The FIG regime - implications for UK inbound expatriates and their employers

4 April 2025

The Finance Act 2025 finally abolishes the concept of “domicile” in relation to tax. As a result, non-domiciled individuals will no longer be able to claim the remittance basis of tax on their Foreign Income and Gains (FIG).

From 6 April 2025, under the new FIG regime, expatriate employees coming to the UK will be taxed on their FIG based on their residence status before they arrived in the UK. This applies regardless of whether they bring their FIG into the UK or not.

How does the new FIG regime work?

Under the FIG regime, a UK inbound expatriate can claim to exempt their FIG from UK tax for the first four tax years of residency in the UK if they:

were not resident in the UK in the 10 tax years before the first tax year they became tax resident in the UK;
make a FIG claim in their UK tax return; and
provide details of their FIG on their UK tax return (even though it will not be taxable).

These individuals are referred to as Qualifying New Residents (QNR) and includes individuals who on 6 April 2025 have been UK tax resident for less than 4 tax years following 10 consecutive years of non-residence.

Where a FIG claim is made, the QNR will lose their tax-free personal allowance for the tax year and Capital Gains Tax (CGT) annual exemption. Unlike the remittance basis, there are no concessions akin to the £2,000 unremitted income and gains threshold that allows individuals to retain their personal allowance.

Overseas Workday Relief (OWR) offers an exemption for an individual's employment income related to their non-UK workdays. Subject to transitional provisions (see below), this relief will be available for the first four tax years an individual is a tax resident in the UK, provided they qualify for the FIG regime. This represents an additional year of OWR compared to the relief offered under the remittance basis.

The new relief is subject to an annual cap equal to the lower of:

£300,000; and
30% of the individual’s taxable earnings.

The cap is calculated on a cumulative basis, meaning any trailing bonus and share-based income paid after the tax year it relates to must be tracked and accounted for according to the limits applicable for that tax year, and not the tax year it is paid in.

Transitional provisions

If an individual qualified for the remittance basis and OWR, but they will not qualify for the FIG regime, they can only claim OWR for the remainder of the first three tax years they are resident in the UK.

Employees that are part way through their three-year OWR claim at 6 April 2025 and are eligible for the FIG regime can benefit from OWR for a total of four years of residence.

However, this means that those individuals who claimed OWR under the old regime in the 22/23, 23/24 and 24/25 tax years, will not qualify for OWR in 25/26.

Employees partway through their OWR period at 6 April 2025 will not be subject to the annual cap applied to OWR.

The temporary repatriation facility (TRF) applies to individuals who were previously subject to the remittance basis and potentially have large amounts of unremitted FIG.

These individuals can make an election to remit (i.e. bring in) their unremitted pre-6 April 2025 FIG to the UK and be taxed at preferential rates on the FIG they remit. The reduced rate is set at 12% for the 2025/26 and 2026/27 tax years, and 15% for the 2027/28 tax year.

Additional considerations

Section 690 PAYE directions

A section 690 direction allows employers to limit the UK PAYE income tax on the estimated percentage of a qualifying new resident's (QNR’s) earnings that relates to their UK workdays. From 6 April 2025, this can be obtained via an online self-certification process. This is a welcome simplification.

Home leave tax relief

The home leave tax relief provisions have been updated to reflect the abolishment of the domicile concept.

From 6 April 2025, employees are eligible for tax relief on qualifying travel expenses related to travel between the UK and the country they normally live in, i.e. in most cases, the country they have come to the UK from and will return to.

This relief applies for:

the first four tax years for qualifying new residents who qualify for FIG and OWR; and
the first three tax years of residence for individuals who qualify for OWR but not FIG.

Remittance basis users who undertook 100% of their work overseas

Under the remittance basis rules, non-domiciled individuals could potentially claim relief from UK tax on all their employment income if they undertook 100% of their employment duties overseas and did not remit this income to the UK.

This does not apply to non-UK source employment income related to periods from 6 April 2025.

Winners and losers of the new FIG regime

Winners

Employers - a more competitive inbound expatriate regime to attract expatriates to the UK
The economy – remittances do not impact an individual's UK tax position = remitting funds to spend on UK goods and services.
UK nationals, excluded from claiming the remittance basis, can potentially qualify for the FIG scheme
UK inbound expatriates who will spend no more than four tax years in the UK and will not be impacted by the OWR restriction if they qualify for the FIG regime.
QNR’s who wish to remit large sums of post 5 April 2025 FIG to the UK tax free.
Individuals who need to remit pre-6 April 2025 FIG to the UK and qualify for the 12/15% reduced tax rate that applies to this income under the TRF for the 2025/26, 2026/27 and 2027/28 tax years.

Losers

The economy – existing asset rich long standing non domiciled UK residents with large amounts of FIG may decide to leave the UK given adverse implications for them.
High earning QNR’s for whom their OWR claims may now be restricted.
Individuals who qualified for the RB and OWR, but not FIG will receive no tax relief for non-employment related FIG.
Employers with tax equalised high earners subject to the OWR limitation. They could face a large tax equalisation bill and the need to track trailing bonus and share income could be administratively burdensome.

Examples

John

John is a US citizen who was assigned to the UK in the 2025/26 UK tax year for 5 years and receives a salary of £2 million a year. He undertakes 20% of his assignment work duties in the USA.

John would be entitled to make an election to be taxed under the FIG regime for the 2025/26, 2026/27, 2027/28 and 2028/29 tax years. Additionally, his OWR for these years would be restricted to £300,000 per year, and he would be entitled to home leave relief in these tax years.

Mary

Mary is a UK citizen who moved to the UAE in 2010 and has been non resident in the UK since the 2010/11 UK tax year. In 2025/26, Mary decides to move back to the UK and re-establishes her UK tax residence.

She would be able to make a FIG election claim for the 2025/26, 2026/27, 2027/28 and 2028/29 UK tax years.

What can employers do to prepare for the FIG regime?

Identify existing and future impacted employees.
Consider funding and providing advice to these employees.
Budget for any added tax equalisation gross up costs that may arise from the 30% OWR restriction for tax equalised employees.
Consult with any tax equalised employees who wish to utilise the TRF facility, and account for any resulting tax equalisation gross up costs that arise.
Update policies, processes and tax cost estimate calculators to factor in the changes.
Account for and track the OWR restriction on trailing bonus and share based income.

Consider the length of assignments and structure of remuneration to combat any restrictions to OWR and home leave relief.

Get in touch with our global mobility specialists

If you would like to know more on how we can support you and your employees when navigating the new FIG regime, contact us today and one of global mobility specialist will be in touch.

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