Significant changes were introduced to the UK’s tax rules for non-domiciled individuals from 6 April 2025. The remittance basis for non-UK domiciled individuals has been replaced with a residency-based system. Longer-term UK residents will be taxed on their worldwide income and gains as they arise. These changes mean that anyone affected needs to take a fresh look at their financial affairs. Good planning, keeping clear records, and getting the right advice will be important to avoid unexpected tax liabilities and to make the most of any reliefs still available.

Here are the essential Do’s and Don’ts for non-doms to help navigate the transition:

✅ Do’s

1. Review Worldwide Income and Gains

• From 6 April 2025, all longer term (over 4 years) UK tax residents must report and pay UK tax on worldwide income and gains as they arise, regardless of remittance.
• Subject to appropriate advice you may wish to consider investing for long term capital growth or other financial strategies which defer the realisation of income.

2. Utilise the Temporary Repatriation Facility (TRF)

• Review previous UK tax returns and consider if appropriate to claim the remittance basis for 24/25 in order to benefit from the transitional provisions.
• Consider remitting pre-6 April 2025 foreign income and gains under the TRF, available for the 2025/26 and 2026/27 tax years, to benefit from a reduced tax rate. ​
• Review remittances under the TRF to ascertain the most efficient for taxed or untaxed income and gains taxed outside of the UK.

3. Maintain Detailed Records

• Keep comprehensive documentation of all foreign income, gains, and remittances, including dates, amounts, sources, and related bank statements and foreign taxes paid.

4. Rebase Foreign Assets if Eligible

• If you have claimed the remittance basis and were neither UK domiciled nor deemed domiciled by 5 April 2025, you may elect to rebase the value of foreign capital assets held personally on 5 April 2017 to their value on that date. Ensure you have records and valuations (where possible) of such assets. ​

5. Review Offshore Trusts and Structures

• Review any trusts you are either settlor or beneficiary of.
• Assess the implications of the new rules on offshore trusts, as protections from UK taxation on foreign income and gains arising within such trusts will be removed for most individuals. ​
• Review any closely held foreign companies you are a shareholder of.

6. Monitor Residency Status

• Keep accurate records of your days spent in and out of the UK to determine your residency status under the Statutory Residence Test.​
• Consider if you are tax resident in another jurisdiction also and whether any applicable DTA may apply.

7. Seek Professional Advice Before Transactions

• Consult with tax professionals before making significant financial decisions, such as selling foreign assets or making large transactions, to understand the UK tax implications.​

🚫 Don’ts

1. Don’t Assume Previous Non-Dom Benefits Still Apply

• The remittance basis has been abolished from 6 April 2025; relying on previous non-dom advantages could lead to unexpected tax liabilities. ​

2. Don’t Overlook Taxation of Trust Distributions

• Distributions or benefits from offshore trusts may now trigger UK tax charges; ensure you understand the new tax treatment before receiving such distributions. ​

3. Don’t Delay Using the TRF for Pre-2025 Foreign Income and Gains

• The TRF offers a limited window to remit pre-6 April 2025 foreign income and gains at a reduced tax rate; This applies for two years at 12% and then one year at 15% delaying beyond this period may result in higher tax charges. ​
• Don’t assume claiming the TRF will be the most efficient form of remittance, particularly for taxed gains.
• Don’t assume you will get any or full credit for foreign taxes already suffered.

4. Don’t Neglect Mixed Funds

• Bringing funds into the UK from accounts containing both clean capital and income/gains without proper tracing can lead to unintended tax consequences.​

5. Don’t Ignore Inheritance Tax (IHT) Changes

• The UK is moving to a residence-based IHT system; long-term UK residents may be subject to IHT on worldwide assets. Keep detailed records of any gifts or transfers you make, especially if they involve offshore assets.

6. Don’t Make Assumptions About Overseas Workday Relief (OWR)

• OWR will continue but with changes; ensure you understand the new eligibility criteria and conditions. ​

7. Don’t Undertake Complex Transactions Without Advice

• Transactions involving offshore trusts, closely held companies, foreign asset sales, company reconstructions, or significant remittances can have complex tax implications; always seek professional guidance.
• Don’t Assume that Transactions are Exempt in the UK
• Just because a transaction or a particular source of income is exempted from tax outside of the UK do not assume that this will be the case in the UK.

Contact Us

At Dixcart UK, we are here to help you manage the upcoming changes to the non-dom regime with clear, tailored advice.

For more information on this or to find out how we can support you during this transition, please use our enquiry form or email us at hello@dixcartuk.com.

On 6 May 2025, the United Kingdom and India finalised a landmark Free Trade Agreement, marking a significant milestone in bilateral relations. This agreement, the UK’s most substantial post-Brexit trade deal, is projected to boost the UK economy by £4.8 billion annually by 2040.

