From 6 April 2025, tax changes will come into force in the UK that will dramatically change the rules for residents, investors and business owners with foreign income. Below you can find the key aspects of the 2025 UK tax reform, including the abolition of the remittance regime, new QNR and TRF statuses, and updates to inheritance taxation (IHT). The information will be particularly useful for Ukrainians who are planning to relocate or have assets abroad.
Key changes to the UK tax system in 2025
- Cancellation of the remittance tax regime and introduction of a taxation mechanism for qualified new residents (QNR).
- Introduction of the Temporary Repatriation Fund (TRF).
- Revision of the inheritance tax (IHT) mechanism and replacement of the concept of ‘domicile’ with the status of ‘long-term resident’.
- Adjustment of the structure of excluded property trusts (EPTs) and, as a result, changes in tax planning for non-residents.
Cancellation of the remittance regime: what changes?
Previously, non-residents of the UK could avoid paying taxes on foreign income unless it was remitted to the UK (the so-called remittance regime). From April 2025, this regime will be cancelled.
Instead, a new status for Qualified New Residents (QNRs) will be introduced, which will allow them to enjoy tax relief for the first four years of residence.
Who can obtain QNR status and what are the benefits?
QNR (Qualified New Resident) is an individual who will become a UK tax resident but has not held such status for the last 10 years. For example, a person who was not resident in the UK between 6 April 2015 and 5 April 2025 can become a QNR and take advantage of this new regime.
The benefits of QNRs include:
- Full exemption from tax on foreign income, even if transferred to the UK;
- No capital gains tax, provided that such income is declared;
- Exemption from taxation of foreign trusts if the resident has QNR status.
- It is important to note that the QNR status will be valid only for the first 4 years of residence.
Temporary Repatriation Facility (TRF): an opportunity for former residents
A special Temporary Repatriation Facility (TRF) has been created for persons who have previously used the remittance regime. What it gives:
- An opportunity to transfer foreign income earned before 6 April 2025 to the UK;
- A reduced tax rate on distributions from trusts has been announced: 12% in 2025/26 and 15% in 2027/28;
- Favourable mechanism for legal return of capital.
New rules for inheritance taxation (IHT)
Instead of the principle of ‘domicile’, the concept of ‘long-term resident’ is introduced.
If a person has been a UK tax resident for 10 or more years out of the last 20, he or she will be liable to pay inheritance tax on all assets, including foreign assets. The long-term resident status is maintained until the person spends 10 years outside the UK.
There is a transitional period until 6 April 2028 for individuals who leave the UK in 2025-2026.
Changes in EPTs: new rules for founders
Excluded Property Trusts (EPTs), which have often been used to reduce the tax burden, are also undergoing changes:
- If the settlor of the trust has been in the UK for 10 years or more, the trust will lose its IHT relief.
- EPT settlors who directly own assets will pay taxes on income and capital gains of the trust.
- EPTs established before 30 October 2024 will remain exempt from inheritance tax - even if the settlor becomes a long-term resident.
How to prepare for the UK tax changes in 2025?
The reform of the UK tax system from 2025 is aimed at increasing tax transparency and introducing a new approach to foreign residents. If you:
- Are planning to change your tax residence;
- have income or business outside the UK;
- use trusts or foreign companies in your ownership structure.
Contact Maira Consult lawyers for an individual analysis of your situation and adaptation of your financial strategy to the new conditions.
