Author: Amit Roy

New 4-year foreign income and gains (FIG) regime

  • w.e.f. 6th April 2025; Shift from domicile to residence for income tax, capital gains tax and inheritance tax.1

  • New 4-year FIG regime

In the past non-domiciled individual could pay taxes on FIGs on remittance.

From 6th April 2025 old rules will be removed and new arrivals will be given 100% relief on FIG in their first four years of tax residence, provided they have not been resident in the past 10 years immediately prior to their arrival. 8

This includes UK nationals and UK domiciled individuals who may not have previously had access to, or used, the remittance basis.27

Split year counted as full year of UK residence. 30

If an individual is still within their first four years of UK tax residence under the SRT on 6 April 2025, they can access the 4-year FIG regime until they have exceeded the four-year period. 31

If an individual leaves the UK temporarily during the four-year period, they can claim the 4-year FIG regime for any of the qualifying tax years remaining on their return to the UK. 32

  • Former Remittance basis (RB) users

    Who are not eligible for new regime will pay taxes on arising basis like any other taxpayer. They will continue to pay tax on pre-6th April 2025 FIGs. 9

    Remittance basis users who leave the UK and return after a period of ten tax years can only claim the 4-year FIG regime for any new FIG that arises within their 4-year FIG regime period. They cannot claim for any FIG they remit during the 4-year FIG regime period that relates to a year in which they were taxed on the remittance basis. They may, however, be able to use the TRF if their year of return is during the period the TRF is available. 33

    Mixed funds – it is advisable for former RB users planning on remitting funds to open fresh bank accounts for particular transactions to ensure clarity (source of funds) and unnecessary additional tax (avoid additional funds coming in the tax net).
  • Capital Gains Tax
    RB users can re-base their foreign assets to 5th April 2017.

  • New Temporary Repatriation facility (TRF)

This will allow individuals previously taxed on Remittance basis (RB) to designated pre-6th April 2025 FIG and pay reduce rate of tax for three years. 13

Tax YearRate
2025-2612%
2026-2712%
2027-2815%

Designation means individuals will have freedom to choose when to remit the funds. This does not need to be in the TRF window and could be in a later year. 15

Partial designations can be made.118

TRF not available to non-residents, thus taxpayer (TP) has to be tax resident in the tax year in which he wishes to claim TRF. ICAEW Tax track podcast – Goodbye non-doms, hello FIG

Add TRF charge to funds remitted to pay tax in the UK.

No FTCR against TRF RDRM73340.

  • Overseas workday relief (OWR)

    Removes the need to keep funds outside UK and increase the term from 3 to 4 years.

    As in RB Regime, with 4-year FIG regime foreign employment income will not be covered by this regime. TP can claim relief under OWR. 38

    Annual limit: lower of 30% of the qualifying employment income or £300,000 per tax year.77

    OWR relief is given by employer via payroll on an estimated basis, corrected via SA on actual days basis. ICAEW Tax track podcast – Goodbye non-doms, hello FIG
  • Claim

New 4-year regime is not automatic taxpayer (TP) will need to make a claim for it in their tax return within 2 years i.e. for 2025-26 by 31st Jan 2028. 24

TP will need to quantify the amount of income and gains for which relief is being claimed under the regime. If amounts of FIG are not quantified and included in the return, then individuals will remain chargeable and subject to tax at their usual rates. 25

Individuals will not need to make a claim for every year of the 4-year period. 26

Claim can be either of income or gains or both. OWR claim is separate. 41

If claim made, no relief for losses – income or capital arising in the year of claim. 42

Claim can be source by source basis.43

TP lose their personal allowance and AEA for CGT.44

Source:
1. Reforming_the_taxation_of_non-UK_individuals.pdf all numeric references on this article are paragraphs on this technical note.

Foreign life insurance policy on death

Key point is that the death benefit is not taxable.

All gains are chargeable unless they are qualifying policies.43.6

Foreign i.e. policies issued by an non-EU insurer say from India will be a non-qualifying policy. 43.21

Death is a chargeable event. 43.6

Gain is reported in deceased’s tax return. IHTM28160

Computation of gain43.7

Gain = TB – (TD+PG)

TB is total benefit; For a life insurance policy, where the chargeable event is the death of an individual covered under the policy, the value of the policy must be taken to be the surrender value of the policy immediately before the death and not the amount of the proceeds. This is the amount of surrender proceeds that the insurer would, as a matter of fact, have been prepared to pay to the policyholder if the policy had been surrendered immediately before the death. IPTM7520 i.e. death benefit is not taxable.

