In new guidance, HMRC have sought to clarify the availability of overseas workday relief under the new non-dom tax regime from April 2025, as part of a summary of how the new regime is expected to operate. HMRC’s Technical Note sets out the principal changes to the taxation of non-domiciled, UK resident individuals from 6 April 2025, as announced at Spring Budget 2024. The remittance basis will be abolished and replaced by a new regime which will include the following:
Qualifying individuals (broadly, those who become resident in the UK after ten years of non-UK residence) will not pay UK tax on foreign income and gains (FIG) arising in the first four years after becoming UK resident.
Overseas workday relief (OWR) will continue to be available under the new regime. Relief will cover earnings from employment duties performed outside the UK for the first three years of UK tax residence. The guidance notes that ‘employees who are eligible for OWR in 2023/24 or 2024/25 for their first year since returning to the UK should still be able to claim OWR for the full three years’, but that those ‘re-entering from 2025/26 will not be able to claim OWR, if they are not eligible for the FIG regime’.
As a transitional protection, individuals who lose access to the remittance basis status on 6 April 2025 but are not eligible for the new four-year FIG regime will pay tax on 50% of their foreign income for 2025/26 only (this reduction will not apply to chargeable gains).
A ‘temporary repatriation facility’ for 2025/26 and 2026/27 will allow individuals who have been taxed on the remittance basis to elect to pay tax at 12% on remittances of pre-6 April 2025 FIG.
The guidance also covers trusts, CGT rebasing, and various implications for IHT. Draft legislation is expected to be published for consultation later in 2024. HMRC say that some of the detail on IHT changes ‘will be settled after consultation with representative bodies and other interested parties’.
In new guidance, HMRC have sought to clarify the availability of overseas workday relief under the new non-dom tax regime from April 2025, as part of a summary of how the new regime is expected to operate. HMRC’s Technical Note sets out the principal changes to the taxation of non-domiciled, UK resident individuals from 6 April 2025, as announced at Spring Budget 2024. The remittance basis will be abolished and replaced by a new regime which will include the following:
Qualifying individuals (broadly, those who become resident in the UK after ten years of non-UK residence) will not pay UK tax on foreign income and gains (FIG) arising in the first four years after becoming UK resident.
Overseas workday relief (OWR) will continue to be available under the new regime. Relief will cover earnings from employment duties performed outside the UK for the first three years of UK tax residence. The guidance notes that ‘employees who are eligible for OWR in 2023/24 or 2024/25 for their first year since returning to the UK should still be able to claim OWR for the full three years’, but that those ‘re-entering from 2025/26 will not be able to claim OWR, if they are not eligible for the FIG regime’.
As a transitional protection, individuals who lose access to the remittance basis status on 6 April 2025 but are not eligible for the new four-year FIG regime will pay tax on 50% of their foreign income for 2025/26 only (this reduction will not apply to chargeable gains).
A ‘temporary repatriation facility’ for 2025/26 and 2026/27 will allow individuals who have been taxed on the remittance basis to elect to pay tax at 12% on remittances of pre-6 April 2025 FIG.
The guidance also covers trusts, CGT rebasing, and various implications for IHT. Draft legislation is expected to be published for consultation later in 2024. HMRC say that some of the detail on IHT changes ‘will be settled after consultation with representative bodies and other interested parties’.
