Finance Act 2025

Part 2 U.K. Replacement of special rules relating to domicile

Chapter 1 U.K. New rules for foreign income and gains of individuals becoming UK resident

37 Claim for relief on foreign income U.K.

(1) In Part 8 of ITTOIA 2005 (foreign income: special rules), after Chapter 4 insert—

“Chapter 5 U.K. Relief for new residents on foreign income

845A Claim for relief for qualifying new residents

(1) An individual may make a claim for relief for a tax year under this section (a “foreign income claim”) if the individual is a qualifying new resident for that year (see section 845B).

(2) Where an individual makes a foreign income claim for a tax year, the individual is entitled to relief for the tax year that is equal to so much of the total income of the individual for that year as—

(a) reflects qualifying foreign income (see section 845H), and

(b) is identified as such in the claim.

(3) The relief is given by deducting the amount of the relief in calculating the individual's net income for the tax year (see Step 2 of the calculation in section 23 of ITA 2007).

(4) A foreign income claim must be made in a return.

(5) A foreign income claim in relation to a tax year must be made before the end of the period of 12 months beginning with 31 January after the end of that tax year.

(6) A foreign income claim may not be made as a consequential claim (within the meaning of section 43C(5) of TMA 1970) if the circumstances which give rise to the consequential claim result from a loss of tax brought about carelessly or deliberately by the individual or a person acting on the individual’s behalf.

(7) See also—

(a) Chapter 5C of Part 2 of ITEPA 2003 which provides for a claim for relief that may be made in respect of foreign employment income where a foreign employment election is made, and

(b) Schedule D1 to TCGA 1992 which provides for a claim for relief that may be made in respect of foreign gains (a foreign gain claim).

(8) Sections 845C to 845E set out some income tax consequences of a foreign income claim, a foreign employment election or a foreign gain claim.

(9) See also section 1K of TCGA 1992, which provides for the loss of an individual’s annual exempt amount for capital gains tax where a foreign income claim, a foreign employment election or a foreign gain claim is made.

(10) For the purposes of this section—

(a) “return” means a return under section 8 of TMA 1970 (personal return),

(b) references to a claim being included in a return include a claim being so included as a result of an amendment of the return, and

(c) subsections (5) to (7) of section 118 of TMA 1970 (loss of tax brought about carelessly or deliberately) apply for the purposes of this section as they apply for the purposes of that Act.

845B Qualifying new residents

(1) For the purposes of this Chapter, an individual is a qualifying new resident for a tax year if—

(a) the individual is UK resident for that tax year,

(b) the individual is not disqualified for that tax year, and

(c) for each of the 10 tax years before that tax year, the individual was not UK resident.

(2) An individual is also a qualifying new resident for a tax year if—

(a) the individual is UK resident for that tax year,

(b) the individual is not disqualified for that tax year, and

(c) that tax year is one of the next three tax years after a qualifying tax year in relation to the individual.

(3) A tax year is a qualifying tax year in relation to an individual if—

(a) the individual was a qualifying new resident for that tax year as a result of subsection (1),

(b) the individual would have been a qualifying new resident for that tax year as a result of that subsection, but was not only as a result of the individual being disqualified for that tax year, or

(c) the tax year—

(i) is the tax year 2022-23, 2023-24 or 2024-25, and

(ii) is a tax year to which paragraph (a) or (b) would have applied in relation to the individual had this section had effect for that tax year.

(4) An individual is disqualified for a tax year if the individual would, for the purposes of section 41 of the Constitutional Reform and Governance Act 2010, be regarded as—

(a) a member of the House of Commons for any part of that tax year, or

(b) a member of the House of Lords for any part of that tax year.

845C Effect of claim, foreign employment election or foreign gain claim on losses

(1) Subsection (2) applies where—

(a) an individual who carries on a relevant business wholly outside the United Kingdom makes a foreign income claim, a foreign employment election or a foreign gain claim for a tax year,

(b) the individual has a loss for that tax year from the relevant business, and

(c) the profits (if there were any) of the business would be qualifying foreign income for that year.

(2) No relief for that loss is available in the tax year for which the claim or election is made or in any other tax year.

(3) In this section “relevant business” means—

(a) a trade, profession or vocation, or

(b) a property business.

845D Effect of claim, foreign employment election or foreign gain claim: costs of dwelling-related loan

(1) This section applies where an individual—

(a) has a relievable amount for a tax year in respect of an overseas property business for the purposes of section 274A (reduction for individuals: entitlement), and

(b) makes a foreign income claim, a foreign employment election or a foreign gain claim for the tax year.

(2) The individual is not entitled to relief under section 274A for that tax year in respect of that relievable amount.

(3) For the purposes of section 274A, the individual’s brought-forward amount for the following tax year in respect of the overseas property business is nil.

845E Effect of claim, foreign employment election or foreign gain claim on personal allowance etc

Where an individual makes a foreign income claim, a foreign employment election or a foreign gain claim for a tax year, the individual is not entitled, for that year, to—

(a) any allowance under Chapter 2 of Part 3 of ITA 2007 (personal allowance and blind person's allowance),

(b) any tax reduction under Chapter 3 of that Part (tax reductions for married couples and civil partners),

(c) any tax reduction under Chapter 3A of that Part (transferable tax allowance for married couples and civil partners), or

(d) any relief under section 457 or 458 of ITA 2007 (payments for life insurance etc).

845F Effect of claim on relief for contributions to registered pension schemes

(1) Subsection (2) applies where—

(a) an individual makes a foreign income claim for a tax year,

(b) the individual is entitled to relief under section 188 of FA 2004 (relief for contributions) for that tax year, and

(c) the maximum amount of relief to which the individual is entitled under that section for that tax year is greater than the basic amount within the meaning of section 190(4) of that Act.

