Broadly speaking, those who qualify for the new regime will, for the first four years after becoming UK tax resident, be exempt from UK income tax and capital gains tax on Figs arising during those four tax years and can bring those Figs into the UK tax-free during that time.
However, they will still be taxed on UK income and gains. After four years, individuals will become liable for UK income tax and CGT on their worldwide income and gains if they remain UK resident.
Additionally, they – including, for the first time, so-called ‘excluded property trusts’ from which they may benefit – would become subject to IHT.
To qualify for the new Fig regime, an individual must have been non-UK tax resident for the 10 consecutive tax years immediately prior to the first year of claiming it.
The good, the bad, and the ugly
For non-doms who have been UK tax resident for more than four years, the immediate impact will be significant, as Fig will become taxable at UK rates.
Figs taxed in the UK at rates as high (currently) as 45 per cent and 28 per cent may prove intolerable for many; the impact would be worse still if, as rumoured, CGT rates are set to rise in the Budget in an attempt to generate 50 per cent more CGT revenue.
Additionally, trust protections will end for non-doms who do not qualify for the new Figs regime, meaning Figs arising in offshore trust structures will be taxed on the non-dom settlor, in the same way as a UK domiciled settlor.
Figs that arose before April 6 2025 in trust structures will be taxed on settlors or beneficiaries if they are matched to worldwide trust distributions, but non-dom settlors will no longer be entitled to the remittance basis.
For those who choose to withstand these changes, financial advisers will want to consider the negative impact on the net yield of foreign investments.
Subject to the chancellor’s rumoured reluctant U-turn prompted by Treasury mandarins doubting Labour’s projected tax-take from their plans, changes to the IHT position for non-doms will also be considerable.
Currently, only UK assets are subject to IHT while a person remains neither actually domiciled nor deemed-domiciled in any part of the UK, but the proposed rules will extend IHT to an individual’s worldwide assets if he or she has been UK tax resident for 10 years or more.
Once caught by IHT on worldwide assets, individuals must become non-UK tax resident for a further 10 years before non-UK assets fall outside the IHT net.
Non-UK trust assets, whether settled before or after April 6 2025, will for the first time become subject to IHT if the settlor meets the residence criteria or is within the 10-year ‘tail’ provision at the time the assets are transferred into trust and/or when either a 10-year anniversary charge or exit charge would arise under the domestic ‘relevant property’ trust tax regime.
