Foreign Income and Gains (FIG) Relief Effective from 6 April 2025

From the 2025/26 UK tax year onwards you may be eligible for Foreign Income and Gains (FIG) relief if you were non-UK resident for the 10 consecutive years immediately preceding your first year of UK residence, and meet specific conditions.

From the 2025/26 UK tax year onwards, individuals who meet specific conditions may be eligible for Foreign Income and Gains (FIG) relief. This new regime applies to individuals who were non-UK resident for the 10 consecutive tax years immediately preceding their first year of UK residence.

Key features of FIG relief

Exemption of foreign income and gains:
Qualifying individuals can exclude their foreign income and gains from UK tax for up to four consecutive tax years, starting from their first year of UK residence.

Fixed four-year period:
The four-year FIG relief period begins in the first tax year the individual becomes UK resident and runs consecutively, regardless of whether the individual remains UK resident throughout that period. The relief is not extended or paused due to any subsequent non-residence during those years.

Illustrative example:
If an individual becomes UK resident in the 2025/26 tax year and satisfies the 10-year non-residence condition, they may claim FIG relief for the following four tax years:

• 2025/26
• 2026/27
• 2027/28
• 2028/29

This four-year period runs consecutively from the first year of UK residence. Even if the individual becomes non-UK resident in one or more of these years, the relief period remains fixed and will not be extended.

Claim process:
To claim FIG relief, the individual must submit a UK self-assessment tax return for each relevant UK tax year.

Loss of Personal Allowance and Capital Gains Tax Annual Exemption:
One notable drawback of claiming FIG relief is the loss of entitlement to both the UK Personal Allowance, currently £12,570 per tax year, and the Capital Gains Tax Annual Exemption, currently £3,000 per tax year.

Tax planning considerations

• No UK-source income or gains

Where the individual has no UK-source income or gains, it is generally tax-efficient to claim FIG relief during the four-year eligibility period, as this allows their foreign income and gains to be excluded from UK tax without any downside.

• With UK-source income or gains

If the individual does have UK-source income or gains, a comparative analysis should be undertaken to determine the most tax-efficient approach:

Option 1: Claim FIG relief

• Foreign income and gains are excluded from UK tax.
• The individual forfeits entitlement to both the UK Personal Allowance and the Capital Gains Tax Annual Exemption, meaning all UK-source income and gains are fully taxable.

Option 2: Use the arising basis

• Worldwide income and gains are subject to UK tax.
• The individual retains entitlement to:
• The UK Personal Allowance;
• The Capital Gains Tax Annual Exemption; and
• Foreign tax credits for any overseas tax paid, which may be used to offset their UK tax liability.

Choosing the most tax-efficient option depends on the amount and sources of income and gains, as well as any foreign tax liabilities. Professional advice is strongly recommended to determine the optimal approach based on your personal circumstances.

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