Tax Residency in Malta - Advantages of the remittance basis of taxation following the proposed changes to the UK tax regime for non-domiciled individuals
The proposed changes to the UK's tax regime, effective from 6 April 2025, represent a significant shift in how non-UK domiciled individuals are taxed. This transition from the current remittance-basis rules to a residence-based system marks a substantial change.
Key Changes to the UK Tax Regime
1.Worldwide Income and Gains Taxation: Non-domiciled individuals who have been UK residents for more than four years will be subject to UK tax on their worldwide income and gains, regardless of where the income or gains are generated.
2. Fig Regime Implications: Opting into the new Foreign Income and Gains (FIG) regime removes entitlement to personal allowances and the capital gains tax exemption.
3. Temporary Repatriation Facility (TRF): Individuals can repatriate pre-6 April 2025 foreign income and gains at a reduced tax rate of 12% during the 2025-2027 period.
4. Non - UK Residents: Non-UK residents who have not been in the UK for the preceding 10 tax years will be eligible to benefit from the FIG regime for up to four years once they become UK residents.
5. Residence - Based Inheritance Tax: The UK government plans to introduce a residence-based Inheritance Tax (IHT) system, where worldwide assets will be subject to UK IHT once an individual has been a UK resident for 10 years. This rule will continue to apply for 10 years after leaving the UK.
6. Trust Protections Removal: Trust protections for non-domiciled and deemed domiciled individuals who do not qualify for the FIG regime will be removed. Consequently, trust income and gains will be taxed on UK-resident settlors or transferors as they arise.
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