UK Remittance Regime Undergoes Radical Transformation: Key Changes and Transitional Provisions


A reform to the UK Remittance Basis regime announced at the Spring Budget

In a significant UK Budget announcement on 6 March 2024, the UK remittance regime is set to undergo a substantial overhaul, marking a shift towards residence-based criteria rather than domicile. The revamped system will specifically target individuals in their initial four years of UK residency or those who have been non-UK residents for at least a decade. Surprisingly , foreign profits, encompassing both income and gains, will enjoy complete exemption and can be remitted to the UK without incurring taxation. This is similar to the Australian tax treatment of temporary residents.

To ensure a smooth transition and minimise the impact on existing users of the remittance basis regime, the UK Government has introduced certain transitional provisions. These measures aim to mitigate the impact of the changes and incentivise individuals to bring money into the UK, especially if remittances have historically faced high taxation. Careful planning during the transition period could potentially result in significant tax savings, given the proposed timelines and perceived leniency of these provisions.

In summary, the transitional provisions entail:

    • Individuals transitioning from the remittance basis on April 6, 2025, who are ineligible for the new regime, will only be taxed on 50% of foreign income received during the tax year 2025/26 (from April 6, 2025, to April 5, 2026).
    • Individuals who, under current rules, would still have been taxed on the remittance basis for the tax year 2025/26, will have the option to rebase foreign assets to their value as of April 5, 2019.
    • Remittances made between April 6, 2026, and April 5, 2027, of foreign income and gains generated while an individual was subject to the remittance basis, will be subject to a special low tax rate of 12%, in contrast to the usual rates of up to 45% on income and 20% on gains.

The team at Salann will be following these changes closely and how they will impact on individuals with UK and Australian connections. Contact Ruya Ozalgan or Paula Tallon to discuss your particular circumstances.

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