Introduction to the UK Non-Dom Rules and Their Abolition
The UK non-dom rules ended on 6 April 2025, replacing a two-hundred-year-old system with a residence-based regime. For wealthy Americans living in Britain, this is the most significant change in a generation. Furthermore, the reforms reach far beyond income tax. They reshape inheritance tax, investment planning, and the timing of every major financial decision you make.
Many US expats assume the change does not concern them. After all, the United States taxes its citizens on worldwide income regardless of domicile. That assumption is dangerous. Additionally, the new rules interact with your US position in ways that can quietly increase your total tax burden across both countries.
At TaxYork, we advise senior professionals, entrepreneurs and internationally mobile families who sit inside both systems. In our experience, the clients most exposed are precisely those who believe they are unaffected. Consequently, they miss deadlines and reliefs that never return.
This guide explains what replaced the old regime, how the new inheritance tax test works, and what wealthy Americans in Britain should do now. HMRC has published the underlying policy changes in detail.
https://www.gov.uk/government/publications/changes-to-the-taxation-of-non-uk-domiciled-individuals
What Replaced the UK Non-Dom Rules in April 2025?
The old system rested on domicile, a common-law concept of your permanent home. From 6 April 2025, domicile no longer determines your income tax and capital gains tax position. Instead, residence does.
Why the UK Non-Dom Rules Were Abolished
The UK non-dom rules allowed long-term residents to keep foreign income and gains outside UK tax, provided the money stayed offshore. Critics argued the regime was unfair and distorted behaviour. Therefore, successive governments narrowed it before abolishing it entirely. The result is a simpler, but for many, considerably more expensive system.
Importantly, abolition was not merely cosmetic. The remittance basis has gone. Consequently, long-term residents now pay UK tax on worldwide income and gains as they arise, exactly like everyone else.
The Four-Year FIG Regime Explained
The replacement is the Foreign Income and Gains regime, universally shortened to FIG. New arrivals who have been non-UK resident for ten consecutive tax years can claim 100% relief on foreign income and gains for their first four years of UK residence. During that window, foreign income escapes UK tax entirely, and you may bring it into Britain freely.
Nevertheless, the relief carries a price. If you claim FIG, you forfeit your personal allowance and your capital gains annual exempt amount for that year. Moreover, the window is strictly four years and cannot be extended. Afterwards, you are taxed on worldwide income like any other UK resident.
The End of the Remittance Basis
The remittance basis, which allowed non-doms to shelter offshore wealth indefinitely, no longer exists for years from 2025/26 onwards. As a result, clients who structured their affairs around keeping funds offshore must rethink entirely. Historic offshore income is not forgotten either, which brings us to the repatriation facility.
The New Residence-Based Inheritance Tax Test
Inheritance tax has also moved from domicile to residence, and this is where the greatest damage often occurs. HMRC sets out the general framework of the tax.
https://www.gov.uk/inheritance-tax
The Long-Term Resident Rule
From 6 April 2025, you fall within UK inheritance tax on your worldwide estate once you become a long-term resident. That means being UK resident for at least ten of the previous twenty tax years. Consequently, an American who has lived in London for a decade now has their entire global estate exposed to UK inheritance tax at 40%, including US property and investments.
Furthermore, the exposure does not end the moment you leave. A tail provision keeps departing residents within scope for up to ten years, depending on how long they lived in Britain. Therefore, leaving the UK is no longer a quick fix.
Why IHT Now Reaches Worldwide Assets
Under the old regime, non-doms were generally only exposed to UK inheritance tax on UK-situated assets. That protection has gone. Accordingly, a wealthy American with a US brokerage account, a family home in Connecticut and a London flat may now face UK inheritance tax on all of it. The US-UK estate tax treaty provides relief in some circumstances, yet it is technical and frequently misunderstood.
The Temporary Repatriation Facility
The government paired abolition with a limited amnesty for historic offshore wealth. Specifically, the Temporary Repatriation Facility, or TRF, lets former remittance basis users bring pre-6 April 2025 foreign income and gains into the UK at a reduced rate.
How the TRF Works
Designated amounts are taxed at 12% for the 2025/26 and 2026/27 tax years, rising to 15% for 2027/28. After that, the facility closes. Given that these funds would otherwise attract rates up to 45%, the saving is substantial. Consequently, for clients with significant offshore reserves, the TRF is one of the most valuable planning opportunities available today.
Why the Window Matters
The facility is deliberately temporary. Therefore, the decision is time-limited and irreversible once the window shuts. In our experience, clients who delay modelling their position often discover too late that a modest amount of planning would have saved six figures. Above all, the TRF rewards those who act early rather than perfectly.
