UK Non-Domiciled Reform 2025: What Italian Entrepreneurs Need to Know

For decades the UK non-domiciled (non-dom) regime represented one of the most significant tax advantages for foreigners resident in the country: the ability to avoid paying British taxes on income and gains produced abroad, provided these were not brought into the country. From 6 April 2025 this system changed fundamentally, with a reform that abolished the old remittance basis mechanism and introduced a new regime based solely on the length of UK residence: the Foreign Income and Gains (FIG) regime.

For Italian entrepreneurs who reside in the United Kingdom — or who are considering relocating — understanding what has changed, who still benefits and how to plan their tax position in the new context has become more urgent than ever.

What the non-domiciled regime was and how it worked

Before analysing the reform, it is useful to understand what the old system provided — because many Italian entrepreneurs structured their tax position based on it and must now assess its impact.

The concept of domicile in British law differs from tax residency. An individual is domiciled in the country where they intend to reside permanently — their "home country" in the legal sense. An Italian who relocates to the United Kingdom for work or business is typically resident (under the Statutory Residence Test) but not domiciled in the country — they are a non-domiciled resident or non-dom.

Under the old system, non-doms had two options:

Arising basis: taxation on all worldwide income like any UK resident. This was the default option for those who did not expressly claim the remittance basis.

Remittance basis: taxation only on UK-sourced income, with exclusion of foreign income that was not "remitted" — that is, physically brought into the country. Foreign income left abroad was not taxed in the UK, regardless of the amount.

This system was particularly advantageous for Italian entrepreneurs with significant foreign income — dividends from Italian companies, property income, foreign investment returns. By opting for the remittance basis, they could reside and work in the UK paying British taxes only on UK income, managing foreign income separately.

The cost of the remittance basis increased with years of residence: after 7 years of UK residence a Remittance Basis Charge (RBC) of £30,000 per year was required; after 12 years £60,000; after 15 years it was no longer available.

The 6 April 2025 reform: what changed

From 6 April 2025 the remittance basis system was abolished for new residents and gradually phased out for existing ones. In its place a new regime based solely on the length of UK residence was introduced: the Foreign Income and Gains (FIG) regime.

The new FIG regime — 4-year exemption

The core of the reform is a temporary exemption of 4 tax years for new UK residents: anyone who becomes UK tax resident after a period of at least 10 years of non-residence benefits from complete exemption on foreign income and foreign capital gains for the first 4 tax years of residence.

During these 4 years:

• Foreign income and foreign capital gains are completely exempt from UK taxation
• No Remittance Basis Charge is payable
• Foreign funds can be brought into the UK without taxation
• There are no domicile requirements — anyone satisfying the 10-year non-residence requirement can access the regime

This is a significant change from the old system: the exemption is simpler to apply, requires no domicile verification, and allows free remittance of foreign funds into the country — but is limited to 4 years.

What happens after 4 years

From the fifth year of residence onwards, the new resident is taxed on an arising basis — that is, on all worldwide income like any other UK resident. The possibility of keeping foreign income outside UK taxation indefinitely no longer exists.

The transitional regime for existing non-doms

For those already non-dom and benefiting from the remittance basis before 6 April 2025, the reform provided transitional measures:

• Foreign funds accumulated before 6 April 2025 and not yet remitted are subject to a special remittance regime: they can be brought into the UK at a reduced rate of 12% for the 2025–2026 tax year (a one-off opportunity, valid for that year only)
• Unrealised capital gains on assets held at 5 April 2025 benefit from a rebasing: the tax base of assets is updated to market value at 5 April 2019 for those who were non-dom at that date
• Those with more than 15 years of UK residence who could no longer use the remittance basis before the reform are now subject to ordinary arising basis taxation

Who still benefits after the reform

The reform eliminated the historical advantage of long-standing non-doms. However, the new system still presents significant opportunities for specific categories:

New residents in the first 4-year cycle
Anyone relocating to the UK after at least 10 years of non-residence — including Italians moving for work or to start a business — benefits from the full FIG exemption for 4 years. This still represents a very significant tax advantage for those with substantial foreign income.

Entrepreneurs with well-planned structures
Those who structured their assets and income efficiently before relocating — for example with holdings in appropriate jurisdictions, already optimised foreign funds, planned investment structures — can still significantly optimise their tax burden during the FIG period.

Those maintaining UK residence for fewer than 4 years
An entrepreneur who relocates to the UK for a specific project, benefits from the FIG exemption for the duration of their stay (up to 4 years), then returns to Italy, may have taken advantage of a period of low taxation on foreign income without long-term fiscal impact.

The impact for Italian entrepreneurs resident in the UK

For an Italian entrepreneur already resident in the United Kingdom before 6 April 2025, the impact of the reform depends on the length of residence and the specific situation:

Fewer than 4 years of UK residence
If you began UK residence after 6 April 2021 (that is, after the 10-year non-residence period required), you may potentially access the new FIG regime for the remaining period up to 4 years total from the start of residence. Verify your specific position with an adviser.

