Out of Africa: Part four – Impact of the 2024 autumn budget

In this article Julie Howard and Annabella King look at how the details of the changes to the "non-dom" regime, which took effect from 6 April 2025, will impact individuals considering relocating to the UK from Africa and Africans already living in the UK. The changes to the regime were originally announced by the previous government on 6 March 2024 (see part three of our Out of Africa series in which Julie Howard covered these proposals). 

Given the continued attraction of the UK as a place to live, work, invest and educate children, we expect to continue to see clients emigrating to the UK from Africa, some of whom have complex business interests and existing offshore holding structures. For individuals who are already UK tax resident, an understanding of the new rules is crucial and individuals who are considering moving to the UK will need to be aware of the changes in order to plan successfully ahead of their move. In this article we set out key elements of the new regime and suggest some practical steps individuals can take.

New four-year regime to replace the current remittance basis

With effect from 6 April 2025, the concept of domicile has been abolished as a connecting factor for UK tax purposes and the remittance basis of taxation is no longer available.

Individuals moving to the UK (who have not been UK resident in any of the previous 10 years) or who have been UK tax resident for fewer than four tax years will, from 6 April 2025, be eligible to claim the new regime.

Under this regime, for those first four years of UK residence, there will be no UK tax on foreign income and foreign chargeable gains (known as FIG) even if these are brought into the UK. This includes distributions from trusts which could otherwise be liable to UK tax. This marks a significant change from the previous remittance basis regime which discouraged individuals from bringing offshore income and gains into the UK. Individuals who were already UK resident but for fewer than four tax years, will be able to claim the new regime for the remainder of their first four years of residence, from 6 April 2025. A claim will have to be made for the new regime to apply and individuals will have to quantify and identify the source of the income and gains for which relief is being claimed.

Individuals who remain UK resident after the expiry of their first four tax years and individuals who have been UK resident for four years already (including before 6 April 2025) will be taxed on their worldwide income and gains from 6 April 2025. Individuals who have claimed the remittance basis previously will be able to benefit from the Temporary Repatriation Facility (see below) in respect of unremitted FIG from earlier years.

Overseas workday relief remains available and has been extended to four years to align with the new four-year FIG regime but is subject to a new annual limit.

For individuals considering relocating to the UK from Africa who are keen to take advantage of the four-year regime, it is important to review previous patterns of visits to the UK. They will need to check that they have been non-UK resident in the previous 10 tax years. If, for example, an individual has visited the UK from Africa regularly in advance of moving here (to look at schools or to find and purchase a property, for example), they will need to review the number of days they have spent here each tax year (6 April to following 5 April) and consider the relevant day count thresholds under the Statutory Residence Test to ensure they have not been inadvertently a UK tax resident in previous tax years.

Transitional reliefs

African individuals already living in the UK may be able to take advantage of certain transitional reliefs which have been introduced as part of the new regime. Individuals who have previously been subject to the remittance basis in at least one year before 6 April 2025 will be able to take advantage of the new “Temporary Repatriation Facility” (the “TRF”).  For 2025/26 and 2026/27, a reduced 12% flat rate will apply to “designated” pre-6 April 2025 foreign income and gains and for 2027/28 a reduced flat rate of 15% will apply. This can also be available in respect of overseas funds where the individual is not certain of the source of the funds. To make use of the TRF individuals must “designate” these overseas funds on their tax return for the relevant year. Once “designated”, such funds can be remitted to the UK without further tax charge. Where individuals who qualify for the TRF receive a benefit from a non-UK trust during the TRF period, this will also qualify for relief if “matched” with pre-6 April 2025 income or gains that have arisen within the trust.

The extension of the TRF from the two years announced previously to three years and the fact that it applies to income/gains matched against distributions from offshore trusts were welcome changes to the previously announced proposals and are designed to encourage individuals to bring pre-6 April 2025 foreign income and gains to the UK.

An additional transitional relief is a capital gains tax rebasing to 5 April 2017 values for personally held foreign assets where the individual has claimed the remittance basis in any of the 2017/18 to 2024/25 tax years and was not UK domiciled or deemed domiciled before 6 April 2025.

