UK Government Change tax landscape for Australian Expats living in the UK: Non-Dom rules changes in 2025

As part of the October 2024 Budget, the UK Government has moved to drastically change the way it imposes tax on Australian Expats living in the UK and for those planning to move there.

Currently, Australian Expats living in the UK who are tax residents there but are ‘non-domiciled’ (non-dom), do not pay tax on their foreign income or gains if they do not transfer them to the UK. An Australian Expat is considered ‘non-domiciled’ in most cases if they were not born in the UK or have been a tax resident of the UK in fewer than 15 of the last 20 tax years.

What are the changes?

On 6 April 2025, the UK will officially transition away from its traditional domicile-based tax system to a new regime based entirely on tax residence. This shift effectively abolishes the long-standing benefits of the non-domicile regime, including the remittance basis.

What is the Remittance Basis?

Previously, under the remittance basis of taxation, Australian Expats living in the UK who were non-domiciled residents could choose to be taxed only on UK income and gains. Foreign income and gains were only taxable when they were remitted to the UK. From April 2025, all UK residents will be taxed on their worldwide income and gains as they arise.

4-Year Foreign Income & Gains (FIG) Regime

The new system introduces a 4-year relief for foreign income and gains. This 100% relief is available to new arrivals who have not been UK tax residents in the prior ten years. This window aims to provide temporary for individuals relocating to the UK.

Inheritance Tax (IHT) Changes

The new rules also replace the domicile-based Inheritance Tax system with a residence-based one. Under this system, individuals who have been UK residents for 10 out of the last 20 years will have their global estate brought into the scope of UK IHT.

Conclusion:

The transition to a residence-based system marks a significant change for non-domiciled Australian Expats living in the UK, bringing with it several challenges including full UK taxation on global income and gains, effectively ending the previous advantages of the remittance basis.

For non-domiciled Australian Expats living in the UK, it may be sensible to speak with an Expat financial adviser to reassess current tax strategies and consider alternative jurisdictions to preserve wealth.

Runway Wealth Management is the trusted Financial Adviser to the Australian Expat community. Our tailored advice is backed by expertise, education and experience, which allows us to be at the forefront of Australian Expat Financial Planning.

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General Advice Disclaimer: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances, and objectives. We recommend you obtain professional financial advice specific to your circumstances.