International mobility and UK tax: planning for two critical milestones

For internationally mobile individuals, the UK’s post-6 April 2025 tax landscape requires careful forward planning. Two milestones will often be particularly significant:

• the end of the four-year period under the foreign income and gains (FIG) regime for recent arrivers; and
• the point at which an individual has been UK resident for 10 out of the previous 20 UK tax years and becomes “long-term resident” (LTR) for inheritance tax (IHT) purposes.

Each of these junctures has the potential to materially widen an individual’s exposure to UK taxation.

Understanding the FIG regime

The FIG regime was introduced from 6 April 2025 as part of the UK’s move away from the remittance basis of taxation and towards a residence system for taxing foreign income and gains. Broadly, an eligible individual may claim relief on qualifying foreign income and gains arising in their first four tax years of UK residence provided they were non-UK tax resident for at least the previous 10 consecutive UK tax years (“a qualifying new resident”).

For many individuals who have recently arrived in the UK, the period during which a FIG claim is available is a narrow one. Once FIG relief ceases to apply, foreign income and gains arising will generally be taxed in the UK on the arising basis, subject to any available credit for foreign tax and to the terms of any applicable double tax treaty. That change can have significant consequences, particularly where the individual has substantial offshore investments, non-UK business interests or has an interest in a self-settled trust.

Making use of the remaining FIG window

For individuals who claim under the FIG regime, the final FIG years may represent a meaningful planning opportunity. Where a substantial gain is expected on the disposal of a foreign asset, or where material distributions or income realisations are anticipated from an overseas portfolio or structure, it may be sensible to consider whether those events can take place during the remaining FIG period rather than after it has ended. Timing may now directly affect whether proceeds fall outside the UK tax net altogether or are fully taxed as they arise.

This issue is especially acute in cases involving offshore structures. The 2025 tax reforms fundamentally altered the treatment of FIG within settlor-interested trust structures. In particular, the former protection for FIG arising within such structures is no longer available and the UK tax consequences can be significant. FIG that is treated as arising to a settlor can qualify for relief under the FIG regime; however, only if the settlor is a qualifying new resident and the FIG arises within their first four years of UK residence.

When long-term residence triggers IHT exposure

While the end of the FIG period is principally an income tax and capital gains tax issue, the 10-year milestone is often even more significant because of its implications for IHT.

From 6 April 2025, an individual’s exposure to IHT is no longer determined by domicile but by a residence system. Broadly, an individual becomes a LTR for IHT purposes once they have been UK resident for at least 10 of the previous 20 UK tax years. At that point, an individual’s worldwide asset base may come within the scope of UK IHT on lifetime transfers and on death.

Importantly, LTR status can continue after an individual leaves the UK for a “tail” period between three and ten tax years, depending on how many years an individual has been UK tax resident.

Trusts remain one of the most sensitive areas under the new rules. Overseas assets in a trust an individual has set up or added to can be within the IHT regime when that individual is LTR, even if the assets were settled when the individual was not yet LTR. That represents a significant departure from the previous position that the IHT status of a trust was fixed by reference to the settlor’s domicile position when the trust was created.

Cross-border family arrangements also require attention. Where one spouse or civil partner has become LTR and the other has not, the availability of the spouse exemption for IHT may be more limited than many couples expect. Although an election may in some circumstances be available, that is not a step to be taken lightly, since it can widen the recipient spouse’s own exposure to IHT.

Reviewing structures

Against this background, it is important for individuals to undertake a thorough review of their affairs before either milestone is reached.

Before the FIG period ends, individuals should carefully identify which income and gains fall within the FIG regime and consider whether material transactions ought to be accelerated while relief remains available. In some cases, where a taxpayer had previous claimed the remittance basis, consideration can also be given to the availability of the “temporary repatriation facility” to bring amounts derived from previously untaxed and unremitted FIG into the UK at a lower flat rate of tax (further details of which are outlined in this article).

Before the 10-year IHT threshold is reached, the exercise is usually broader. It will often involve a review of an individual’s worldwide asset base, existing trust structures, succession plans and any family arrangements that may have IHT consequences under the new residence-based IHT regime once the 10-year point has passed.

Conclusion

For internationally mobile individuals, the expiry of the period to qualify for the FIG regime and becoming LTR for IHT purposes can significantly increase their exposure to UK taxation. A timely review of FIG, offshore structures, trust arrangements and succession planning can make a material difference to the options available. Given the complexity of the new rules, advice should be taken well in advance of either milestone being reached.

This article is for general information purposes only and does not constitute legal advice or a comprehensive statement of the law. Specific legal advice should always be sought in relation to individual circumstances.

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   • Matthew Braithwaite

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   • Private Client

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   • Harry Osborne

   • Solicitor
   • Private Client

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