What This Means for Wealthy US Citizens in Britain
Americans face a complication that other non-doms do not. The United States taxes its citizens on worldwide income wherever they live, as the State Department confirms.
https://www.state.gov/citizenship/american-citizens-abroad/
The US–UK Double Layer
Here lies the trap. If you claim the FIG regime, the UK does not tax your foreign income. However, the US still does. Because there is no UK tax on that income, there is no foreign tax to credit against your US liability. Consequently, the relief that benefits a British non-dom may simply hand your money to the IRS instead. The FIG regime can therefore be worth far less to an American than to anyone else.
Additionally, claiming FIG costs you your UK personal allowance. Accordingly, the calculation must be run across both systems together, never in isolation. The IRS explains how foreign tax credits operate.
https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit
Foreign Tax Credits and the FIG Regime
For most long-term American residents, the Foreign Tax Credit remains the workhorse. UK income tax is generally higher than US federal tax, so the credit usually eliminates the US charge. Nevertheless, the interaction with the FIG regime, the TRF and the new inheritance tax test demands genuine modelling. Our cross-border team handles exactly this coordination.
https://www.taxyork.com/our-services/cross-border-planning
A Real-World Client Scenario
Consider a representative scenario from our practice. It shows how quickly the numbers move.
The Situation
An American private equity partner moved to London in 2016 and claimed the remittance basis for years. She held roughly £4 million offshore, plus a US portfolio and a family property in Boston. By 2025 she had been UK resident for nine years. Understandably, she assumed the reforms were a British problem, not an American one.
The Outcome
We modelled both systems together. First, she crossed the ten-year long-term resident threshold in 2026, pulling her entire worldwide estate into UK inheritance tax at 40%. Second, her offshore reserves qualified for the TRF at 12% rather than 45%. Consequently, designating funds within the window saved a substantial sum, while early estate restructuring addressed the inheritance tax exposure before it crystallised. Ultimately, acting one year early changed the outcome materially.
Common Mistakes to Avoid
Small misunderstandings cause the largest losses under the new regime. Fortunately, all of them are avoidable.
Assuming Nothing Changed
The most expensive error is inertia. Clients who were comfortable under the old regime often assume their structure still works. In reality, the remittance basis has gone, and structures built around it may now generate tax rather than shelter it. Therefore, every long-standing arrangement deserves a fresh review.
Missing the TRF Window
The Temporary Repatriation Facility closes after 2027/28. Once gone, historic offshore income reverts to full rates. Consequently, delay converts a 12% opportunity into a 45% liability. Professional bodies including the CIOT and ICAEW have highlighted how narrow this window is.
https://www.ciot.org.uk/tax-guidance
https://www.icaew.com/insights/viewpoint-article/2024/feb-2024/tax-guide-for-expats
How TaxYork Can Help
At TaxYork, we specialise in the intersection where the UK non-dom rules meet the US tax system. We model both regimes together, because looking at either alone produces the wrong answer. Furthermore, we quantify your TRF opportunity, test your long-term resident position, and structure your estate before the exposure crystallises.
Our clients include private equity partners, founders, senior executives and internationally mobile families across London and the wider UK. We also support Americans who have fallen behind on US filings, using the IRS Streamlined Filing Compliance Procedures to restore compliance without penalties.
https://www.irs.gov/individuals/international-taxpayers/streamlined-filing-compliance-procedures
https://www.taxyork.com/our-services/irs-streamlined-filing
Additionally, offshore accounts must still be reported to the US Treasury each year, and HMRC maintains its own guidance for UK residents.
https://www.fincen.gov/financial-crimes-enforcement-network/fbar
https://www.gov.uk/government/organisations/hm-revenue-customs
https://www.taxyork.com/countries-we-serve/united-kingdom
Additionally, our treaty specialists ensure foreign tax credits and treaty articles are applied correctly across both jurisdictions.
https://www.taxyork.com/our-services/tax-treaty-optimisation
Conclusion
The abolition of the UK non-dom rules has redrawn the map for wealthy Americans in Britain. Specifically, the remittance basis has gone, the FIG regime offers only four years of relief, and inheritance tax now follows residence rather than domicile. Moreover, the Temporary Repatriation Facility offers a genuine but closing opportunity.
For US citizens, the reforms are doubly complex, because relief in Britain can simply shift tax to America. Therefore, the only sensible approach models both systems as one. Ultimately, the clients who act now will protect substantially more wealth than those who wait for certainty that never arrives. Independent guidance on domicile concepts remains useful background reading.
https://www.investopedia.com/terms/d/domicile.asp
https://www.moneyhelper.org.uk/en
Contact Us
Are you an American affected by the end of the UK non-dom rules? TaxYork can model your UK and US position together and quantify your options before the deadlines pass. Call our specialist team today on 020 3488 8606. Alternatively, email us at hello@taxyork.com. You can also book a consultation through our website.
https://www.taxyork.com/contact
Disclaimer
This article provides general information about the UK non-dom rules and related reforms. It does not constitute professional tax or legal advice. Tax rules change frequently and individual circumstances vary considerably. Therefore, you should seek personalised guidance before acting. TaxYork accepts no liability for decisions made solely on the basis of this content.