global Tax Navigating the U.K.'s New Non-Domiciled Tax Rules: Impact of U.K. Budget and Your U.S. Taxes March 31, 2025 Attention U.S. citizens living in the U.K.…starting April 2025, worldwide income will no longer be exempt after four years. This could mean higher taxes and complex reporting requirements. Here’s what you should know. The U.K. Chancellor of the Exchequer, Rachel Reeves, has announced major changes to the way the U.K. will tax foreign income and gains. If you're a U.S. citizen living in the U.K., these changes could mean higher taxes, stricter compliance and immediate tax planning. Current rules The current non-domiciled (non-dom) regime, which has been in place for over 200 years, taxes U.K. non-domiciles only on money they earn in the U.K., allowing them to be exempt from their foreign income and gains, unless remitted into a U.K. bank account. Changes To U.K Tax System From April 6, 2025, the current regime would be phased out and replaced by the new Foreign Income and Gains (FIG) regime. Under the FIG regime, new U.K residents, including British domiciles, will benefit from 100% relief on foreign income and gains during their first 4 years of tax residence; provided they have not been a U.K. tax resident in any of the 10 consecutive years prior to their arrival. Taxpayers currently utilizing the remittance basis will be able to benefit from the FIG regime during any year within the 4-year residence period. Tax Impact on U.S. Citizens Living Abroad U.K tax residents who have exceeded 4 years of residence from April 6, 2025, will now be subject to tax on their worldwide income and gains. A few steps taxpayers can take to save time and money include: Pre-immigration planning for new inbound U.K. residentsEstablish a relationship with your U.S. and U.K. tax advisors to ensure foreign tax credits are being appropriated to the correct jurisdictionYour U.S. financial advisors will need to be made aware of the changes as non-reporting funds have harsh tax implications in the U.K. In general, having non-U.S. income may trigger the following reporting obligations: FinCEN Form 114 (FBAR)Form 8938Form 3520Form 8621Form 116Form 2555Form 8858Form 8865Form 5471 It is important to be prepared for the changes whether you are planning an impending move or have concerns about how the new changes could impact your U.S. taxes.
