. There is one niche exception to this: UK Members of Parliament and Members of the UK House of Lords cannot be QNRs.

Any tax years of residence in the 10-year reference period would disqualify the individual. If, for example, the British national mentioned above returns to the UK for a period of time whilst they are working abroad and spends enough time in the UK to be UK resident that tax year, they would need to have a clear 10 years of non-residence following this residence year in order to return as a QNR.

QNR status is short-lived: it lasts only for 4 consecutive tax years, starting with the first tax year of residence. The 4-year rule is also unwaveringly strict. Even if the QNR is non-resident in any of the 3 years following the first tax year of residence, no further years are added. It is a “use it or lose it” rule, where the benefit of QNR status cannot be carried forward if unused. The benefits can, however, be significant and it is expected that there will be an influx of short-stayers who come to the UK solely to take advantage of the time-limited regime.

What is the regime and how does it work?

As hinted at in the name, the FIG regime provides relief from UK tax on FIGs: foreign (ie. non-UK) income, foreign gains and foreign employment income insofar as the income is attributable to non-UK duties. The FIG regime is only available for QNRs, and applies regardless of whether the FIGs are remitted or otherwise brought into the UK.

If an individual does not qualify for QNR status, they will be taxable in the UK on worldwide income and gains from their first tax year of UK residence in the same way as any other tax resident.

The FIG regime relief needs to be claimed by the QNR in their annual UK self-assessment tax return, and unfortunately it is not as simple as a blanket exemption. When making a claim for relief, QNRs will need to itemise and quantify each type of foreign income received and gain realised. This flexibility of being able to claim the relief for only certain types of foreign income and gains is beneficial. However, looking at the other side of the coin, it is anticipated that this method of reporting could prove to be a major compliance burden for QNRs. The true extent of this will only be known after the filing period for the 2025/26 UK tax returns is complete (31 January 2027), as these will be the first tax returns to which the FIG regime can apply. It has been noted that QNRs face a trade-off: being able to take advantage of the regime also means providing the UK tax authorities with information about non-UK assets – as these assets are not taxable in the UK, some QNRs may feel uncomfortable providing information which has no fiscal impact for and is technically of no interest to the UK tax authorities (particularly if the QNRs are intending to be tax resident in the UK on a short term basis only, for example, to realise a liquidity event or undertake a restructuring). However, the level of detail required to participate in the regime mirrors the transparency of most modern international tax cooperation models and so it will be left to be seen whether these “fears” will be reflected in a reduction of the numbers of QNRs who actually take advantage of the regime.

There are, of course, many further nuances to the regime. For example, there is another, more concrete trade-off if the FIG regime relief is claimed: QNRs who claim the relief will not able to claim annual personal income tax or capital gains tax allowances, and foreign losses (income or gains) made in the year any FIG relief is claimed are never allowable. For most QNRs, this is a trade-off worth having: however, for those who have significant losses or tax credits to use they may choose not to opt into the regime for this reason.

Unlike the remittance basis, there is no fee payable to use the FIG regime.

Categories of eligible FIGs are listed in the legislation, and include most types of non-UK income and gains which would be expected. For example, most types of investment income such as interest and dividend income, including accrued income profits and offshore income gains, property income, trade profits, pension income and most gains from disposals of non-UK assets. The source of the income and the situs of assets is therefore a very important piece of the puzzle to understand, as those who can claim the relief will prefer non-UK income and non-UK situs investments over their UK equivalents.

Certain FIGs are notably excluded. Excluded FIGs include, for example, foreign gains on disposals of interests in what are known as “property-rich” companies (broadly, companies with at least 75% of gross asset value derived from UK property). Gains triggered by withdrawals of offshore life bonds are also excluded, as is non-UK performance income for sportspersons and entertainers.

For eligible investment income and gains there is no limit to the amount of relief that can be claimed. However, this is not the case for employment income. There is a limitation on the relief for employment income which is attributable to duties performed outside the UK: it is capped annually at the lower of GBP 300,000 or 30% of the individual’s total qualifying employment income of the year. There is also an additional compliance burden for employees, who would need to effectively make a double claim – a foreign employment election for the years in which they are a QNR and then a foreign employment relief claim to claim relief for particular employment income. The reason for this additional administration is probably because some employment income can arise after the end of the tax year in which the duties were performed. The regime is therefore not as beneficial for employees as it is for others.