(2) The maximum amount of relief to which the individual is entitled under section 188 of that Act for that tax year is to be reduced by the lesser of—

(a) the relevant amount, and

(b) the amount that would reduce the maximum amount of relief to the basic amount.

(3) The “relevant amount” is the amount of the relief to which the individual is entitled under section 845A(2) of this Act as a result of making the foreign income claim, so far as that amount reflects relevant qualifying foreign income.

(4) An amount of qualifying foreign income is “relevant qualifying foreign income” if the income is relevant UK earnings within the meaning of section 189(2) of FA 2004.

845G Foreign income relief ignored for purposes of determining adjusted net income

(1) Subsection (2) applies for the purpose of determining the adjusted net income under section 58 of ITA 2007 of an individual for a tax year for which the individual has made a foreign income claim.

(2) The adjusted net income is to be determined as if the relief allowed by the claim had not been deducted in calculating the individual's net income for the tax year.

845H Qualifying foreign income

Income is qualifying foreign income if it—

(a) falls within a description set out in the following table, and

(b) is not disqualified income (see section 845I).

No.	Description
1	Profits of a trade carried on wholly outside the United Kingdom (see Chapter 2 of Part 2).
2	A UK resident partner’s share of the profits of a trade carried on by the firm wholly outside the United Kingdom.
3	Profits of an overseas property business.
4	Adjustment income (within the meaning of Chapter 17 of Part 2) in respect of a trade carried on wholly outside the United Kingdom (see that Chapter).
5	Income chargeable under Chapter 2 of Part 4 (interest) that arises from a source outside the United Kingdom.
6	Income chargeable under Chapter 4 of Part 4 (dividends from non-UK resident companies).
7	Income chargeable under Chapter 7 of Part 4 (purchase life annuity payments) that arises from a source outside the United Kingdom.
8	Income chargeable under Chapter 8 of Part 4 (profits from deeply discounted securities) that arises from a source outside the United Kingdom.
9	Income chargeable under section 579 (royalties and other incored.me from intellectual property) that arises from a source outside the United Kingdom.
10	Income chargeable under Chapter 3 of Part 5 (films and sound recordings: non-trading businesses) that arises from a source outside the United Kingdom.
11	Income chargeable under Chapter 4 of Part 5 (certain telecommunication rights: non-trading income) that arises from a source outside the United Kingdom.
12	Income that arises from a source outside the United Kingdom and that is treated as arising to an individual under section 624 or 629 (income arising under settlement attributed to settlor).
13	So much of any amount of income treated as arising to an individual under section 633 (capital sums paid to settlor by trustees of settlement) for the tax year as falls within the foreign amount of income available up to the end of the tax year.
	The foreign amount of income available up to the end of a tax year is the amount that would be determined, in accordance with sections 635 to 637 (amount of available income), as the amount of income available up to the end of the tax year if all income arising under the settlement from a source in the United Kingdom were ignored.
14	Income treated as arising to an individual under section 643A (benefits paid out of protected income).
15	Income chargeable under section 649 (estate income) that arises from a source outside the United Kingdom.
16	Income chargeable under Chapter 7 of Part 5 (annual payments not otherwise charged) that arises from a source outside the United Kingdom.
17	Income chargeable under Chapter 8 of Part 5 (income not otherwise charged) that arises from a source outside the United Kingdom.
18	Accrued income profits (within the meaning of Part 12 of ITA 2007) made by an individual as a result of a transfer of securities if income from the securities would be qualifying foreign income.
19	Income treated as arising under regulation 17 of the Offshore Funds (Tax) Regulations 2009 (offshore income gains).
20	Income that is treated as arising to an individual under section 721, 728 or 732 of ITA 2007 (transfer of assets abroad: deemed income) and that is “foreign” for the purposes of (respectively) section 726, 730 or 735 of that Act.
21	Pension income that arises from a source outside the United Kingdom (see Part 9 of ITEPA 2003).
22	A benefit to which section 678 of ITEPA 2003 applies (foreign social security benefits).
23	The foreign proportion (see paragraph 46 of Schedule 2 to FA 2022) of income arising as a result of the payment of interest, or the making of a distribution or qualified distribution (within the meaning of paragraph 45(5) of that Schedule), by a QAHC (within the meaning of that Schedule).

845I Disqualified income

Income is disqualified income if—

(a) it is income of a settlement (within the meaning of Chapter 5 of Part 5) arising in the tax year 2024-25 or an earlier tax year that is treated as arising in tax year 2025-26 or a later year as a result of section 648(3) to (5),

(b) it is income arising from a security treated as situated in the United Kingdom as a result of section 138ZB of TCGA 1992 (share exchanges involving non-UK incorporated close companies),

(c) it is income chargeable to income tax as a result of section 809AZB of ITA 2007 (transferred income streams),

(d) it is performance income (see section 845J),

(e) it is income from a pension to which section 629 of ITEPA 2003 applies (pre-1973 pensions paid under the Overseas Pensions Act 1973), or

(f) it is a payment made to or in respect of—

(i) a relieved member of a relevant non-UK scheme (within the meaning of Schedule 34 to FA 2004), or

(ii) a transfer member of such a scheme,

to which the member payment provisions (within the meaning of that Schedule) apply.

845J Performance income

(1) Performance income is any income chargeable to income tax (however that charge arises) that results, directly or indirectly, from the performance of a relevant activity by a performer (whether performed in the United Kingdom or not).

(2) “Performer” means any individual who gives performances of entertainment or sport.

(3) For the purposes of this section “performances of entertainment or sport” includes any activity of a physical kind performed by an individual (alone or with others) which is or may be made available to the public or any section of the public, whether for payment or not.

