London in the 1980s was the era of big hair and big banks due to the de-regulation of the banks (and a lack of regulation of hair products until 1987). This decade saw big American banks, and American bankers, move into the UK market.
The American bankers, venture capitalists and hedge fund managers who came to work in the UK, bought properties and often chose to raise their children here. Many returned to the US with their families, but some have stayed the course.
Many Americans are, once again, looking to move to the UK. This may be particularly attractive to those who were raised here in the 1980s.
Those families who chose to stay in the UK, and anyone planning a move or return to the UK, will have to be alive to the tax consequences of becoming UK tax resident. This is particularly relevant following the wide-ranging changes to the way the UK tax regime affects people who would previously have claimed to be “non-UK domiciled”.
In the UK, individuals are now taxed based on where they live rather than based on their domicile or citizenship. US individuals living in the UK will have to pay UK income tax on their UK earnings. However, the following new provisions may offer some relief from UK income tax on foreign income and gains for those people who have been living in the UK as a “non-UK domiciled” individual, or for those planning to move/return to the UK.
Four-year “Foreign Income and Gains” Regime
The Foreign Income and Gains Regime (FIG Regime) has been introduced with effect from 6 April 2025. Individuals arriving in the UK for the first time, or returning to the UK after a period of absence, can access the FIG Regime if, at the time of their arrival in the UK, they have been non-UK resident for a period of ten consecutive tax years. Access to the FIG Regime means that, for the first four years after becoming UK tax resident, the individual will not be required to pay UK tax on certain categories of their foreign income and gains, whether or not the funds are brought into the UK. Individuals looking to use this relief should note that becoming UK tax resident starts the four year FIG “clock” running. The clock continues to run even if the individual leaves the UK during that four year period.
The foreign income and gains on which the relief is claimed must be fully disclosed in the individual’s UK Self-Assessment tax return. There is no charge for claiming this relief in the UK, unlike in other jurisdictions. However, individuals who elect to make use of the FIG Regime will lose their entitlement to the UK income tax personal allowance (£12,570 for the 2025/26 tax year) or the capital gains tax annual exempt amount (£3,000 for the 2025/26 tax year).
Overseas Workday Relief
Overseas Workday Relief (OWR) provides some relief from employment income earned for duties performed outside the UK, regardless of whether those earnings are brought into the UK. OWR is available for up to four tax years from the year of arrival in the UK, in line with the FIG Regime. The amount of relief available for each tax year is capped at the lower of 30% of the qualifying income or £300,000.
As with the FIG Regime, OWR should be claimed in the UK Self-Assessment tax return and, if a claim is made, the individual will lose their entitlement to the UK income tax personal allowance and capital gains tax annual exempt amount.
Individuals should ensure that they keep clear records of overseas workdays in the event that HMRC challenges their OWR claim.
Temporary Repatriation Facility
The Temporary Repatriation Facility (TRF) provides relief for individuals who have already been resident in the UK and who have who previously claimed the “remittance basis” of taxation. The remittance basis allowed individuals who were not “domiciled” or “deemed domiciled” in the UK to keep their foreign income and gains outside the UK and thereby keep those assets outside the UK tax net. Individuals who used the remittance basis after seven years of residence paid a “remittance basis charge” in order to continue to access that beneficial tax regime. If the individual then brought funds into the UK which had been generated during a year when they claimed the remittance basis, UK tax would then need to be paid.
The remittance basis of taxation has now been abolished for future tax years (though it will continue to be relevant for individuals who have claimed the remittance basis in previous tax years).
The TRF aims to encourage individuals who have previously claimed the remittance basis to bring funds into the UK. It is, however, a limited window of opportunity ending on 5 April 2028.
An election in the self-assessment tax return, which must include a designation of the funds concerned, must be made to take advantage of this special rate. If the election is made between 6 April 2025 and 5 April 2027, the special tax rate will be 12% and the rate will be 15% for elections made from 6 April 2027 to 5 April 2028. The relevant funds may then be brought to the UK without any further tax charges.
US/UK Double Tax Treaties
Finally, US citizens living and working in the UK can also look to the “double tax treaties” between the US and the UK. The Treaties aim to avoid any double taxation where both the US and the UK might seek to tax the same funds. These treaties offer generous protections for US domiciliaries which will continue to be available.
Please contact Catherine Pugsley, Anna Gaston, Beatrice Lewers or Hannah Fingleton in our Private Client Team on 020 7222 5381 to discuss this further.