The Non-Dom Sunset: Planning Your UK Tax Exit in 2026

To effectively navigate the UK non-dom sunset, residents should plan an exit or tax restructuring before April 2025 to mitigate the impact of the new residence-based regime. For many High Net Worth Individuals, this involves establishing tax residency in a more favourable jurisdiction such as Italy, Greece, or the UAE before the four-year transition period concludes. Early preparation is essential to insulate offshore wealth from newly expanded UK inheritance and income tax obligations.

Key Takeaways

• The Deadline: The existing Remittance Basis of taxation will officially cease on 5 April 2025, replaced by a 4-year foreign income and gains (FIG) regime.
• Inheritance Tax (IHT) Exposure: The new rules shift IHT from a domicile-based system to a residence-based system, potentially exposing global assets to a 40 percent levy after 10 years of UK residence.
• Transition Reliefs: A Temporary Repatriation Facility (TRF) will be available for three years, allowing individuals to bring previously untaxed offshore income into the UK at a reduced rate.
• Exit Urgency: Individuals who have been in the UK for over 15 years will face the most significant tax increases, making a 2025 or 2026 exit a primary strategic consideration.
• Global Alternatives: Jurisdictions like Italy (Lump Sum Tax), Greece (Non-Dom regime), and Switzerland remain the leading alternatives for those departing the UK.

Why is the Non-Dom Status Being Abolished?

For over two centuries, the non-domiciled status allowed individuals living in the UK but domiciled elsewhere to avoid paying UK tax on their foreign income and gains, provided those funds were not brought into the country. However, following the 2024 Spring Budget and subsequent confirmations by the Labour government, this regime is being dismantled. The stated objective is to create a fairer tax system where all long-term residents contribute based on their global wealth, regardless of their background or origin.

As of 6 April 2025, the concept of domicile will be removed from the UK tax code for most purposes. In its place, a simpler system based on tax residency will emerge. This shift represents the most significant overhaul of UK personal taxation in a generation, directly impacting several thousand HNWIs who currently utilise the remittance basis.

What is the New Residence-Based Regime?

The central pillar of the new system is the Foreign Income and Gains (FIG) regime. Under these rules, individuals moving to the UK will not pay tax on their foreign income or gains for their first four years of tax residency, provided they have been non-resident for the preceding ten years. During this 4-year window, they can bring these funds into the UK without any additional tax charge.

However, once the four-year period expires, these individuals will be taxed on their worldwide income and gains in the same manner as any other UK resident. For those already living in the UK who have passed this four-year mark, the transition on 6 April 2025 will be abrupt. They will suddenly find their offshore investment portfolios, rental income from abroad, and foreign capital gains subject to UK tax rates of up to 45 percent on income and 24 percent on capital gains.

How Will Inheritance Tax Change After 2025?

Perhaps the most concerning aspect of the UK non-dom sunset planning is the shift in Inheritance Tax (IHT). Currently, non-doms only pay IHT on their UK-situated assets. Their foreign assets are generally held in "excluded property trusts" which remain outside the 40 percent UK IHT net indefinitely.

From April 2025, the government intends to move to a residence-based system for IHT. The proposed rule suggests that once an individual has been a UK resident for 10 years, their global estate will fall within the scope of UK IHT. Furthermore, a "tail" provision is expected to apply; if an individual leaves the UK after being resident for 10 years, they may remain subject to UK IHT on their worldwide assets for up to 10 years after departure.

Planning the Exit: When Should You Leave?

For many, the question is no longer whether to leave, but when. The 2025/26 tax year is the critical pivot point. To avoid becoming a victim of the 10-year IHT tail, long-term residents must assess their "years of residence" immediately. Individuals who have already reached the 10-year threshold may find that even if they leave in late 2025, they remain entangled with HMRC until 2035.

Strategic timing involves looking at the UK's Statutory Residency Test (SRT). By carefully managing the number of days spent in the UK, an individual can ensure they become non-resident for the 2025/2026 tax year, effectively triggering their exit before the most stringent elements of the new regime take hold. This requires a clean break, involving the disposal of UK principal private residences or changing the center of their life to a new host country.

Comparing Alternative Jurisdictions for UK Expats

When planning a UK tax exit, the destination must offer more than just low taxes; it requires lifestyle compatibility, security, and connectivity. Below is a comparison of the top destinations for departing UK non-doms.