(4) The following are “relevant activities”—

(a) the giving of a performance of entertainment or sport;

(b) the participation of the performer in any sound or video recording;

(c) any activity in connection with a commercial occasion or event (including the appearance of the performer in connection with the occasion or event).

(5) The reference to a commercial occasion or event includes any description of occasion or event—

(a) for which any person might receive or become entitled, as a result of anything done by the performer, to receive anything by way of cash or any other form of property; or

(b) which is designed to promote commercial sales or activity by advertising, the endorsement of goods or services, sponsorship, or other promotional means of any kind.”

(2) In ITA 2007—

(a) in section 24 (reliefs deductible at Step 2), in subsection (1)(a)—

(i) at the end insert—

• “section 845A of ITTOIA 2005 (claim for relief for qualifying new residents), and”, and

(ii) at the end of the entry for section 193(4) of FA 2004, omit the “and”,

(b) in section 34 (personal allowance and blind person’s allowance) for subsection (3) substitute—

“(3) See also—

(a) section 809G, in relation to tax years before 2025-26 where a claim for the remittance basis to apply is made, and

(b) section 845E of ITTIOA 2005, in relation to tax years from 2025-26 where a foreign income claim, a foreign employment election or a foreign gain claim is made.

Those sections provide that where an individual makes such a claim or election for a tax year, the individual is not entitled to any allowance under this Chapter for that tax year.”,

(c) in section 55A (transferable tax allowance for married couples and civil partners) for subsection (3) substitute—

“(3) See also—

(a) section 809G, in relation to tax years before 2025-26 where a claim for the remittance basis to apply is made, and

(b) section 845E of ITTIOA 2005, in relation to tax years from 2025-26 where a foreign income claim, a foreign employment election or a foreign gain claim is made.

Those sections provide that where an individual makes such a claim or election for a tax year, the individual is not entitled to any tax reduction under this Chapter for that tax year.”,

(d) in section 460 (residence of claimants for relief under section 457 or 458) for subsection (4) substitute—

“(4) See also—

(a) section 809G, in relation to tax years before 2025-26 where a claim for the remittance basis to apply is made, and

(b) section 845E of ITTOIA 2005, in relation to tax years from 2025-26 where a foreign income claim, a foreign employment election or a foreign gain claim is made.

Those sections provide that where an individual makes such a claim or election for a tax year, the individual is not entitled to any relief under section 457 or 458 for that tax year.”,

(e) in section 809EZA (disguised investment management fees: charge to income tax)—

(i) in subsection (2A), for paragraphs (d) and (e) substitute—

“(d) the individual makes a foreign income claim for the relevant tax year.”, and

(ii) in subsection (2C), for “before the end of the period of non-residence” substitute “in any period—

(a) ending immediately before a qualifying tax year in relation to the individual (within the meaning of section 845B(3) of ITTOIA (qualifying new residents)), and

(b) that consists only of tax years for which the individual is not UK resident.”, and

(f) in section 989 (the definitions), at the appropriate places insert—

• ““foreign income claim” means a claim under section 845A of ITTOIA 2005”;

• ““qualifying new resident” has the meaning it has in Chapter 5 of Part 8 of ITTOIA 2005 (see section 845B of that Act).”

(3) In paragraph 46 of Schedule 2 to FA 2022 (qualifying asset holding companies)—

(a) in the heading for “applies” substitute “applied or who makes a foreign income claim”,

(b) in sub-paragraph (1)—

(i) in the words before paragraph (a), for “This paragraph applies” substitute “Sub-paragraphs (2) and (3) apply”, and

(ii) in paragraph (a), for “applies” substitute “applied”, and

(c) after sub-paragraph (6) insert—

“(6A) Sub-paragraphs (4) to (6) also apply for the purposes of item 22 in the table in section 845H of ITTOIA 2005 (qualifying foreign income for the purposes of foreign income claim).”

(4) The amendments made by this section have effect for the tax year 2025-26 and subsequent tax years.

38 Claim for relief on foreign employment income U.K.

(1) In Part 2 of ITEPA 2003 (employment income: charge to tax), after Chapter 5B insert—

“Chapter 5C U.K. Relief for new residents on foreign employment income

Foreign employment election U.K.

41M Foreign employment election for qualifying new residents

(1) This Chapter applies if an individual is a qualifying new resident for a tax year (the “qualifying year”).

(2) An individual is a qualifying new resident for a tax year for the purposes of this Chapter if the individual is a qualifying new resident for the tax year for the purposes of Chapter 5 of Part 8 of ITTOIA 2005 (see section 845B of that Act).

(3) The individual may make an election for the qualifying year under this section (“a foreign employment election”).

(4) Section 41P makes provision about a claim for relief—

(a) which an individual can make for the qualifying year or any subsequent tax year, where the individual has made a foreign employment election, and

(b) which entitles the individual to relief in that year calculated by reference to employment income that is in respect of the qualifying year.

(5) Sections 41Q (amount of relief available) and 41R (limit on relief) set out how to determine the amount of relief to which the individual is entitled.

(6) See also—

(a) sections 845C to 845E of ITTOIA 2005, which set out some income tax consequences of a foreign employment election, and

(b) section 1K of TCGA 1992, which provides for the loss of the individual’s annual exempt amount for capital gains tax where a foreign employment election is made.

(7) A foreign employment election must be made in a return.

(8) A foreign employment election for the qualifying year must be made before the end of the period of 12 months beginning with 31 January after the end of the qualifying year.

(9) A foreign employment election may not be made as a consequential claim (within the meaning of section 43C(5) of TMA 1970) if the circumstances which give rise to the consequential claim result from a loss of tax brought about carelessly or deliberately by the individual or a person acting on the individual’s behalf.