The FIG regime is not as complicated as the resident non-domiciled remittance regime. In particular is the fact that income and gains for which FIG relief has been claimed can be remitted to the UK without a UK tax charge: this is a welcome simplification. However, even with this simpler regime, pre-arrival planning can bring tax benefits and planning ideas are covered below in “…practical points a newcomer can consider…”

What about trusts from 6 April 2025?

Some individuals may move to the UK on or after 6 April 2025 with trust structures already in place. Offshore (ie. non-UK resident) trusts have not been left out of the picture in the new rules: the QNR status of both the settlor and beneficiaries has a major impact on their tax treatment. Broadly, QNR settlors with an interest in the trust are not taxable on FIGs arising in their non-UK resident trusts, but they are taxable on UK income and gains. As is the case with personally arising FIGs, QNR settlors have to make the requisite claim for relief for their trust FIGs, and this is only available whilst they have QNR status. Once they are no longer a QNR, UK resident settlors are generally taxable on all income and gains arising in their non-UK resident trusts provided they and/or their wider family can benefit.

It must be noted, however, that when the settlor claims relief for trust FIGs this does not remove the FIGs from UK taxation altogether, but simply defers any charge to UK tax until a UK resident beneficiary receives a benefit.

QNR beneficiaries of non-UK resident trusts (who also make the requisite relief claims) are not subject to UK tax on receipt of income distributions. Receipts of capital distributions and other benefits are much more complex: in some circumstances these receipts are also tax free.  However there is a risk of a tax charge being triggered after the FIG regime ends if the nuances of the new rules are not understood correctly. Advice should always be sought in these circumstances.

For those arriving in the UK on or after 6 April 2025 with pre-existing trusts, the motive defences could still be a valuable tax tool. In the right circumstances, a successful application of the motive defences could lead to no reporting requirements for the QNR in relation to the trust income and gains (the gains motive defence requires gains to arise to an underlying company). The application of these motive defences is very bespoke and advice should be sought on this.

The anti-avoidance rules known as the “onward gifting rules” still apply to QNRs – if a QNR receives a capital distribution from a non-UK resident trust and subsequently passes this to a UK resident donee who is not a QNR, the donee may be taxed on the receipt as if they received it from the trust directly. Again, all these rules are complex and advice should be sought.

Secondly – the LTR regime for inheritance tax. Who is an LTR?

Since 6 April 2025, exposure to UK inheritance tax is no longer determined by domicile or deemed domicile status: instead, “long term residency” is key. Those who are LTRs are potentially exposed to UK inheritance tax on worldwide assets.

So who is an LTR? An LTR is an individual who has been tax resident in the UK for 10 or more of the previous 20 tax years. An individual who remains UK resident for 10 tax years acquires LTR status at the start of the eleventh tax year, even if that tax year turns out to be a year of non-UK residence. Therefore, it will be good practice for individuals to limit their periods of UK residence to 9 years in order to prevent becoming an LTR. As with QNR status, domicile and nationality are not relevant. So the Swiss national mentioned above would not be an LTR for their first 10 years of UK tax residence, and similarly the British national also would be not be an LTR: their non-residence period of 10 consecutive UK tax years would have “re-set the clock”.  

UK tax residence status is determined by the Statutory Residence Test, which has been the case for UK tax years from 2013/14 onwards. To determine tax residency status in previous tax years, the former rules apply which were largely based on case law supplemented by UK tax authority practice and which were consequently far less clear.

LTR status sticks around even after the individual leaves the UK – this is known as the LTR “tail”. Once an LTR ceases to be UK resident, they will nonetheless continue to have LTR status for a specified number of UK tax years, determined by how long they were actually UK resident for. If they were UK resident for 10 to 13 tax years out of the previous 20, their tail is 3 UK tax years. The tail is 4 UK tax years following 14 years of tax residence, and 5 following 15 years and so on. The tail increases by a year for each additional year of UK residence. 20+ years of UK residence out of the previous 20 triggers the maximum tail of 10 years.

