For decades, the UK’s non-domicile (non-dom) system has been one of the most attractive tax structures for globally mobile individuals — especially NRIs who maintain significant assets, income, and investments in India. But beginning 6 April 2025, the UK is completely abolishing the non-dom regime and replacing it with a new Foreign Income and Gains (FIG) regime, rewriting tax obligations for every UK resident with worldwide income.

This is not a minor policy shift — it is one of the biggest tax restructurings in modern UK history. For NRIs, it reshapes the way Indian investments, property income, NRE interest, business profits, and foreign capital gains will be taxed.

If you are:

• An NRI currently living in the UK, or
• Planning to move to the UK in the near future, or
• Returning to India from the UK, or
• Holding cross-border assets, trusts, or business structures,

you must understand these changes in detail and update your tax planning strategy accordingly.

This blog breaks down the new rules, their impact, real planning opportunities, and how NRIs can respond strategically before April 2025.

1. Understanding the Non-Dom System (Until 5 April 2025)

The “non-dom” system allowed individuals who lived in the UK but whose permanent home (domicile) was elsewhere to choose the remittance basis.

Under this system, NRIs paid UK tax only on:

• Income earned in the UK
• Foreign income brought into (remitted to) the UK
• Business profits arising in the UK

And they did not pay UK tax on:

• Indian capital gains (shares, MFs, property)
• NRE/FCNR interest
• Rental income from Indian property
• Foreign dividends
• Foreign business profits
• Offshore trust distributions

As long as the money stayed outside the UK, it was not taxed.

This regime was especially beneficial for NRIs with high-value investment portfolios, real estate, business income, or asset sales in India.

But from 6 April 2025, this rule disappears permanently.

2. What Changes From 6 April 2025: The End of Non-Dom + Start of Worldwide Taxation

From April 2025 onward:

All UK residents will be taxed on worldwide income and gains — regardless of domicile status.

This includes:

• Indian investment income
• Indian rental income
• Indian capital gains
• NRE/NRO/FCNR interest
• ESOP gains from Indian companies
• Business profits from India
• Dividends from Indian companies
• Gains on foreign shares and property

The UK is shifting to a residence-based system, meaning that simply being resident in the UK subjects you to global taxation.

This change impacts nearly 74,000 current non-doms, including thousands of NRIs.

3. Introducing the New 4-Year FIG Regime (Foreign Income & Gains)

A major opportunity for NRIs moving to the UK after a long gap

The FIG regime offers a 4-year exemption on most foreign income and gains — but only for qualifying individuals.

You can qualify if:

• You become a UK resident on or after 6 April 2025, AND
• You were not UK-resident for at least 10 consecutive tax years before your arrival, AND
• You are within your first 4 years of UK residency.

What foreign income & gains are eligible?

• Foreign employment income (with specific limits)
• Rental income from non-UK property
• Dividends from foreign companies
• Interest on foreign bank accounts
• Foreign business profits
• Foreign pension income
• Gains on most foreign assets
• Offshore trust income allocated to you

What is NOT covered?

• UK income or gains
• Crypto gains (considered UK-sited for UK residents)
• Foreign trading profits partly earned in the UK
• Certain insurance bond gains

Important considerations:

When you claim the FIG regime, you lose:

• UK personal allowance
• CGT annual exemption
• Blind person allowance
• Relief on foreign losses
• Mortgage interest relief on foreign property

This means FIG is beneficial mainly for wealthy NRIs with high foreign income, but less beneficial for those with modest income streams.

4. Transitional Reliefs for Existing NRIs (Before April 2025)

If you are already living in the UK and have used the remittance basis in the past, two major transitional reliefs apply.

These are some of the biggest NRI tax planning opportunities NRIs have before the rules change.

4.1 Temporary Repatriation Facility (TRF): Pay Just 12%–15% UK Tax Instead of Full Rates

This facility allows you to bring foreign income and gains earned before April 2025 into the UK at reduced tax rates:

• 12% in 2025–26
• 12% in 2026–27
• 15% in 2027–28

This is available if you claimed the remittance basis even once.

TRF is highly valuable for NRIs who have:

• Large Indian capital gains sitting offshore
• Sale proceeds from Indian real estate
• ESOP liquidation proceeds
• Business profits retained abroad
• Foreign investment portfolios

The best part?

You can designate the funds (triggering tax) without remitting immediately. Actual remittance can occur later.

This helps avoid forced asset sales or liquidity stress.

4.2 Asset Re-Basing to 5 April 2017 Value

For eligible NRIs, foreign assets will be treated as acquired at their 2017 market value when sold after 6 April 2025.