(10) For the purposes of this Chapter—

(a) “return” means a return under section 8 of TMA 1970 (personal return),

(b) references to a claim or election being included in a return include a claim or election being so included as a result of an amendment of the return, and

(c) subsections (5) to (7) of section 118 of TMA 1970 (loss of tax brought about carelessly or deliberately) apply as they apply for the purposes of that Act.

Key definitions U.K.

41N Key definitions

(1) This section sets out some definitions that apply for the purposes of this Chapter.

(2) “Qualifying employment income” means—

(a) qualifying general earnings,

(b) qualifying third party income, and

(c) qualifying securities income.

(3) “Qualifying foreign employment income” means—

(a) qualifying foreign general earnings,

(b) qualifying foreign third party income, and

(c) qualifying foreign securities income.

(4) Section 41T defines what it means—

(a) for general earnings to be “qualifying general earnings”, and

(b) for qualifying general earnings to be “qualifying foreign general earnings”.

(5) Section 41U defines what it means—

(a) for third party income to be “qualifying third party income”, and

(b) for qualifying third party income to be “qualifying foreign third party income”.

(6) Section 41V defines what it means—

(a) for securities income to be “qualifying securities income”, and

(b) for qualifying securities income to be “qualifying foreign securities income”.

Claim for relief U.K.

41P Claim for relief for qualifying new residents

(1) Where an individual has made a foreign employment election, the individual may make a claim for relief for the qualifying year or any subsequent tax year (“a foreign employment relief claim”).

(2) Where an individual makes a foreign employment relief claim for a tax year, the individual is entitled to relief that is equal to so much of the net taxable employment income for that year as—

(a) reflects qualifying foreign employment income (see section 41Q), and

(b) is identified as such in the claim.

(3) But subsection (2) only applies to the extent the total amount of the relief given does not exceed the limit (see section 41R).

(4) The relief is given by deducting the amount of the relief in calculating the individual's net income for the tax year for which the claim is made (see Step 2 of the calculation in section 23 of ITA 2007).

(5) A foreign employment relief claim must be made in a return.

(6) A foreign employment relief claim for a tax year must be made before the end of the period of 12 months beginning with 31 January after the end of that tax year.

(7) A foreign employment relief claim may not be made as a consequential claim (within the meaning of section 43C(5) of TMA 1970) if the circumstances which give rise to the consequential claim result from a loss of tax brought about carelessly or deliberately by the individual or a person acting on the individual’s behalf.

(8) For the purposes of this Chapter “net taxable employment income”, in relation to a tax year, means the employment income on which the individual is charged to tax for the tax year (see section 9(1)).

41Q Amount of relief available

(1) For the purposes of section 41P(2), the amount of net taxable employment income for a tax year that “reflects” qualifying foreign employment income is the total of—

(a) the total of the amount of the net taxable earnings from each employment in the tax year that reflects qualifying foreign general earnings (see subsections (2) to (5)), and

(b) the total of the amount of the net taxable specific income from each employment for the tax year that reflects qualifying foreign third party income or qualifying foreign securities income (see subsection (6)).

(2) The amount of the net taxable earnings from an employment in a tax year that “reflects” qualifying foreign general earnings is—

(a) the amount of the taxable earnings from the employment in the tax year that are qualifying foreign general earnings, minus

(b) the amount of the qualifying deductions.

(3) If the amount calculated under subsection (2) is nil or a negative amount, then none of the net taxable earnings from the employment in the tax year reflect qualifying foreign general earnings.

(4) If the foreign employment relief claim is for the qualifying year, the amount of the qualifying deductions is the proportion of the total deductions that is the same as the proportion of the claim year taxable earnings that are qualifying foreign general earnings.

(5) If the foreign employment relief claim is for a subsequent tax year, the amount of the qualifying deductions is the amount resulting from the following steps—

• Step 1

  Deduct the claim year taxable earnings from the total deductions.

  If the result is nil or a negative amount, there are no qualifying deductions.

• Step 2

  Deduct any other taxable earnings that are not qualifying foreign general earnings.

  If the result is nil or a negative amount, there are no qualifying deductions.

(6) The proportion of the net taxable specific income from an employment for a tax year that “reflects” qualifying foreign third party income or qualifying foreign securities income is the same as the proportion of the taxable specific income for the employment in that year that is qualifying foreign third party income or qualifying foreign securities income.

(7) In this section—

• “claim year taxable earnings” means the taxable earnings from the employment in the tax year that are “for” the year for which the claim is made determined in accordance with section 16 and 17;

• “total deductions” means the total amount of any deductions allowed from the taxable earnings from the employment in the tax year under provisions listed in section 327(3) to (5) (see section 11(1)).

41R Limit on relief

(1) This section sets out how to determine the limit on the amount of relief the individual is entitled to when making a foreign employment relief claim for a year for the purposes of section 41P(3).

(2) The limit is the lesser of—

(a) 30% of the relevant qualifying employment income, and

(b) £300,000.

(3) For the purposes of this section “relevant qualifying employment income” means—

(a) so much of the net taxable employment income for the tax year for which the claim is made as reflects qualifying employment income, and

(b) if the foreign employment relief claim is for a tax year that is subsequent to the qualifying year, so much of any net taxable employment income for any earlier tax year (but not any tax year before the qualifying year) as would reflect qualifying employment income if that earlier year was the year for which the claim was made.

(4) If the foreign employment relief claim is for a tax year that is subsequent to the qualifying year, the limit is reduced by the total of any amounts reflecting qualifying foreign employment income that have previously been relieved under section 41P.