The Role of the Temporary Repatriation Facility (TRF)

For those who decide to stay in the UK or who cannot leave immediately, the government has introduced the Temporary Repatriation Facility. This is a crucial tool in UK non-dom sunset planning. The TRF will allow individuals who have previously claimed the remittance basis to bring their pre-April 2025 foreign income and gains into the UK at a reduced tax rate for a limited three-year window.

Specific rates for the TRF are expected to be attractive, likely between 12 percent and 15 percent. This provides a "use it or lose it" opportunity to clean up offshore structures and bring capital into the UK for investment or lifestyle purposes before the full 45 percent rate applies to any future remittances. This is particularly relevant for those with large stockpiles of untaxed income in offshore holdcos or trusts.

What Happens to Existing Offshore Trusts?

Historically, the "Protected Trust" status allowed non-doms to insulate foreign income and gains within a trust from UK tax, provided no benefits were received. From 6 April 2025, this protection will be removed. Income and gains arising within these trusts will be taxed on the settlor as they arise if the settlor has been resident in the UK for more than four years.

This change necessitates a top-to-bottom review of trust deeds. Trustees and beneficiaries must coordinate to determine if the trust still serves a purpose or if it should be wound up before the 2025 deadline. In some cases, decanting assets into new structures or distributing capital before the transition may be the only way to avoid a significant tax leak.

Practical Steps for a 2025/2026 Exit

1. Audit Residency History: Precisely count your UK residency years since arrival. If you are approaching year 10 or year 15, your planning timeline is compressed.
2. Valuation of Global Assets: Obtain formal valuations for all non-UK assets. The government may allow a revaluation (rebasing) of assets to their April 2019 value for capital gains purposes, but this is subject to specific criteria.
3. Review the Statutory Residency Test: Professional advice is needed to satisfy the "split-year treatment" criteria, allowing you to leave mid-year without being taxed on global income for the entire period.
4. Secure Foreign Residency: Apply for Golden Visas or Digital Nomad Visas in your target jurisdiction well ahead of your UK departure to ensure a seamless transition of tax tax domicile.
5. Dismantle UK Ties: Simply leaving is not enough. To defend an exit against HMRC scrutiny, one must reduce "ties" such as available accommodation, work days in the UK, and social memberships.

Conclusion: The New Frontier of Global Mobility

The abolition of the non-dom status marks the end of an era for London as the undisputed home of the global elite. However, it also opens a new chapter in strategic tax planning. By acting before the April 2025 threshold, individuals can preserve their wealth and choose a jurisdiction that aligns better with the modern, transparent tax landscape. The window for UK non-dom sunset planning is closing rapidly; those who delay may find themselves subject to a 40 percent global tax net that is difficult to escape.

Disclaimer: This article does not constitute legal or tax advice. The UK tax code is subject to legislative change, and readers should consult with a qualified tax professional or legal advisor before making any financial or residency decisions.

Frequently Asked Questions

Can I avoid the 10-year IHT tail by leaving before April 2025? If you have been a UK resident for fewer than 10 years and leave before the new rules take effect, you may avoid the residence-based IHT scope. If you have already exceeded 10 years, you will likely be subject to the tail provision under the current proposals.

What is the 'rebasing' digital date for capital gains? For individuals who have previously used the remittance basis, the government has suggested that they may be able to rebase the value of their foreign assets to their value at April 2019. This means only the gain from 2019 onwards would be subject to UK capital gains tax upon disposal.

Will I be taxed on my foreign income if I only visit the UK for 90 days? Under the Statutory Residency Test, spending 90 days in the UK does not automatically make you a resident, but it depends on your "ties" (e.g., family, work, accommodation). If you are deemed non-resident, your foreign income remains outside the UK tax net.

Is the UAE a viable alternative for UK tax residents? Yes, the UAE is a popular destination due to its 0 percent personal income tax and proximity to Europe. However, to be considered a non-UK resident, you must satisfy the UK's exit requirements and spend the majority of your time outside the UK.

Should I close my UK bank accounts when I leave? While not strictly required, closing UK accounts and minimising UK-source income is a strong indicator of an intent to change residency. It helps in establishing a "clean break" for the HMRC's records.