The new UK Foreign Income and Gains (FIG) regime offers tax relief on foreign income for qualifying new residents—learn who qualifies and how to claim.
1. What is the FIG regime and who is eligible to claim relief under it?
The FIG (Foreign Income and Gains) regime provides a form of UK tax relief for individuals who become UK residents after a period of at least 10 consecutive tax years of non-UK residence. Eligible individuals, known as ‘qualifying new residents’, can claim relief on their foreign income and gains that arise during their first four years of UK residence. This relief is claimed for tax purposes and can cover foreign income, foreign gains, or both.
2. How does someone qualify as a ‘qualifying new resident’ for the FIG regime?
To be a ‘qualifying new resident’, an individual must be UK resident in the tax year for which they are claiming relief. Immediately before that tax year, they must have been non-UK resident for at least 10 consecutive tax years. For subsequent years (up to three following the first qualifying year), they must remain UK resident and not be a member of either House. Importantly, even if someone was deemed treaty non-resident or experienced split year treatment, any year they were UK resident under the Statutory Residence Test still counts as a year of UK residence for these criteria.
3. What types of foreign income and gains qualify for relief under the FIG regime?
The FIG regime offers relief for ‘qualifying foreign income’ and certain ‘foreign capital gains’. Qualifying foreign income includes profits from trades carried on wholly outside the UK, a UK resident partner’s share of such profits, profits from overseas property businesses, foreign interest and dividends, purchased life annuity payments, royalties from intellectual property, certain income from films and sound recordings, specific income under settlements legislation and the transfer of assets abroad provisions, foreign pension income, and foreign social security benefits, among other categories. Qualifying foreign capital gains generally include chargeable gains on the disposal of assets situated outside the UK that do not derive at least 75% of their value from UK land, as well as certain gains attributed from non-UK resident entities.
4. Are there any types of foreign income or gains that do not qualify for relief under the FIG regime?
Yes, there is ‘disqualified income’ for which relief cannot be claimed under the FIG regime. This includes certain income arising under settlements legislation, income from securities linked to share exchanges involving non-UK incorporated close companies, transferred income streams, ‘performance income’ (as defined elsewhere), and certain types of pension income. Similarly, certain pre-April 2025 capital gains that were subject to the remittance basis are excluded from relief under the FIG regime.
5. How is a claim for relief under the FIG regime made and what are the time limits?
A claim for relief under the FIG regime must be made by the individual who is taxable on the foreign income or gain. For foreign income, the amount of relief claimed must be quantified in the relevant Self Assessment tax return. The relief is given by deducting this amount in calculating the individual’s net income. For foreign gains, the claimed amount is deducted from the total chargeable gains. Claims generally need to be made within the standard time limits for Self Assessment tax returns, typically by 31 January following the end of the tax year. While amendments to a claim can usually be made within a few months after the filing deadline, late claims are generally not permitted unless they fall under HMRC’s late claims policy or are ‘consequential claims’ arising from HMRC assessments or amendments.
6. What are the potential effects of claiming relief under the FIG regime, particularly regarding losses?
Individuals claiming relief under the FIG regime who carry on a trade, profession, vocation, or property business wholly outside the UK are not entitled to loss relief for any trading or property income losses from that year. This means that if the profits from such an overseas business would have been qualifying foreign income, any losses incurred cannot be offset against other income or carried forward to future tax years, even if relief under the FIG regime is not claimed for all four eligible years.
7. How does UK residence status affect an individual’s liability to UK tax, and what about personal allowances for FIG regime claimants?
UK residents are generally taxed on their worldwide income and gains, while non-residents are typically only taxed on their UK-sourced income. The FIG regime provides a specific relief for certain new UK residents on their foreign income and gains. Generally, UK residents are entitled to personal tax allowances and reliefs. While those who previously claimed the remittance basis may have lost some allowances, individuals claiming under the FIG regime, as UK residents taxed on the arising basis for their worldwide income and gains (with potential relief on foreign elements), remain entitled to the standard personal allowances based on their circumstances.
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