(5) To determine the amounts mentioned in subsection (3)(a) and (b), apply section 41Q, but as if—

(a) the references in that section to qualifying foreign employment income were to qualifying employment income,

(b) the references in that section to qualifying foreign general earnings were to qualifying general earnings, and

(c) the references in that section to qualifying foreign third party income and qualifying foreign securities income were references to qualifying third party income and qualifying securities income.

41S Effect of claim on relief for contributions to registered pension schemes

(1) This section applies where an individual who is an active member of a registered pension scheme for the purposes of section 188 of FA 2004 (relief for contributions) makes a foreign employment relief claim for a tax year.

(2) For the purposes of sections 189(1)(a) and 190 of that Act, references to the amount of the individual’s relevant UK earnings chargeable to income tax for that year are to be read as references to that amount minus the relieved amount.

(3) The “relieved amount” is the amount of the relief to which the individual is entitled under section 41P(2) of this Act as a result of making the foreign employment relief claim.

41T Foreign employment relief ignored for purposes of determining adjusted net income

(1) Subsection (2) applies for the purpose of determining the adjusted net income under section 58 of ITA 2007 of an individual for a tax year for which the individual is entitled to relief under section 41P.

(2) The adjusted net income is to be determined as if the relief had not been deducted in calculating the individual’s net income for the tax year.

Qualifying foreign employment income U.K.

41U Qualifying foreign general earnings

(1) General earnings are “qualifying general earnings” if they are—

(a) “for” the qualifying year determined in accordance with sections 16 and 17,

(b) if the qualifying year is a split year as respects the individual, attributable to the UK part of the year, and

(c) from an employment the duties of which are performed wholly or partly outside the UK during the qualifying year.

(2) Any attribution required for the purposes of subsection (1)(b) is to be done on a just and reasonable basis.

(3) Qualifying general earnings are “qualifying foreign general earnings” if they are neither—

(a) in respect of duties performed in the United Kingdom, nor

(b) from overseas Crown employment subject to United Kingdom tax (see section 41W).

(4) For the purposes of subsection (3), the extent to which qualifying general earnings are in respect of duties performed in the United Kingdom is to be determined on a just and reasonable basis.

41V Qualifying foreign third party income

(1) For the purposes of this Chapter, “third party income” is an amount that counts under Chapter 2 of Part 7A (treatment of relevant step for income tax purposes) as employment income in respect of an employment.

(2) Third party income is “qualifying third party income”—

(a) if it is in respect of an employment the duties of which are performed wholly or partly outside the UK during the qualifying year, and

(b) to the extent that the value of the relevant step that counts as employment income (see section 554Z3) is—

(i) “for” the qualifying year determined in accordance with section 554Z4(2), and

(ii) if the qualifying year is a split year as respects the individual, attributable to the UK part of the year.

(3) Any attribution required for the purposes of subsection (2)(b)(ii) is to be done on a just and reasonable basis.

(4) Qualifying third party income is “qualifying foreign third party income” to the extent that it is not in respect of duties performed in the United Kingdom.

(5) The extent to which qualifying third party income is not in respect of duties performed in the United Kingdom is to be determined on a just and reasonable basis.

41W Qualifying foreign securities income

(1) For the purpose of this Chapter, “securities income” is an amount that counts under Chapters 2 to 5 of Part 7 (employment-related securities etc) as employment income in respect of an employment (the “relevant employment”).

(2) Securities income is “qualifying securities income”—

(a) if the duties of the relevant employment are performed wholly or partly outside the UK during the qualifying year, and

(b) to the extent that it—

(i) accrues during the qualifying year, or

(ii) if the qualifying year is a split year as respects the individual, accrues during the UK part of the year.

(3) To determine when securities income accrues treat an equal amount of the securities income as accruing on each day of the relevant period determined in accordance with section 41G.

(4) But if the proportion of the securities income that would be regarded as qualifying securities income by virtue of subsection (3) is not, having regard to all the circumstances, just and reasonable, the amount of the securities income that is qualifying securities income is such amount as is just and reasonable.

(5) Qualifying securities income is wholly “qualifying foreign securities income” if the duties of the relevant employment are performed wholly outside the United Kingdom.

(6) If some, but not all, of the duties of the relevant employment are performed outside the United Kingdom—

(a) the qualifying securities income is to be apportioned (on a just and reasonable basis) between duties performed in the United Kingdom and duties performed outside the United Kingdom, and

(b) the income apportioned in respect of duties performed outside the United Kingdom is qualifying foreign securities income.

(7) But qualifying securities income from overseas Crown employment subject to United Kingdom tax is not qualifying foreign securities income.

41X Meaning of “overseas Crown employment subject to UK tax”

(1) This section explains what is meant by —

(a) qualifying general earnings “from overseas Crown employment subject to United Kingdom tax” for the purposes of section 41T(3)(b), and

(b) qualifying securities income “from overseas Crown employment subject to United Kingdom tax” for the purposes of section 41V(7).

(2) Qualifying general earnings and qualifying securities income are “from overseas Crown employment” if the earnings or income is from Crown employment (within the meaning of section 28(2)) in respect of duties performed outside the United Kingdom.

(3) Such earnings or income are to be taken as being “subject to United Kingdom tax” unless they fall within any exception contained in an order made under section 28(5) for the purposes of section 27(2).

(4) An order made under section 28(5) may also—

(a) provide for any exceptions mentioned in subsection (3) to not apply for the purposes of this section, and

(b) make exceptions for the purposes of this section.

(5) For the purposes of this section, if securities income is partly from overseas Crown employment subject to United Kingdom tax, a just and reasonable proportion of the securities income is to be taken to be from such employment.