Key Highlights of the Agreement

1. National Insurance Exemption for Indian Workers – Employers and Employees

A pivotal feature of the UK–India Free Trade Agreement is the three-year exemption from UK National Insurance Contributions (NICs) for both:

• Indian employees temporarily seconded to the UK; and
• Their Indian employers, provided the secondment is part of an intra-company transfer.

This means that neither the employer nor the employee will be required to pay UK NICs during the qualifying secondment period, provided they continue contributing to India’s social security system. The arrangement is reciprocal, applying equally to UK employees seconded to India.

The exemption only applies to secondments involving employers with operations in both countries. It does not extend to Indian nationals employed solely by UK-based entities.

Implications:

• Cost Efficiency: The combined saving of employer and employee NICs can reduce total employment costs by up to 20%, improving competitiveness and cash flow.
• Global Mobility Planning: Multinational companies can strategically deploy staff between the UK and India without dual social security contributions.
• HR Compliance: Businesses must ensure the secondment arrangement meets the definition of an intra-group transfer and is time-limited to three years.

2. Tariff Reductions and Market Access

The agreement eliminates tariffs on 90% of UK exports to India, including sectors like whisky, gin, cosmetics, and food products. Conversely, 99% of Indian exports, such as textiles, food, and jewellery, will face no import duty in the UK.

Opportunities:

• Export Expansion: Indian businesses can capitalise on duty-free access to the UK market, particularly in textiles and jewellery.
• Investment Prospects: The reduction in tariffs opens avenues for joint ventures and partnerships in key sectors.

3. Enhanced Professional Mobility

The FTA streamlines visa procedures and employment laws, facilitating the movement of Indian professionals to the UK. This includes contractual service suppliers, business visitors, investors, and independent professionals such as yoga instructors, musicians, and chefs.

Considerations:

• Talent Deployment: Businesses can leverage this provision to deploy skilled professionals in the UK market efficiently.
• Compliance: Ensure adherence to the UK’s qualification and experience requirements for professionals.

4. Exclusion of Legal Services

Notably, the legal services sector is excluded from the agreement, with the Law Society of England and Wales expressing disappointment over this omission. This exclusion is seen as a missed opportunity for both economies.

Strategic Implications for Indian HNWIs and Businesses

Tax Planning and Corporate Structuring

The NI exemption offers a strategic advantage for Indian businesses with UK operations. By reducing employment costs, companies can reallocate resources to other growth areas. There is also a benefit of reduced employee NI costs for the individual giving then a higher net income than otherwise. However, it is crucial to evaluate the long-term tax implications and ensure compliance with both UK and Indian tax regulations.

Investment and Expansion Opportunities

The tariff reductions and improved market access present lucrative opportunities for Indian investors and businesses to expand their footprint in the UK. Sectors such as fashion, textiles, and jewellery are poised for growth, given the elimination of import duties.

Professional Mobility and Talent Acquisition

The streamlined visa processes facilitate the movement of Indian professionals, enabling businesses to tap into the UK market’s talent pool and meet operational needs effectively.

Conclusion

The UK–India Free Trade Agreement signifies a new era of economic collaboration between the two nations. For Indian individuals and businesses, this agreement opens doors to strategic tax planning, market expansion, and talent mobility. Engaging with experienced tax advisors and legal experts will be essential to navigate the complexities and maximise the benefits of this landmark deal.

For more information, please contact us: advice.uk@dixcart.com.

Background – What the UK Offers as a Tax Efficient Jurisdiction

The UK is one of the world’s leading financial countries given its financial services industry and its robust corporate law and governance frame works. This information concentrates on its highly competitive corporation tax system for holding companies.

One of the UK Government’s key ambitions has been to create the most competitive tax system in the G20. It has developed strategies to support, rather than hinder, growth and to boost investment.

Through the implementation of these strategies the Government is aiming to make the UK the most attractive location for corporate headquarters in Europe.

In order to achieve this the UK Government has created an environment where:

• There are low corporate taxes
• Most dividend income is tax exempt
• Most share disposals are tax exempt
• There is a very good double tax treaty network to minimise withholding taxes on dividends, interest and royalties received by a UK company
• There is no withholding tax on the distribution of dividends
• Withholding tax on interest can be reduced due to the UK’s double tax agreements
• There is no tax on profits arising from the sale of shares in a holding company by non-resident shareholders
• No capital duty is applicable on the issue of share capital
• There is no minimum share capital
• An election is available to exempt overseas branches from UK taxation
• Informal tax clearances are available
• Controlled Foreign Company Legislation only applies to narrowly targeted profits

Tax Advantages in More Detail

• Corporation Tax Rate

Since 1 April 2017 the UK corporation tax rate has been 19% but will increase to 25% with effect from 10^th April 2023.

The 19% rate will continue to apply to companies with profits of no more than £50,000 with marginal relief for profits up to £250,000.

• Tax Exemption for Foreign Income Dividends

Small Companies

Small companies are companies with less than 50 employees that meet one or both of the financial criteria below:

• Turnover less than €10 million
• Balance sheet total of less than €10 million

Small companies receive a full exemption from the taxation of foreign income dividends if these are received from a territory that has a double taxation agreement with the UK which contains a non-discrimination article.