We recommend that individuals who are already UK tax resident and have paid tax on the remittance basis undertake a review of their overseas assets to ascertain the extent to which they can utilise the transitional reliefs. For example, African individuals who are currently UK resident could bring previously unremitted overseas funds to cover their anticipated spending into the UK at the favourable rates available under the TRF. If they are beneficiaries of offshore trusts, they could explore whether a trust distribution they could receive would be matched against pre-6 April foreign income and gains that have arisen within the trust to enable a claim to be made under the TRF to pay tax at the favourable rates it offers.

Inheritance tax and “long-term residents”

For UK tax purposes, liability to inheritance tax has historically been based on the concept of domicile (essentially where someone regards their permanent home). From 6 April 2025, domicile has ceased to be a connecting factor for inheritance tax purposes. Instead, it is now based on UK residence with an individual becoming subject to inheritance tax on their worldwide estate once they have been UK tax resident for 10 of the previous 20 tax years (known as a “long-term resident”). This represents a reduction from the previous position where an individual became deemed domiciled after 15 years of UK residence.

The worldwide assets of a long-term resident who ceases UK residence will also remain within the scope of inheritance tax for between 3 and 10 years after departure, under “tail” provisions, depending on how long they have been UK resident. It will be important for any individuals who are considering returning to Africa after 6 April 2025 to keep these rules in mind.

Offshore trusts – income, gains and inheritance tax

Under the previous regime before 6 April 2025, UK resident non-UK domiciled settlors were generally not liable to UK tax (under the “protected settlements” rules) on foreign income and gains within the structure unless they received trust distributions or benefits and remit these to the UK. From 6 April 2025 foreign income and gains arising in settlor-interested non-UK trusts are taxed on UK resident settlors as they arise, unless the settlor is within the four-year FIG regime discussed above.

In our experience, many African clients have offshore trusts in place. It is very important to review existing trusts so that settlors who have become UK resident understand how they will be taxed in relation to these from 6 April 2025. In particular, there may be scope for restructuring trusts or reorganising investments within the trust to minimise exposure to UK tax going forwards.

Under the previous regime, trusts settled by non-UK domiciled individuals (who were not deemed domiciled) benefitted from “excluded property” status for inheritance tax purposes, meaning that the trust remained outside the scope of inheritance tax provided it did not hold UK situated assets directly or certain UK assets indirectly.

From 6 April 2025 the inheritance tax treatment of non-UK assets held in trust follows the residence status of the settlor and if a settlor becomes a long-term resident (or having left the UK, is within the tail provisions), all assets held by the trust will be within the scope of inheritance tax. This means that:

• Where the settlor can benefit from the trust assets (which we often find is the case for African clients with offshore trusts in place), all of the trust assets will form part of the settlor’s estate and be subject to IHT on their passing at up to 40% under the UK’s “gift with reservation of benefit” rules – unless the trust was an excluded property trust set up before 30 October 2024 and to the extent it does not hold UK situated assets (including certain indirectly held assets deriving value from UK residential property); and
• All of the trust assets will be subject to the UK’s “relevant property regime”, which, broadly speaking, imposes charges every 10 years (up to a maximum rate of 6% of the value of the trust’s assets) and proportionate exit charges when assets leave the trust – these charges will apply to all trusts whenever created if the settlor meets the long-term residence criteria.

For African clients with existing trusts, a review of these trusts should be undertaken in order to understand the potential inheritance tax exposure from 6 April 2025.

Conclusion

Individuals who are considering relocating from Africa to the UK should obtain professional advice to ensure that they can plan successfully ahead of their move. The four-year regime is extremely favourable, offering the ability not to pay UK tax on foreign income and gains arising during that period even if brought into the UK. Disposals of assets and trust distributions could therefore be timed to take place during this four-year period without attracting UK tax (although for countries like South Africa which impose exit charges on departure this may be of more limited value). For people who have already moved here from Africa, reviews of existing offshore structures they have set up and/or benefit from will be crucial to ensure that they understand the extent of their UK tax exposure going forwards.