41Y Location of employment duties

(1) Section 38 (period of absence from employment) applies for the purposes of this Chapter as if references to general earnings were to general earnings or third party income.

(2) Section 40(1) and (2) (place of performance of duties on board vessel or aircraft) applies for the purposes of this Chapter.

(3) Duties of an employment performed in the UK sector of the continental shelf in connection with exploration of exploitation activities are to be treated for the purposes of this Chapter as being performed in the United Kingdom.

(4) In subsection (3) “the UK sector of the continental shelf” and “exploration or exploitation activities” have the same meaning as in section 41 (treatment of general earnings from employment in the UK sector of the continental shelf).

Other rules for determining amounts of qualifying foreign employment income U.K.

41Z Artificial arrangements to be disregarded

(1) Any arrangements falling within subsection (2) are to be disregarded for the purposes of determining the extent to which—

(a) general earnings are qualifying general earnings;

(b) third party income is qualifying third party income;

(c) securities income is qualifying securities income;

(2) Arrangements fall within this subsection if the main purpose, or one of the main purposes of the arrangements is to enable an individual to obtain—

(a) relief under this Chapter to which they would not otherwise be entitled, or

(b) relief under this Chapter of a greater amount than that to which they would otherwise be entitled.

(3) In this section “arrangements” includes any agreement, understanding, scheme, transaction or series of transactions (whether or not legally enforceable).

41Z1 Limit on qualifying foreign employment income from associated employments

(1) This section applies if—

(a) the individual has associated employments from or in respect of which there is qualifying employment income, and

(b) the duties of the associated employments are not performed wholly outside the United Kingdom.

(2) There is a limit on how much of the qualifying employment income from or in respect of the associated employments is qualifying foreign employment income.

(3) The limit is the proportion of the qualifying employment income that is reasonable having regard to—

(a) the nature of, and time devoted to, the duties performed outside the United Kingdom, and those performed in the United Kingdom, and

(b) all other relevant circumstances.

(4) In this section “associated employments” means employments with the same employer or with associated employers; and section 24(5) and (6) applies for the purposes of this section.”

(2) In Schedule 8—

(a) Part 1 makes general consequential amendments;

(b) Part 2 makes consequential amendments relating to the operation of PAYE;

(c) Part 3 contains transitional provision.

(3) The amendments made by this section and the provision made by Schedule 8 have effect for the tax year 2025-2026 and subsequent tax years.

39 Claim for relief on foreign gains U.K.

(1) TCGA 1992 is amended as follows.

(2) Before Schedule 1 insert—

Section 1A(2)(za)

“Schedule D1 U.K. Relief for new residents on foreign gains

Claim for relief for qualifying new residents

1 (1) An individual may make a claim for relief for a tax year under this paragraph (a “foreign gain claim”) if the individual is a qualifying new resident for that tax year.

(2) Paragraphs 2, 3 and 4 set out the reliefs that may be obtained by making a foreign gain claim.

(3) A foreign gain claim must be made in a return.

(4) A foreign gain claim in relation to a tax year must be made before the end of the period of 12 months beginning with 31 January after the end of that tax year.

(5) A foreign gain claim may not be made as a consequential claim (within the meaning of section 43C(5) of the Management Act) if the circumstances which give rise to the consequential claim result from a loss of tax brought about carelessly or deliberately by the individual or a person acting on the individual’s behalf.

(6) For the purposes of this paragraph—

(a) “return” means a return under section 8 of the Management Act (personal return),

(b) references to a claim being included in a return include a claim being so included as a result of an amendment of the return, and

(c) subsections (5) to (7) of section 118 of the Management Act (loss of tax brought about carelessly or deliberately) apply as they apply for the purposes of that Act.

Relief for qualifying foreign gains

2 (1) Where an individual makes a foreign gain claim for a tax year, the individual is entitled to relief for each qualifying foreign gain accruing to the individual in that year that is identified in the claim.

(2) The relief is given by deducting an amount equal to the sum of those gains from the total amount of chargeable gains accruing to the individual.

Relief in respect of deemed gains under section 86

3 (1) This paragraph applies if—

(a) an amount of chargeable gains would (but for this paragraph) be treated as accruing to an individual in a tax year under section 86(4) (attribution of gains to settlors of non-resident settlements),

(b) a qualifying foreign gain accrued in that tax year to the trustees of the settlement concerned (or would have done on the assumption in section 86(3)), and

(c) the individual identifies the gain mentioned in paragraph (b) in a foreign gain claim for that tax year.

(2) For the purposes of section 86(1)(e) as it applies to the individual, the following are to be disregarded (in that tax year and in later tax years)—

(a) the gain mentioned in sub-paragraph (1)(b);

(b) any qualifying foreign loss that accrued to the trustees in that tax year (or that would have so accrued on the assumption in section 86(3)).

Relief in respect of deemed gains under sections 87 and 89(2) and Schedule 4C

4 (1) This paragraph applies if—

(a) a settlement is for a tax year—

(i) one to which section 87 or 89(2) applies (attribution of gains to beneficiaries of settlements), or

(ii) a relevant settlement in relation to a Schedule 4C pool, within the meaning of paragraph 8A of Schedule 4C (transfers of value: attribution of gains etc),

(b) a beneficiary of the settlement receives a capital payment from the trustees in that tax year, and

(c) the individual identifies the capital payment in a foreign gain claim for that tax year.

(2) The capital payment is to be disregarded (in that tax year and in later tax years) for the purposes of sections 87, 87A and 89(2) and paragraph 8 of Schedule 4C.

(3) The following apply for the purposes of this paragraph as they apply for the purposes of section 87—

(a) section 87G (which provides for capital payments made to a close member of the settlor’s family to be treated in certain cases as received by the settlor);

(b) section 97 (which makes provision about the construction of “capital payment”, “settlement”, “trustees” and “beneficiary”).