There are special rules for determining LTR status for individuals who are under the age of 20. These are not covered here.  

How does the regime work?

Individuals who are LTRs are exposed to UK inheritance tax on their worldwide assets on death and on certain lifetime gifting. Non-LTRs are exposed to UK inheritance tax only on UK assets or on non-UK assets (notably shares in closely held companies and partnership interests) which are connected with UK residential property or (as proposed from 6 April 2026) with UK agricultural property (referred to here as “non-excluded foreign property”). All other non-UK assets of non-LTRs are known as “excluded property” which are outside of the scope of UK inheritance tax.

There are transitional provisions specifically for individuals who have had periods of residence in the UK in the last 20 years, but who were non-domiciled on 30 October 2024 and have not been resident in the UK from the UK tax year 2025/26 onwards. These are not covered here.

Again, what about trusts from 6 April 2025?

The LTR regime also impacts UK inheritance tax charges on trusts – the charging trigger point is now focussed on the LTR status of the settlor at the relevant time of the charge.

The test for whether trust assets are in the scope of UK inheritance tax apply on each potential “occasion of charge”. These occasions of charge are principally those which occur under the relevant property charging regime: on gifts of assets into trust (entry charge, up to 20%), on 10-year anniversaries of the creation of the trust (anniversary charge, up to 6%) and when capital is distributed (exit charge, up to 6%). The death of the settlor (up to 40%) is also an occasion of charge under the gift with reservation of benefit rules, but only if the trust is revocable or the settlor was a beneficiary or could be added as a beneficiary. There is also an exemption to this latter occasion of charge for certain trusts which were funded prior to 30 October 2024 to the extent they do not hold UK property or non-excluded foreign property.

Different rules apply to living and deceased settlors. If a trust has a living settlor who is a LTR at the occasion of charge (for example, at the 10-year anniversary of the creation of the trust), all the trust assets are potentially in scope of UK inheritance tax. If the living settlor is not an LTR, only UK assets and non-excluded foreign property are within the scope of inheritance tax.

If the trust has a deceased settlor, the inheritance tax exposure depends on when the settlor died. If the settlor died before 6 April 2025, and was a UK domiciled or deemed domiciled individual when the trust was funded, all the trust assets are potentially in scope of UK inheritance tax on each occasion of charge. If the settlor was not domiciled or deemed domiciled in the UK when the trust was funded, only the UK assets and non-excluded foreign property would be in scope. If the settlor dies after 5 April 2025, their LTR status at the time of death is relevant. If they were an LTR at the time of death, all the trust assets are potentially in scope of UK inheritance tax on each occasion of charge. If they were not an LTR, only the UK assets and non-excluded foreign property would be in scope.

There are again many further nuances to the regime. For example, the change of the residency status of a living settlor is one – when a LTR settlor ceases to be an LTR (which includes their time as an LTR under the tail), an inheritance tax exit charge is triggered on the value of any non-UK assets (not including non-excluded foreign property) as those assets are technically leaving the UK inheritance tax net at that time. Additionally, there is a cap of GBP 5 million per trust on the total 10-year anniversary and exit charges which can be charged in a 10-year period on non-UK assets which were in the trust as excluded property before 30 October 2024 and which are non-UK situs at the time of charge.

Bearing in mind the new regimes, what are some practical planning points a newcomer can consider before arriving – particularly in relation to financial assets?

With the non-domicile regime, pre-arrival planning was extremely important to ensure newcomers could take full advantage of the benefits of the remittance basis. It included the structuring of bank accounts and the stockpiling of “clean capital” which under the new regime is no longer needed. With the QNR regime, pre-arrival planning is in most circumstances less of a necessity:  financial portfolios of non-UK assets can be optimised even after becoming UK resident whilst QNR status is maintained, while cash and assets can move in and out of the UK without UK tax consequences provided the relief is claimed. The main planning for personal financial portfolios before arrival will be to check for UK situs investments and, subject to investment considerations, remove these from the portfolio. Certainly it is the case that QNRs with the majority of their wealth situated outside the UK are the ones who will be able to take advantage of the FIG regime most fully.

