What are the New UK Long-Term Residency Rules?
The UK government recently introduced a new framework to revise residency and domicile regulations. The rules, brought into effect as part of broader restructuring around non-domicile status, present updated tax obligations and eligibility criteria for expats. These changes ensure tax fairness while aligning foreign income, inheritance tax (IHT) regulations, and residency requirements under a “residence-first” system.
This marks the end of the previously accommodating non-dom regime (set to be abolished entirely by April 2025) for expats or non UK Nationals with assets there. Instead, the focus shifts to residency status, offering temporary relief on foreign income and gains in some cases—but ultimately broadening tax exposure over time.
A Quick Look at the Past Rules on LTR and Domicile
Before these reforms, the UK had a non-domicile regime offering certain expats significant tax advantages. Key features included the controversial “remittance basis,” under which expats could exclude overseas income and gains from UK tax—in return for not repatriating these funds to the UK.
Similarly, domicile played a flexible role, offering protections against inheritance tax on global assets. These structures favoured individuals with offshore trusts or income from multiple jurisdictions.
However, critics argued this system undermined fairness in taxation, indirectly incentivised capital outflow, and excluded common expats from benefiting fully.
What’s Changing? Breaking Down the New LTR Rules
- Prove non-UK residency status for at least 10 tax years
- File detailed claims with adequate records covering international earnings.
- Forego annual income tax and CGT exemptions during application periods.
What These Changes Mean for non-resident UK Nationals
The impact of these reforms varies significantly depending on expat categories, asset structures, and personal financial priorities.
If you lived overseas for 10 years, you can come back to the UK and not be liable for IHT on worldwide assets for the next 10 years.
You will always be exposed to IHT on UK-sited assets but not international ones.
For UK Nationals Returning to the UK
Returning UK nationals should pay special attention to the FIG regime. If you plan a flexible “split year” settlement schedule, tax-free income might apply to offshore investments initially—but full taxation looms within four years.
Likewise, British expats relying on low-tax overseas jurisdictions (e.g., UAE or Hong Kong ) need contingency plans ensuring that increased global scrutiny doesn’t compromise existing returns.
For Non-UK Nationals with UK Assets
Non-UK nationals holding assets in the UK must carefully assess their financial strategies to align with local tax and regulatory frameworks. The taxation of UK-based income, including rental or investment earnings, requires thorough planning to mitigate unnecessary liabilities.
Resident or nonresident, UK situs assets are applicable.
Additionally, if you are residing in a jurisdiction with favorable tax laws, it is essential to ensure your UK assets are structured in compliance with increasing global transparency measures, such as the Common Reporting Standard (CRS). Establishing contingency plans and seeking professional advice can help preserve the value of your investments while adhering to evolving legal requirements.
Practical Advice for Adapting to New Rules
1. Assess Your Residency Timeline
Understanding when you meet residency thresholds—and when exemptions lapse—is vital. UK expats planning return trips should experiment with residency windows to remain eligible yet avoid forced taxation via misclassification.
2. Audit Offshore Holdings Strategically
Many expats reverted towards non-UK trusts using loopholes permissible pre-April 2025. However, early adjustments towards diversified, publicly compliant offshore mechanisms build investor flexibility and domestic security credentials.
For instance:
- Split high-risk assets, ensuring sufficient jurisdiction spreads using specialist Indexed Mutuals.
- Explore potential TRF windows for timing advantageous reclassification pre-Autumn international audits.
3. Revisit Estate Structuring Proactively
Your estate—especially multi-country or involving inheritance-sharing arrangements—faces strengthened sideline scrutiny amidst active domicile-proof tightening clauses.
For those with complex financial arrangements, such as international investments, trust structures, or significant family wealth, the challenges can be even greater. Working with trusted advisors who specialise in cross-border tax matters is key to ensuring that all aspects of your financial position are addressed.
Plan with Soteria Trusts
Our team combines years of experience with a tailored approach, ensuring that your residency status and wealth planning are aligned with your goals and priorities. We provide bespoke advice to address your unique circumstances, including guidance on structuring your assets, minimising tax risks, and positioning your finances for long-term success. With a clear understanding of the intricacies of the UK’s tax system, we empower you to approach this period of change with confidence and peace of mind.
At Soteria Trusts, we are committed to being your trusted partner during this pivotal time, providing reassurance, expertise, and a personalised approach. Contact us for a consultation today!