Other effects of claim

5 For other effects of making a foreign gain claim, see—

(a) section 1K(6)(b) (annual exempt amount), which provides that where a foreign gain claim has effect in relation to an individual for a tax year, the individual has no entitlement to an annual exempt amount for that year,

(b) section 16(4) (computation of losses), which provides that where a foreign gain claim has effect in relation to an individual for a tax year, qualifying foreign losses accruing to the individual in that year are not allowable losses, and

(c) sections 845C to 845E of ITTOIA 2005, which set out some income tax consequences of making a foreign gain claim.

Interpretation of Schedule

6 In this Schedule—

• “qualifying foreign asset” means an asset that—

  (a)

  is situated outside the United Kingdom, and

  (b)

  does not derive at least 75% of its value from UK land (see Schedule 1A);

• “qualifying foreign gain” means—

  (a)

  a chargeable gain accruing on the disposal of a qualifying foreign asset,

  (b)

  a chargeable gain treated as accruing as a result of section 3 (gains of non-UK resident close companies attributed to UK residents) where the gain accruing to the non-UK resident close company to which the deemed gain relates accrued on the disposal of a qualifying foreign asset, or

  (c)

  a qualifying QAHC gain,

  but a chargeable gain falling within paragraph (a) or (b) is not a qualifying foreign gain if it is a gain to which paragraph 1(2) of Schedule 1 applies (pre-2025-26 gains subject to the remittance basis);

• “qualifying foreign loss” means a loss accruing on the disposal of an asset that is a qualifying foreign asset;

• “qualifying QAHC gain” means the foreign proportion (see paragraph 46(4) to (6) of Schedule 2 to FA 2022) of a chargeable gain accruing on the disposal of shares in a QAHC (within the meaning of that Schedule) other than a chargeable gain to which paragraph 46(3) of that Schedule applies.”

(3) In section 1A (territorial scope), in subsection (2), before paragraph (a) insert—

“(za) Schedule D1 (relief for new residents on foreign gains),”.

(4) In section 1E (losses deductible only when within scope of tax), in subsection (6), for “Schedule 1 (UK resident individuals not domiciled in the UK)” substitute “paragraph 5 of Schedule D1 (relief for new residents on foreign gains).”

(5) In section 1K (annual exempt amount), in subsection (6)—

(a) the words from “section” to the end become paragraph (a) of that subsection, and

(b) after that paragraph insert “, or

(b) the individual makes a foreign gain claim, a foreign income claim or a foreign employment election for that tax year.”

(6) In section 16 (computation of losses), at the end insert—

“(4) A qualifying foreign loss accruing to an individual in a tax year is not an allowable loss if a foreign gain claim, a foreign income claim or a foreign employment election has effect in relation to the individual for that tax year.

(5) In subsection (4), “qualifying foreign loss” has the same meaning as in Schedule D1 (see paragraph 6 of that Schedule).”

(7) In section 288 (interpretation), in subsection (1) at the appropriate places insert—

• ““foreign employment election” means a claim under section 41M of ITEPA 2003;”;

• ““foreign gain claim” means a claim under paragraph 1 of Schedule D1;”;

• ““foreign income claim” means a claim under section 845A of ITTOIA 2005;”;

• ““qualifying new resident” has the meaning given by section 845B of ITTOIA 2005 (which sets out the circumstances in which an individual will be a qualifying new resident following a period of 10 years of non-residence);”.

(8) In Schedule 1A, in paragraph 1, after “2B(4)(b)” insert “or paragraph 6 of Schedule D1”.

(9) In Schedule 1C (annual exempt amount in cases involving settled property), in paragraph 1(4), for the words from “who” to the end substitute “to whom subsection (6) of that section does not apply.”

(10) In Schedule 2 to FA 2022 (qualifying asset holding companies), in paragraph 46—

(a) in the heading (as amended by section 37(3)(a)), after “income” insert “or gain”, and

(b) in sub-paragraph (6A) (as inserted by section 37(3)(c)), after “claim)” insert “and paragraph (c) of the definition of “qualifying foreign gain” in paragraph 6 of Schedule D1 to TCGA 1992 (foreign gain claims)”.

(11) The amendments made by this section have effect for the tax year 2025-26 and subsequent tax years.

Chapter 2 U.K. Ending the special treatment of individuals not domiciled in United Kingdom

40 Remittance basis not available after tax year 2024-25 U.K.

(1) Amendments made by paragraph 1 of Schedule 9 have the effect that the remittance basis is not available for tax year 2025-26, or for subsequent tax years.

(2) But provisions relating to the remittance of income and gains will continue to have effect in relation to income and gains subject to the remittance basis in previous tax years.

(3) Other provision is made by that Schedule (including provision amending the Income Tax Acts and TCGA 1992)—

(a) in consequence of ending the availability of the remittance basis,

(b) clarifying the circumstances in which amounts are remitted (see paragraph 5), and

(c) in connection with otherwise ending the relevance of domicile to income tax and capital gains tax.

(4) Subject to subsections (5) and (6), the provision made by that Schedule has effect for the tax year 2025-26 and subsequent tax years.

(5) Paragraph 6 of Schedule 9 (relief for amounts remitted again on becoming UK resident) is to be treated as having always had effect.

(6) The amendments made by paragraphs 9 and 10 of Schedule 9 (residence of personal representatives) have effect where the deceased person died on or after 6 April 2025.

41 Temporary repatriation facility U.K.

Schedule 10 makes provision for a “temporary repatriation facility” for individuals who have been subject to the remittance basis.