This can dramatically reduce capital gains tax exposure — especially on long-term Indian real estate or large investment portfolios.

5. Offshore Trusts: Major Changes for NRIs

Many wealthy NRIs use Indian, UAE, or offshore trusts for succession planning. These structures are heavily impacted.

New rules include:

• “Protected” trusts lose tax protection
• Gains and income of settlor-interested trusts become taxable
• Non-UK assets inside trusts may face 10-year IHT charges up to 6%
• Exit charges triggered even after leaving the UK
• Links between settlor residence and trust taxation become more complex

If you or your family have existing trusts — even if offshore — you should review the structure immediately.

6. The New UK Inheritance Tax (IHT) System for NRIs (One of the Biggest Impacts)

The UK is replacing the domicile concept for IHT with the Long-Term Resident test.

You become a Long-Term Resident if:

• You have been UK-resident for 10 out of the last 20 years.

Once you meet this threshold:

You become liable to UK Inheritance Tax (IHT) on your worldwide estate, not just UK assets.

This includes:

• Indian property
• Indian bank deposits
• NRE/NRO/FCNR balances
• Foreign shares
• Jewellery, gold, personal assets
• Foreign business ownership

Even after you leave the UK:

Your IHT exposure may continue for 3 to 10 years, depending on your total years of residence.

This is one of the most consequential changes for wealthy NRIs.

7. How the UK–India Tax Treaty Helps NRIs

The UK–India DTAA (Double Taxation Avoidance Agreement) remains in effect and provides:

• Credit for Indian taxes paid
• Reduced rates on dividends, interest, royalties
• Tie-breaker rules to determine residency
• Tax sparing credit in special cases (rare benefit)

To claim these benefits, NRIs should maintain:

• A valid TRC
• Form 10F
• Self-declaration under Indian tax rules
• Clean documentation for offshore income

8. Practical Strategies for NRIs to Reduce Tax Exposure Before and After April 2025

This is where you can actually optimize your tax position.

Before April 2025:

• Dispose of foreign assets strategically
• Maximise use of the Temporary Repatriation Facility
• Clean mixed funds into pure capital/income/gain accounts
• Restructure trusts or evaluate alternate jurisdictions
• Reduce long-term exposure to UK IHT
• Review remittance planning
• Utilise DTAA for credit optimisation

9. For NRIs Returning to India: Use RNOR Status to Your Advantage

When you return to India permanently, your residential status doesn’t change immediately.

You may qualify as Resident but Not Ordinarily Resident (RNOR) for 2–3 years if:

• You were NRI in 9 out of the last 10 years, OR
• You spent less than 730 days in India in the previous 7 years

RNOR Benefits:

• No tax on foreign income
• No tax on foreign capital gains
• No requirement to report foreign assets
• Ideal window to transfer global assets to India

Combine RNOR + UK transitional relief

This creates one of the most tax-efficient repatriation windows ever for nri returning to india between 2025–2027.

10. Frequently Asked Questions

Q1. Is the UK Non-Dom regime ending?

Yes, completely from 6 April 2025.

Q2. What is the new FIG regime?

A 4-year exemption for foreign income and gains for new UK residents.

Q3. Will UK residents be taxed on Indian income?

Yes — from April 2025, all worldwide income becomes taxable.

Q4. What is the Temporary Repatriation Facility?

A 12–15% tax rate on bringing pre-2025 foreign income/gains into the UK.

Q5. Do NRIs need to rethink inheritance planning?

Yes — IHT now applies based on long-term residence, affecting worldwide assets.

Q6. What should NRIs do immediately?

Review structures, plan repatriation, evaluate FIG eligibility, and prepare before April 2025.

Conclusion: This Is a Once-in-a-Generation Tax Change. NRIs Must Act Now.

The abolition of the non-domicile regime transforms how NRIs in the UK will be taxed on Indian income, global investments, foreign assets, and inheritance. The shift to worldwide taxation, the new FIG regime, IHT residency rules, and trust reforms create both risks and opportunities.

Your tax planning today will determine your financial efficiency for the next 10–20 years.

At Dinesh Aarjav & Associates, we specialise in:

• UK–India cross-border taxation
• FIG regime eligibility & optimisation
• TRF strategy planning
• Trust and succession structuring
• NRI returning to India planning
• DTAA structuring
• RNOR optimisation
• UK and India tax compliance

A personalised consultation ensures you avoid unnecessary taxation and maximise relief before these sweeping new rules take effect.