A New Era For UK Residency

The UK tax system for international residents has changed significantly over the last year. We have now moved away from the old “non-dom” rules to a system based on how many years you live in the country. This change affects how you report your global income and how you bring money into the UK.

As we move through 2026, it is important to understand how these new rules apply to your specific situation. The current regime offers some useful tax breaks for newcomers, but it also includes strict limits and new reporting requirements that all residents need to follow.

The Four-Year FIG Regime and the Opportunity for Clean Capital

The abolition of the “non-dom” status has been replaced by the Foreign Income and Gains (FIG) regime. This new system is remarkably different from the old remittance basis. New residents who have not lived in the UK for the previous ten years can now benefit from a 100% tax exemption on their foreign income and gains for their first four years of residence.

A notable advantage of this new system is that there is no longer a restriction on bringing these funds into the UK. Under the old rules, remitting foreign income often triggered a tax charge. Now, provided you are within your first four years, these funds are treated as “clean capital” and can be used freely within Britain.

For those who were already resident before these changes took effect, the Temporary Repatriation Facility (TRF) remains open. For the current 2025/26 tax year and the upcoming 2026/27 year, you can designate historic foreign income and gains at a fixed tax rate of 12%. This is a significant discount compared to standard income tax rates, but it is a time-limited window that will rise to 15% in April 2027.

Reforming Overseas Workdays Relief (OWR)

The rules for employees who perform part of their duties outside the UK have also been modernised.

Eligibility for Overseas Workdays Relief is now aligned with the four-year FIG window. The process has been simplified in one major way. You no longer need to keep your foreign earnings in an offshore bank account to qualify for relief.

You can now have your full salary paid directly into a UK account without losing the tax benefit on the portion related to your work abroad.

However, this simplicity comes with a new financial ceiling. The relief is now capped at the lower of £300,000 or 30% of your total qualifying employment income. High earners with extensive international travel must now plan more precisely, as any relief beyond this cap is no longer available.

Homeworking and the Risk of Corporate Tax Presence

With hybrid and remote working becoming standard practice, HMRC has tightened its focus on where corporate business is actually conducted. For individuals working for foreign companies from a home office in Britain, the tax risks are two-fold.

Firstly, if you are physically working in the UK, even if for a foreign employer, that income is generally subject to UK tax and National Insurance from day one.

Secondly, there is an increasing risk of creating a “Permanent Establishment” (PE) for your employer. Following updated international guidance and UK legislation effective from January 2026, a home office is generally not considered a fixed place of business if an employee works there for less than 50% of their working time. If you exceed this threshold, HMRC will look for “commercial reasons” for your presence in the UK.

Importantly, simply allowing an employee to work from home for their own convenience or for talent retention is not considered a valid commercial reason. This could inadvertently bring the foreign company’s profits into the scope of UK Corporation Tax.

The new residence-based system is intended to be simpler, but the time limits and caps mean that strategic planning is more important than ever. If you would like to discuss how to use the 12% TRF rate or review your residency status, please get in touch with us.