Foreign income and gains regime

The foreign income and gains (FIG) regime, in force since 6 April 2025, replaces the remittance basis regime previously available to non-UK domiciled individuals. The FIG regime can apply to individuals who are UK-domiciled and non-UK domiciled.

Overview of the FIG regime

The FIG regime has been introduced for individuals who become UK tax-resident after a period of at least ten consecutive tax years of non-UK residence. For a period of four tax years starting with the first tax year the individual becomes UK tax-resident, they can choose not to pay UK tax on their qualifying foreign income and gains regardless of whether these funds are brought to the UK.

After the four-year period has elapsed, it will no longer be possible to claim tax relief under this regime and the individual will be subject to UK tax on their worldwide income and gains.

If an individual leaves the UK temporarily within the four-year period, they may still be eligible to make a claim if they return to the UK within the remaining four-year period. For example, if an individual becomes UK tax-resident in 2026/27, is non-UK tax-resident in 2027/28 and 2028/29 but then UK tax-resident again from 2029/30 onwards, they will be able to use the FIG regime for the 2026/27 and 2029/30 tax years.

An individual’s tax residence status for the purposes of the FIG regime will be determined using the statutory residence test (SRT). Information on the SRT is available here.

A UK tax year of residence is counted for the purpose of the FIG regime even if the individual is resident in another jurisdiction for the purpose of applying a relevant double taxation agreement. If an individual comes to or leaves the UK part way through a tax year, that year may also be counted so planning to maximise the benefit of the relief available is advisable.

FIG: Making a claim for relief

A claim must be made within the individual’s self-assessment tax return for each tax year in which they wish to rely on this relief. The time limit for making a claim for relief under the FIG regime is the anniversary of 31 January following the end of the tax year to which the claim relates. For example, a claim for relief in the 2026/27 tax year must be made on or before 31 January 2029.

If, outside the time limit for making a claim, an individual identifies additional foreign income or gains that accrued in a year for which a claim had been made, the relief may not apply to the additional income or gains except in limited circumstances.

The definition of qualifying foreign income is drafted widely but there are exceptions to what might qualify. It is important to assess likely sources that may need to be taken into account.

Those who claim to be taxed under the FIG regime will be required to quantify the qualifying foreign income and gains on which they are claiming relief and disclose this in their self-assessment tax return. Broadly, this means that all individuals will be required to disclose their worldwide income and gains within their tax returns even if FIG relief may mean that some of those income and gains are not actually taxed in the UK.

Claims apply on a source-by-source basis meaning taxpayers can claim relief on certain sources of foreign income and gains and not on others. This may be useful when considering the worldwide tax position for an individual.

Any foreign income losses or foreign capital losses which arise during a tax year in which an individual is claiming the new FIG regime will not be deductible, regardless of whether the claim is made in respect of only foreign income, only foreign gains or only on employment income using overseas workday relief.

Additionally, if an individual elects to be taxed under the new FIG regime, they will lose their entitlement to the income tax personal allowance (£12,570 for the 2025/26 tax year) and CGT annual exempt amount (£3,000 for the 2025/26 tax year). Taxpayers will lose their entitlement to both allowances regardless of whether a claim is made in respect of only foreign income, only foreign gains or only on employment income using overseas workday relief.

FIG: Overseas workday relief

Where an employee is eligible for the FIG regime, they can also make an overseas workday relief (OWR) claim for up to four tax years. Previously, this relief was restricted to three tax years.

The new rules provide relief from income tax on earnings from employment duties performed outside the UK regardless of whether these earnings are brought to the UK.

The amount of OWR available in each qualifying tax year will be capped at the lower of 30% of the qualifying employment income, and £300,000. A claim for OWR can be made independently of any other claim under the FIG regime.

Transitional rules may be available to individuals who claimed OWR in a tax year before 6 April 2025 but are ineligible for the new FIG regime. Where this is the case, they may continue to claim OWR for their first three years of UK tax residence. Individuals who were part way through their OWR period on 6 April 2025 and are eligible for the FIG regime can claim OWR for a maximum of four years.

How Moore Kingston Smith can help

A UK resident individual will come within the scope of worldwide taxation much sooner under the FIG regime compared to the previous regime, and there will be reporting requirements. Advice should be taken before making any claims for relief.

If you need advice on how the new regime applies to you, please get in touch with your usual Moore Kingston Smith contact.