Between 4 and 15 years of UK residence
Under the old system you could have continued using the remittance basis by paying the Remittance Basis Charge. Since the reform you are subject to arising basis taxation on all worldwide income. This has a significant impact on foreign income that you previously did not declare in the UK.

More than 15 years of UK residence
You were no longer eligible for the remittance basis before the reform. The reform does not substantially change your position — you were already subject to worldwide taxation.

For those not yet resident in the UK
If you are considering relocating to the United Kingdom, the new FIG system is still very attractive: 4 years of complete exemption on foreign income, no RBC, with free remittance. Preventive planning — structuring your assets before relocation — is the key to maximising the benefit of the FIG period.

The concept of domicile after the reform

An important point to clarify: the concept of domicile has not disappeared entirely from UK taxation. It remains relevant in three contexts:

Inheritance Tax (IHT)
For British inheritance tax, domicile remains a fundamental criterion. Non-doms were taxed only on assets located in the UK; domiciled residents on all worldwide assets. With the reform, after 10 years of UK tax residence an individual becomes deemed domiciled for IHT purposes — even if not formally so — and their worldwide assets become subject to British IHT. This is a critical aspect of wealth planning for long-term UK residents.

Foreign trusts
The tax treatment of foreign trusts in the UK remains influenced by the settlor's domicile concept. Trusts established by non-doms in previous periods may retain certain tax advantages, but the regulatory framework has become more complex with the reform.

Pre-residence planning
For those not yet resident in the UK, domicile planning — through establishing a domicile of choice in a country other than Italy — may still be relevant for IHT purposes, even if no longer for Income Tax and CGT purposes where the FIG regime has become the primary mechanism.

Tax planning in the new context

Before relocating to the UK
If you are planning to move to the United Kingdom, the most important actions to take before UK residence begins are:

• Structure your assets to maximise the benefit of the FIG period
• Realise any capital gains on foreign assets before becoming UK resident
• Plan distributions of dividends from foreign companies before relocation
• Consider the structure of your holding or operating company in light of the new regime

During the FIG period
In the first 4 years of UK residence:

• Use the foreign income exemption to remit funds to the UK without taxation
• Plan the income structure for the period after the 4 years
• Do not make irreversible decisions on residence or asset structure without long-term planning

After the 4 years
From the fifth year onwards, the tax position is that of an ordinary UK resident — taxation on all worldwide income. Planning must focus on optimising the income structure, using available deductions and managing the IHT position for those intending to remain in the UK long-term.

Common mistakes to avoid

• Believing the old non-dom regime still applies in its original form — from the 6 April 2025 reform the system changed fundamentally
• Failing to plan the UK relocation with adequate advance notice — pre-residence asset structuring is essential to maximise the FIG period benefit
• Ignoring the IHT impact on the wealth position after 10 years of UK residence — deemed domicile for IHT purposes can have very significant consequences
• Failing to distinguish between Income Tax/CGT taxation (governed by the new FIG regime) and IHT taxation (still influenced by domicile)
• Not verifying the applicability of the transitional 12% reduced remittance rate for foreign funds accumulated before 6 April 2025

FAQ

What is the non-domiciled regime and who benefits from it in 2026?
The non-domiciled regime concerns people who are resident in the United Kingdom but not domiciled in the country in the legal sense. Since the 6 April 2025 reform, the old remittance basis system was abolished and replaced with the Foreign Income and Gains (FIG) regime: anyone who becomes UK resident after at least 10 years of non-residence benefits from complete exemption on foreign income and capital gains for the first 4 tax years of residence.

Does the non-dom reform affect Italians living in the UK?
Yes, directly. An Italian resident in the UK who before the reform benefited from the remittance basis now sees their tax position changed. If UK residence began less than 4 years ago (and after at least 10 previous years of UK non-residence), they may potentially access the FIG regime. If they have been resident for more years without having been deemed domiciled, they are now subject to worldwide taxation on all income.

Can I still bring foreign funds into the UK without paying tax on them?
During the FIG period (first 4 years of residence after 10 years of non-residence), yes — foreign funds can be remitted to the UK without taxation. After the 4 years, remittance of foreign income generated during the period of UK residence is subject to ordinary taxation. Foreign funds accumulated before becoming UK resident are never taxed in the UK when remitted.

What happens to Inheritance Tax for an Italian who has lived in the UK for many years?
After 10 years of UK tax residence, an individual becomes deemed domiciled for UK Inheritance Tax purposes — even if not formally so. This means all their worldwide assets (not just those in the UK) fall within the scope of UK IHT, at a rate of 40% on the amount exceeding the nil rate band (£325,000 plus any enhancements). This is one of the most critical aspects of wealth planning for long-term UK residents.

If I relocate to the UK now, can I still benefit from the FIG regime?
Yes, if you have not been UK tax resident in the last 10 years. The FIG regime applies automatically for the first 4 tax years of UK residence following the 10-year non-residence period. No formal application is required — it applies by default, unless you expressly opt for ordinary taxation (which in some cases may be more beneficial if foreign income is very low).