Changes to non-dom £2,000 rule

If you've been living in the UK with income from overseas, you might remember a handy little threshold that kept things simple. Earned under £2,000 in unremitted foreign income? No need to claim the remittance basis. No complicated forms. No drama. Well, that's all changed.

From April 2025, the entire remittance basis system has been scrapped. And with it, that convenient £2,000 rule has gone the way of the fax machine. If you're a UK resident with overseas income: whether that's rental income from a property back home, dividends from foreign investments, or income from an overseas business: you need to understand what this means for your tax position. Let's break it down ...

What Was the £2,000 Rule Anyway?

Before we talk about what's new, let's quickly revisit what we've lost. Under the old system, if you were a UK resident but not domiciled here (a "non-dom"), you had a choice. You could either:

• Pay UK tax on your worldwide income as it arose (the arising basis), or
• Only pay UK tax on foreign income when you actually brought it into the UK (the remittance basis)

The remittance basis was a powerful tool. It meant you could earn money overseas, keep it in a foreign bank account, and avoid UK tax on it entirely: as long as you didn't "remit" it to the UK.

Here's where the £2,000 rule came in. If your total unremitted foreign income and gains were under £2,000 in a tax year, you could use the remittance basis automatically. No need to formally claim it. No loss of your personal allowance or capital gains annual exempt amount.

It was a nice, simple buffer for people with modest overseas earnings. But as of 6 April 2025? That entire framework no longer exists.

The Big Shift: Remittance Basis Abolished
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The UK government announced in 2024 that the remittance basis would be completely abolished from April 2025. This wasn't a minor tweak: it was a fundamental overhaul of how the UK taxes foreign income. Under the new rules:
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• All UK residents are taxed on worldwide income and gains as they arise: regardless of domicile status
• The concept of "non-dom" for tax purposes has effectively been dismantled
• The old £2,000 threshold is now irrelevant because there's no remittance basis to apply it to

In practical terms, if you're UK tax resident, HMRC now expects to see all your global income on your tax return. That overseas rental property? Taxable. Those foreign dividends? Taxable. Interest from that savings account you opened years ago back home? You guessed it: taxable.
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Enter the FIG Scheme: A New (But Limited) Lifeline

Now, before you panic, there is some good news. The government didn't just remove the old system without offering an alternative. They introduced the Foreign Income and Gains (FIG) scheme: a new relief designed specifically for people who are new to the UK. Here's how it works:
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• Eligibility: You must not have been UK tax resident in any of the 10 tax years immediately before the year you're claiming
• The benefit: If you qualify, you can exclude your foreign income and gains from UK taxation for up to 4 years
• No remittance requirement: Unlike the old system, you don't need to keep the money offshore. You can bring it into the UK without triggering a tax charge during the relief period

This is genuinely helpful if you've recently moved to the UK or you're planning to. It gives you a grace period to settle in without immediately facing a UK tax bill on your global earnings.

But here's the catch: the clock starts ticking from your first year of UK residence. And after those 4 years are up, you're fully in the UK tax net on worldwide income: no exceptions, no extensions.

What Happens After the 4-Year FIG Period?
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This is where things get serious. Once your 4-year FIG window closes, you'll be taxed on all your foreign income and gains as they arise. There's no gradual transition, no reduced rates: it's full UK taxation from year 5 onwards. If you've built up significant overseas assets during your FIG period, you'll need to think carefully about:
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• Restructuring investments to be more tax-efficient under UK rules
• Timing of disposals: selling assets while still within the FIG period could save significant tax
• Pension planning: overseas pensions may have different tax treatment that needs reviewing
• Rental income arrangements: particularly if you own property abroad

The key point? The FIG scheme buys you time, but it doesn't solve the long-term problem. If you're planning to stay in the UK beyond 4 years, you need a strategy that looks beyond the relief period. For a deeper dive into how foreign income interacts with UK tax obligations, take a look at our guide on whether you need to file a UK tax return if you have foreign income.

Why "Doing Nothing" Is No Longer an Option
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Here's something that surprises a lot of people: HMRC already knows about your overseas income. Or at least, they have the means to find out.

The UK is part of the Common Reporting Standard (CRS): an international framework for automatic exchange of financial information. Over 100 countries now share bank account data with each other, including:
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• Account balances
• Interest and dividend income
• Proceeds from sales of financial assets
• The account holder's name and tax identification number
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If you have a bank account, investment account, or other financial assets in a CRS-participating country, that information is being shared with HMRC every year.
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This means the old approach of "HMRC will never know about my overseas account" simply doesn't work anymore. The data is flowing, and HMRC is getting better at matching it to UK taxpayers. The consequences of getting this wrong can be severe:
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• Penalties of up to 100% of the unpaid tax (or even 200% for offshore matters)
• Interest charges that compound over time
• Criminal prosecution in serious cases of deliberate evasion
• Naming and shaming on HMRC's published list of deliberate tax defaulters

If you've got undeclared foreign income from previous years, it's far better to come forward voluntarily than to wait for HMRC to come knocking. Voluntary disclosure typically results in significantly lower penalties.

What Should You Do Now?
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If you're a UK resident with overseas income, here's your action plan:

1. Understand your residence status

Your UK tax obligations depend heavily on whether you're actually UK tax resident. The Statutory Residence Test (SRT) determines this, and it's more nuanced than simply counting days.

2. Check your FIG eligibility

If you've recently moved to the UK, determine whether you qualify for the FIG scheme. Remember, you need 10 consecutive years of non-UK residence immediately before your arrival.

3. Review all overseas income sources

Make a comprehensive list of your foreign income: bank interest, rental income, dividends, pension income, business profits. All of it needs to be considered.

4. Consider double taxation relief

If you're paying tax on the same income in another country, you may be entitled to relief under a double tax treaty. This can significantly reduce your overall tax burden.

5. Get specialist advice

The intersection of UK tax residence, foreign income, and the new FIG regime is genuinely complex. What worked three years ago doesn't work now.

Ready to Get Your Foreign Income Tax-Sorted?

The abolition of the remittance basis represents the biggest change to UK taxation of foreign income in decades. Whether you're newly arrived and wondering about FIG eligibility, or you've been here for years and need to reassess your position, getting proper advice has never been more important.