TD premiums paid

PG previous gains; previous gains charged on partial payouts.

See also Friends Provident International note example – death on Page 3.

Charge to Tax43.8

Gain is treated as savings income.

Summary of Basic rate tax credit: RA Blog

Policy TypeBasic rate creditTop slicing relief calculation
UK policyYesYes
Foreign policyNoYes


For calculation of Top slicing relief see Tolley Exam training guide.

Reduction for periods of non-UK residence 43.11

Apply if appropriate.



Sources:

  1. Book – Tolley Annual Income Tax re numeric footnotes in this article.
  2. HS321 Gains on foreign life insurance policies (2025) – GOV.UK
  3. Taxation of Indian Life Insurance policy in UK – Roy Accountants

Employment Rights Act 2025

Key changes for SMEs with date of change.

From 6 April 2026           

  1. Statutory Sick Pay 

    Removal of the Lower Earnings Limit
    All eligible employees will be entitled to SSP regardless of income. SSP will be paid at 80% of normal weekly earnings or the uprated weekly flat rate of £123.25, whichever is lower.

    Removal of the Waiting Period
    SSP will be paid from the first full day of sickness absence, not from day four.

    From October 2026    
        
  2. Tipping  

    Employers will need to:

    a. consult with workers or their representatives before creating a tipping policy.

    b. update their tipping policy every 3 years – most restaurants made new tipping policy in circa Oct 2024 due to Employment (Allocation of Tips) Act 2023 which required them to pass 100% tips to employees, so due date for update of tipping policy will be in Oct 2027.

  3. Employment tribunal time limits
    Time limits for making a claim to an employment tribunal will increase from current 3 months to 6 months.

    From 1 January 2027

  4. Unfair dismissal – for an employee to bring an unfair dismissal claim against an employer, time period that employee needs to be in the job will be reduced from 2 years to 6 months.

    Other 2027 changes

  5. Zero-hours and low-hours contracts – Workers will get right to guaranteed hours.
  6. Compensation for cancelled shifts, moved to another date, or cut short by an employer.
  7. Reasonable notice of shifts – Employers must provide reasonable notice of shifts and changes to shifts.


Sources and further reading:

  1. Employer bulletin Feb 2026 re Statutory Sick Pay 
  2. Employment Rights Act 2025 – Acas

VAT Repayment Return

How to be prepared

First VAT return is usually of repayment. I have listed below actions you can take to make the process easier .

  1. File early to get monies early.
    Do not wait for the deadline. HMRC processes repayment within 30 days of VAT submission date, not deadline date, so earlier you file earlier you will get repayment in your bank account.

    2. Use HMRC online tool to check VAT repayment status: link

    3. Email address of HMRC VAT repayment team given below, but do not chase them before 30 days.

    vatfirstperiodrepaymentclaims@hmrc.gov.uk

    4. Prepare to submit supporting paperwork online and then wait for the letter with Case reference.
    You can use this service to check on documents required to ensure all are available while preparing VAT return. HMRC will send a letter in post requesting paperwork to support the repayment like invoices, bank statement etc. Previously we had to send everything by post but now it’s done online. You can start preparing immediately and once letter with Case reference is received, submit the form.


    Send details to support your VAT repayment claim – GOV.UK

    Agent can complete this form on behalf of the client.

    Source:

    1. VAT repayments: Overview – GOV.UK

    Dividends from Authorised Investment funds (AIF)/OEIC

    Dividends

    In the hands of an investor (unit holder) within the charge to IT, dividend distributions are treated in the same manner as any other UK company dividend.1

    Equalisation is returned capital sum. As it is a capital receipt, it should be deducted from the unit holder’s cost of the units for CGT purposes. 2

    It should not be treated as a capital distribution. It is a return of the initial price paid and it should therefore be deducted from the price paid when computing the chargeable gain on the eventual disposal. 3

    Calculation for tax return

    Dividend

    Tax payer usually receives a Tax Certificate from his Broker showing both dividends paid and equalisation figure. Dividend figure included equalisation, so we need to deduct equalisation figure to get to the Dividend figure that needs to be reported in the tax return.

    Capital Gain

    Equalisation should not be treated as a capital distribution. It is a return of the initial price paid and it should therefore be deducted from the price paid when computing the chargeable gain on the eventual disposal. 3

    Tax Return

    UK Company Dividends are put in Box 4 and AIF distributions Box 5 of SA100 TR3.

    Notes:

    1. IFM03350
    2. see IFM02230 for an example
    3. CG57705