Are there any pitfalls to the new Foreign Income and Gains (FIG) regime?
- TBA
- Jun 18
- 4 min read
With several tax changes introduced in the UK this April, entering the ‘era of global taxation’ has become a topic of concern for foreign nationals residing in Britain.
Under the new policy, the UK government has scrapped the remittance basis for non-domiciled individuals—previously allowing up to 15 years without paying UK tax on foreign income.
It has now been replaced by a new residence-based system for foreign income and gains (Foreign Income and Gains, or FIG).
What is the new Foreign Income and Gains (FIG) regime?
For migrants to the UK who become UK tax residents by spending at least 183 days in the country, but whose permanent home (or family base) is abroad, they may qualify as non-domiciled.
Under this new Foreign Income and Gains (FIG) regime, individuals who become UK tax residents before 5 April 2025, and who were non-UK tax residents for the previous ten consecutive tax years, may apply for the FIG scheme within the first four tax years of residency. During these four years, applicants enjoy 100% tax exemption on foreign income and gains.
Is the four-year exemption under fig really worth it? Perhaps not. A closer look at the FIG scheme might make you rethink its value.
Applying for FIG could result in loss of allowances and reliefs
According to the new rules, from 6 April 2025, those who apply for the FIG regime within their first four tax years of UK residency may enjoy 100% tax relief on foreign income and gains. This includes bringing funds into the UK—such as trust distributions—without paying tax.
However, this comes with a major caveat: during the four-year exemption period, you will not be entitled to personal allowances on your income or capital gains.
Personal allowances and reliefs
HMRC’s RFIG43000 guidance makes clear that non-domiciled individuals must choose whether to opt into the new four-year FIG regime.
Once opted in (or if Overseas Workday Relief is claimed), it will affect your eligibility for various tax allowances and reliefs, including:
No personal allowance
No blind person’s allowance
No married couple’s allowance or civil partner’s allowance
No transferable tax allowance for married couples/civil partners
No relief on certain payments such as life insurance premiums
Moreover, foreign income exemptions are ignored when calculating your Adjusted Net Income (ANI), which is used to assess eligibility for various reliefs such as the tax-free childcare scheme.
This means that your entire foreign income is still counted for determining thresholds such as:
Eligibility for childcare support
Liability for the High-Income Child Benefit Charge (HICBC)
Capital gains and losses
The FIG regime also impacts capital gains tax (CGT) treatment:
You will not be entitled to the annual CGT exemption in any tax year where FIG is claimed
You cannot claim capital losses—qualifying overseas losses during such years cannot be used to offset gains
However, foreign capital gains will be exempt first, so UK losses from the same year, or carried forward losses from unrelated prior years, can still be used as normal.
Trade and property losses
If your trade, profession, or property business is based entirely outside the UK, and you apply for FIG in a given tax year, you will not be able to offset any losses from that activity in that year—or in future years.
This applies if the income from such business would otherwise be treated as ‘qualifying’ foreign income.
In this case, the losses cannot be carried forward to offset future profits.
Summary
By opting into the FIG regime, you will lose eligibility for all personal income and capital gains tax allowances, and cannot offset capital, trade, or property-related losses.
Since tax is calculated separately for each source of income, if you have multiple sources of global income, you are strongly advised to consult a qualified accountant or tax adviser before applying for FIG.
This helps ensure optimal use of allowances and tax reliefs to minimise liability.
Some advice from TB Accountants
While FIG offers a four-year foreign income tax exemption, this does not mean your global income is simply written off.
FIG affects many other allowances and reliefs. In addition, once excluded from ANI calculations, your full income may push you into higher tax bands for benefit entitlement and other threshold-based assessments.
Therefore, before applying for FIG via your Self-Assessment in the new tax year, you should fully consider the implications.
Even if you qualify, it does not mean you are required to claim it.
If you plan to apply for FIG, the first reporting deadline for the 2025/26 tax year is 31 January 2027, and the claim must be made annually. If you opt in for the first year, it won’t automatically roll over—you must tick the relevant box in each year’s Self-Assessment to continue claiming tax exemption under the regime.
If you still have questions about the global taxation rules for non-domiciled individuals or the FIG regime, or would like to speak with a tax advisor, contact TB Accountants for more information. With over 16 years of experience, we can offer tailored tax planning and financial services to support your needs.
For individuals and businesses looking for UK taxation services, use our contact form to get in touch for more information.
Get in touch with us at info@tbgroupuk.com or for a free one-to-one consultation.