One exception to the downgrading of the importance of pre-arrival planning is for those who can benefit from trusts or other private wealth structures. Trust beneficiaries should consider whether requesting income distributions before taking up residence in the UK would be appropriate, given the complexities of how the FIG regime functions in these circumstances (the regime can, in some circumstances, tax a distribution made to a QNR after they lose that status). This is an area where bespoke advice is required and all private wealth structures should be reviewed prior to arrival.  

The QNR window is short: newcomers should therefore consider making their first year as long as possible to fully take advantage of the time. This can often be achieved by moving to the UK as close after 6 April as possible. Canny individuals may be able to arrive shortly before the end of the prior year without triggering residency until 6 April. It is very important to be certain when UK residency starts (and indeed ends). Getting it wrong could “waste” a QNR year or see an individual unintentionally remaining UK resident beyond the expiry of QNR status.  

If there is a plan to remain in the UK beyond the 4-year QNR window, consideration could be given to “UK-proofing” portfolios and investments to make them as tax efficient as possible when worldwide taxation is on the cards. For example, exiting investments which are not UK tax friendly and replacing these with tax efficient holdings, simplifying holdings where there is unnecessary complexity, making use of tax wrappers to defer or reduce rates of tax, and realising gains to neutralise base costs. A review of longer-term investment principles on these lines would be recommended. Investments into UK assets also may be on the cards, although care will need to be taken with these and the respective UK inheritance tax exposure.

It goes without saying that pre-arrival planning is still going to be vital for those individuals who are moving to the UK but will not qualify for QNR status, as they will be subject to UK tax on worldwide income and gains from their first tax year of UK residence. Traditional planning should be considered: for example, reviewing investment structures (such as trusts, foundations, family investment companies and similar) for efficiency in the UK, realising gains where convenient, considering tax efficient philanthropy, financing UK property purchases appropriately and reviewing employment arrangements, directorships and management protocols for non-UK companies. 

The LTR regime allows for a bigger window of opportunity – newcomers do not need to concern themselves with specific UK inheritance tax planning if they do not intend to spend more than 9 years in the UK. This window is long compared to the window of QNR status: individuals will have to make a decision to remain in the UK and become fully taxable on their worldwide income and gains for 5+ years after QNR status ceases before inheritance tax considerations become relevant. At that time, again traditional inheritance tax planning techniques could be considered: lifetime gifting, taking out insurance to cover inheritance tax exposure and optimising the use of reliefs and exemptions. Structured planning can be put in place for complex cases. Under the new regime, “excluded property trusts” (which were traditionally set up by individuals before they became exposed to UK inheritance tax) can no longer be used as a tax planning tool in the same way as they were under the domicile-based regime. They no longer offer IHT protection once the settlor becomes an LTR, as set out above, although of course there are many other situations where they may serve a family’s purposes outside of tax reasons.

Lastly, what other (non-tax) things should newcomers be thinking about before a move to the UK?

Aside from tax, there are a number of other things which well-informed newcomers should think about before coming to the UK. Often initial assistance can be sought through lawyers, wealth planners and other family advisors.

A key consideration is an individual’s immigration status, which is sometimes overlooked when efforts are concentrated on designing tax efficient plans. Does the individual and their family have a right to live and work or be educated in the UK for the time period they intend to stay there?

Succession planning is another – will the estate and succession plans which the individual and their family have in place continue to function as intended whilst they are in the UK? What happens if they were to die there? This can be Wills, other testamentary documents, dynastic wealth planning structures, powers of attorney, etc.

Family matters will also be of importance for those who are intending to move with partners, spouses and/or children. What is the impact of UK residence on any matrimonial property regimes or marriage agreements? Is parental responsibility for children recognised and are appointments of guardians for minor children still effective and/or appropriate?

Lastly, but importantly for entrepreneurs and those with family business and other corporate responsibilities: advise should be sought on the corporate impact of their physical presence in the UK. Care will need to be taken not to trigger adverse tax or corporate issues as a result of “management & control” rules in the UK, which in some circumstances seek to pull non-UK companies, partnerships and other corporate vehicles into the UK tax net.

Carolyn Steppler (+41 (0)43 430 02 06) and Sophie Hart (+41 (0)22 591 18 54) at Charles Russell Speechlys Switzerland are on hand to assist with any associated advice.