How long can someone be resident in the UK before they have to pay UK tax?
In the best-case scenario, a maximum of four years for income tax and capital gains tax (CGT) and 9 years for inheritance tax (IHT). However, the answer will depend upon the residence status of the individual and the individual's assets and sources of income and capital gains. This will need to be assessed carefully.
People moving to the UK for the first time and who have not been UK tax resident for the last ten years, or who are within their first four years of UK residence after ten years of non-UK residence, can claim foreign income and gains (FIG) relief. This is an advantageous regime that applies for four UK tax years from when the individual first arrives in the UK. If claimed, the 4-year FIG regime enables individuals to claim 100% relief against UK tax on their FIG during the four-year period. They will be subject to UK tax on their UK income and gains. At the end of the four-year period, they will need to pay income tax and CGT on their worldwide income and gains.
If they decide to remain in the UK, IHT will apply to their non-UK assets when they become long-term resident (LTR). An individual becomes LTR when they have been in the UK for 10 of the past 20 tax years. If they leave before becoming a LTR, IHT will not apply to their non-UK assets. Once someone has become LTR, IHT will continue to apply to their worldwide assets even after they leave the UK for a period determined by the length of their UK residence. The "IHT-tail" can be as short as 3 years and as long as 10 for someone who was UK resident for 20 or more years before leaving. Broadly, UK assets are subject to IHT whether or not the owner is UK resident.
For those who are moving to the UK but who have previously been UK resident, a detailed review of their past residence status will need to be undertaken to examine whether or not they can claim the FIG-regime. IHT will apply to their worldwide assets when they have been resident in the UK for 10 of the past 20 tax years and they will remain subject to IHT on their worldwide assets while UK resident and for the period of their IHT tail, which is determined by the length of their UK residence.
I have been resident in the UK for some time, can I claim Foreign Income and Gains (FIG) relief?
This will depend on how long you have been UK resident. If you are within four years of becoming UK resident after a period of 10 years non-UK residence you may be able to claim the relief. Anyone who has been resident in the UK for more than four years cannot claim FIG relief.
How do I know if I am UK resident?
Determining your UK tax residency status can be complex and the Statutory Residence Test (SRT) operates to conclude residence status. There are three tests. A very high-level summary of those is set out below:
The first determines if you will be treated as automatically non-resident. You will be automatically non-resident if you meet any of these conditions:
- You were resident in the UK for one or more of the three previous tax years and spend fewer than 16 days in the UK in the current tax year.
- You were not resident in the UK for any of the three previous tax years and spend fewer than 46 days in the UK in the current tax year.
- You work full-time overseas and spend fewer than 91 days in the UK, of which no more than 30 are spent working.
The next test determines if you are automatically UK tax resident. You will be automatically UK resident if you meet any of these conditions:
- You spend 183 days or more in the UK in the tax year.
- You have a home in the UK for at least 91 consecutive days, and you spend at least 30 days there in the tax year whilst having no home outside the UK, or not spending sufficient time in your non-UK home.
- You work full-time in the UK for any period of 365 days, with no significant breaks.
If neither automatic test applies, your residency is determined by the sufficient ties test. Your residence status will be determined by the number of ties you have to the UK, such as:
- Family tie (e.g., a spouse or minor children are  UK resident).
- Accommodation tie (having a place to live in the UK).
- Work tie (working in the UK for at least 40 days).
- 90-day tie (spending more than 90 days in the UK in either of the previous two tax years).
- Country tie (if the UK is the country where you spend the most time). This tie only applies in certain circumstances.
The more ties you have, the fewer days you can spend in the UK before becoming resident. Keeping track of your residence status under the SRT is a critical element to understanding your obligations to UK tax.
In each case a day will be treated as spending a midnight in the UK, albeit exceptions can apply.
How can I ease my UK tax burden if I have been in the UK for 10 years paying the remittance basis charge until this tax year (2025/26) and plan to leave soon?
As you have been in the UK for over 4 years you cannot claim FIG relief. Following the abolition of the non-dom regime, your FIG will be subject to UK tax whether or not you bring it into the UK. A transitional relief available to people who have formerly claimed the remittance basis, called the temporary repatriation facility (TRF), will enable you to designate all or some of your FIG and pay tax on it at a reduced rate of 12% if claimed in tax years 2025/26 or 2026/27 or a reduced rate of 15% if claimed in tax year 2027/28. This works with directly held assets as well as assets attributed to you from overseas trusts.
- You could make a rebasing election for CGT purposes, which acts to uprate the value of assets held as at 5 April 2017 to their market value at that date. The election can only be made in limited circumstances:
- You must not have been UK domiciled nor deemed domiciled at any time before the 2025/26 tax year;
- You must have claimed the remittance basis in one of the tax years between 2017/18 and 2024/25, ignoring any tax year where you have automatically qualified for the remittance basis;
- You must have owned the relevant asset on 5 April 2017 and must dispose of it on or after 6 April 2025; and
- The asset must have been situated outside of the UK throughout the period from 6 March 2024 to 5 April 2025 (subject to certain exceptions).
If you meet the conditions it will be possible to rebase the assets to avoid CGT on any gains accruing to them before 6 April 2017.
How will Foreign Income and Gains (FIG) arising in non-UK trusts be taxed in the UK?
The taxation of offshore trusts will depend upon the residence status of the settlor and the beneficiaries. Any UK resident beneficiary, who is not subject to the FIG regime, will be taxed on trust distributions they receive that are matched with trust income and gains. If the beneficiary has claimed the FIG regime, such distributions will be free of tax.
- If the trust has a UK resident settlor, who is not subject to the FIG regime, the income and gains may be taxed on them as it arises as follows:
- If the settlor can benefit from the trust themselves all FIG will be taxed on the settlor as it arises
- If the settlor has been excluded but their spouse/civil partner and minor children can benefit, the settlor will be taxed on the non-UK income of the trust as it arises.
If the settlor has been excluded but their wider family, being their spouse/civil partner; any child or grandchild of the settlor or their spouse/civil partner; and any spouse of such child or grandchild, can benefit, then the settlor will be taxed on the non-UK gains of the trust as they arise. The settlor can claim 100% FIG relief against tax on such gains if they are eligible for the FIG regime.
If the trust is a relevant property trust, subject to 10-year anniversary and exit charges, the trust will be subject to IHT whilst the settlor is a LTR. As this may change over time, bringing non-UK assets in to and out of the IHT net, the trustees will need to keep good communications with the settlor on their UK residence status. If the trust is a qualifying interest in possession the settlor's and the life tenant's LTR status will dictate whether IHT is payable on non-UK assets.