The Government published proposed amendments to those parts of Finance Bill 2024-25 that contain fundamental changes in the scope of inheritance tax (IHT) to a residence based IHT system and the reform of taxation of non-domiciled individuals (non-doms). These government amendments were debated and passed at the report stage of the Finance Bill on 3 March 2025.
Residence Based IHT
The scope of IHT in the UK is fundamentally changing from a domicile-based system to a system based on residence. From 6 April 2025, the test for whether non-UK assets owned by individuals and trustees are within the scope of IHT will be whether the individual, or very broadly for trusts the individual settlor of the trust, is a ‘long-term resident’. For further information see our previous Tax Matters Digest article.
There were some changes to Finance Bill 2025 clauses in relation to the IHT regime based on residence in the UK, which, whilst important for some, were not fundamental. That is not to diminish the impact of this regime change which remains significant for individuals who come into and leave the UK, as well as the trusts they have settled.
Non-dom reforms - including Temporary Repatriation Facility
Fundamental changes to the rules for non-doms are included in Finance Bill 2025 and will come into effect from April 2025. This includes that:
- All UK resident individuals will pay tax on their worldwide income and gains arising after 5 April 2025 and the remittance basis will come to an end;
- There will be a four-year FIG (foreign income and gains) regime available for those who come to the UK after 10 years of non-UK residence;
- There will be a Temporary Repatriation Facility (TRF);
- There will be some rebasing for capital gains; and
- Overseas workday relief will be retained and will still be based on income which relates to overseas duties determined on a just and reasonable basis.
For further information see our previous Tax Matters Digest article.
Media reporting of the Chancellor’s comments at Davos in January that the TRF would be expanded led some to be hopeful of significant change that would be beneficial to affected taxpayers. No such ‘major’ changes were included in the Finance Bill amendments, which mainly dealt with the complex detail of the TRF’s operation, though there was welcome clarification that the TRF will be available to offshore income gains in trusts.
Could you be impacted by these changes?
For more information about the impact of these changes, including summaries of various different scenarios including New Resident, Newcomer, Brit abroad, Decennial, Long Term Resident and GMS – Head of Mobility/HR, please see our Non-Dom Regime Reform page.
If you would like further information or to discuss how these fundamental changes could impact you and your family, please contact the authors or your usual KPMG in the UK contact.