Medium and Large Companies

A full exemption from taxation of foreign dividends will apply if the dividend falls into one of several classes of exempt dividend. The most relevant classes are:

• Dividends paid by a company that is controlled by the UK recipient company
• Dividends paid in respect of ordinary share capital that is non-redeemable
• Most portfolio dividends
• Dividends derived from transactions not designed to reduce UK tax

Where these exemption classifications do not apply, foreign dividends received by a UK company will be subject to UK corporation tax. However, relief will be given for foreign taxation, including underlying taxation, where the UK company controls at least 10% of the voting power of the overseas company.

• Capital Gains Tax Exemption

There is no capital gains tax on disposals of a trading company, by a member of a trading group, where the disposal is all or part of a substantial shareholding in a trading company or where the disposal is of the holding company of a trading group or sub-group.

To have a substantial shareholding a company must have owned at least 10% of the ordinary shares in the company and have held these shares for a continuous period of twelve months during the two years before disposal. The company must also have an entitlement to at least 10% of the assets on winding up.

A trading company or trading group is a company or group with activities that do not include ‘to a substantial extent’ activities other than trading activities.

Generally, if the non-trading turnover (assets, expenses and management time) of a company or a group does not exceed 20% of the total, it will be considered to be a trading company or group.

• Tax Treaty Network

The UK has the largest network of double tax treaties in the world.  In most situations, where a UK company owns more than 10% of the issued share capital of an overseas subsidiary, the rate of withholding tax is reduced to 5%.

• Interest

Interest is generally a tax deductible expense for a UK company providing loans for commercial purposes. There are, of course, transfer pricing and thin capitalisation rules.

Whilst there is a 20% withholding tax on interest, this can be reduced or eliminated by the UK’s double tax agreements.

• No Withholding Tax

The UK does not impose withholding tax on the distribution of dividends to shareholders or parent companies, regardless of where the shareholder is resident in the world.

• Sale of Shares in the Holding Company

The UK does not charge capital gains tax on the sale of assets situated in the UK (other than UK residential property) held by non-residents of the UK. 

Since April 2016 UK residents have paid capital gains tax on share disposals at a rate of 10% or 20%, depending on whether they are basic or higher rate taxpayers.

• Capital Duty

In the UK there is no capital duty on paid up or issued share capital. Stamp duty at 0.5% is, however, payable on subsequent transfers.

• No Minimum Paid up Share Capital

There is no minimum paid up share capital for normal limited companies in the UK.

In the event that a client wishes to use a public company, the minimum issued share capital is £50,000, of which 25% must be paid up.  Public companies are generally only used for substantial activities.

• Overseas Branches

A company may elect to exempt from UK corporation tax all of the profits of its overseas branches that are involved in active operating business.  If this election is made, branch losses may not be offset against UK profits.

• Controlled Foreign Company Rules

Controlled Foreign Company Rules (CFC) are intended to apply only where profits have been artificially diverted from the UK.

Subsidiaries in jurisdictions detailed on a wide list of excluded territories are generally exempt from CFC taxation if less than 10% of the income generated in that territory is exempt from or benefits from a notional interest deduction.

Profit, other than interest income, in all remaining companies is only subject to a CFC charge if a majority of the business functions relating to assets used or risks borne are performed in the UK; even then only if taxed at an effective rate less than 75% of the UK rate.

Interest income, if taxed at less than 75% of the UK rate, is subject to a CFC taxation charge, but only if it arises ultimately from capital invested from the UK or if the funds are managed from the UK.

An election can be made to exempt from CFC taxation 75% of the interest received from lending to direct or indirect non-UK subsidiaries of the UK parent.

Introduction of a New UK Tax – Directed Towards Large Multinational Companies

On April 2015 the UK introduced a new Diverted Profits Tax (DPT) which has also been called the “Google Tax.” It is aimed at countering aggressive tax avoidance by multinational companies, which historically has eroded the UK tax base.

Where applicable, DPT is charged at 25% (compared to the corporation tax rate of 20%) on all profits diverted from the UK.  It is important to note that this is a new tax and is entirely separate from corporation tax or income tax and, as such, losses cannot be set against the DPT.

Conclusion

The UK continues to be regarded as a leading holding company jurisdiction. Due to the number of tax benefits that are legitimately available, its access to capital markets, its robust corporate law and governance frame works.

The recently introduced Diverted Profits Tax is directed towards a specific and limited group of large multinational organisations.

Which UK Services can Dixcart Provide?

Dixcart can provide a comprehensive range of services relating to the formation and management of UK companies. These include:

• Formation of holding companies
• Registered office facilities
• Tax compliance services
• Accountancy services
• Dealing with all aspects of acquisitions and disposals

Contact

If you would like further information on this subject, please contact Paul Webb on hello@dixcartuk.com, or your usual Dixcart contact.