42 Rebasing of assets U.K.

Schedule 11 makes provision about the rebasing of assets for individuals who have been subject to the remittance basis.

Chapter 3 U.K. Trusts etc

43 Trusts: connected amendments, transitional provision etc U.K.

(1) Schedule 12 amends legislation relating to the taxation of income and gains arising within trusts and similar structures, and in particular—

(a) contains amendments connected with the introduction of relief for qualifying new residents and the abolition of the remittance basis of taxation (see Chapters 1 and 2), and

(b) removes certain protections for foreign-source income and gains that have been available since the tax year 2017-18 while making transitional provision in respect of income that arose in past tax years.

(2) In that Schedule—

• Part 1 amends Chapter 5 of Part 5 of ITTOIA 2005 (settlements: amounts treated as income of settlor or family);

• Part 2 amends Chapter 2 of Part 13 of ITA 2007 (transfer of assets abroad);

• Part 3 amends Chapter 2 of Part 3 of TCGA 1992 (settlements: chargeable gains) and other provisions of TCGA 1992 relating to trusts and similar structures;

• Part 4 contains provision about commencement and transitional provision.

Chapter 4 U.K. Inheritance tax

44 Excluded property: domicile test replaced with long-term residence test U.K.

(1) IHTA 1984 is amended as follows.

(2) In section 6 (excluded property), in subsections (1) and (1A), for “domiciled outside the United Kingdom” substitute “who is not a long-term UK resident”.

(3) After section 6 insert—

“6A “Long-term UK resident”: individuals

(1) For the purposes of this Act, an individual is a “long-term UK resident” at all times in a tax year if they were UK resident for at least 10 of the previous 20 tax years.

(2) But an individual is not a long-term UK resident at any time in a tax year (“the current tax year”) if they were non-UK resident—

(a) for any 10 consecutive tax years during the 19 tax years before the current tax year, or

(b) for at least the required number of consecutive tax years ending with the tax year before the current tax year.

(3) To determine “the required number” for the purposes of subsection (2)(b), take the 20 tax years ending with the last tax year for which the individual was UK resident and find the number of those tax years for which the individual was UK resident (“the number of resident years”).

The required number is the number in the second column of the following table corresponding to the number of resident years.

Number of resident years	Required number
13 or less	3
14	4
15	5
16	6
17	7
18	8
19	9
20	10

(4) In this section, “UK resident” means resident in the United Kingdom and “non-UK resident” means not resident in the United Kingdom.

(5) For the purposes of this section, a question as to whether the individual was UK resident for the tax year 2012-13 or an earlier tax year is to be determined as it would have been determined for income tax purposes for that tax year (and as to later tax years see Schedule 45 to the Finance Act 2013 (statutory residence test)).

(6) See also—

(a) section 6B (which modifies this section in its application to young persons);

(b) sections 267ZC to 267ZE (under which a person may be treated as a long-term UK resident as the result of an election).

6B “Long-term UK resident”: young persons

(1) In the application of section 6A(1) for the purpose of determining whether a young person is a long-term UK resident at any time in a tax year (“the current tax year”), that subsection has effect as if—

(a) for “20” there were substituted the number of whole tax years for which the person was alive before the current tax year, and

(b) for “10” there were substituted half the number mentioned in paragraph (a) (rounded up, if not a whole number, to the next whole number).

(2) In subsection (1), “young person” means an individual who was under the age of 20 immediately before the current tax year.

(3) For the purposes of this Act, an individual is not a long-term UK resident at any time in a tax year if they were under the age of 1 (or were not yet born) immediately before the tax year.

6C “Long-term UK resident”: bodies corporate

For the purposes of this Act, a body corporate is a “long-term UK resident” at all times in a tax year if the body—

(a) is incorporated in the United Kingdom, or

(b) was (if in existence before the beginning of the tax year) within the charge to corporation tax on income at any time during the previous tax year by virtue of section 5(1) of the Corporation Tax Act 2009 (UK resident companies).”

(4) This section comes into force on 6 April 2025.

45 Corresponding change for settled property U.K.

(1) IHTA 1984 is amended as follows.

(2) In section 48 (excluded property)—

(a) in the heading, at the end insert “: reversionary interests and Treasury securities”;

(b) omit subsections (3) to (3F).

(3) After section 48 insert—

“48ZA Excluded property: property situated outside the UK etc

(1) If property comprised in a settlement—

(a) is situated outside the United Kingdom, or

(b) is a holding in an authorised unit trust or a share in an open-ended investment company,

this section applies to the property and section 6(1) and (1A) (general excluded property rule) does not.

(2) If the settlor is alive, the property is excluded property at any time when the settlor is not a long-term UK resident.

(3) If the settlor died on or after 6 April 2025, the property is excluded property if the settlor was not a long-term UK resident immediately before they died.

(4) If the settlor died before 6 April 2025, the property is excluded property if the settlor was not domiciled in the United Kingdom when the property became comprised in the settlement.

(5) Subsections (2) and (3) do not apply at any time to property to which section 49(1) (certain interests in possession) applies if, at that time, the person beneficially entitled to the interest is a long-term UK resident.

(6) Subsections (2) to (4) do not apply to property if—

(a) an individual has been beneficially entitled to an interest in possession in the property—

(i) at any time on or after 6 April 2025 while a long-term UK resident, or

(ii) at any time before that date while domiciled in the United Kingdom, and

(b) the entitlement arose directly or indirectly as a result of a disposition made on or after 5 December 2005 for a consideration in money or money's worth.

(7) For the purposes of subsection (6)—

(a) it is immaterial whether the consideration was given by the individual or by anyone else, and

(b) the cases in which an entitlement arose indirectly as a result of a disposition include any case where the entitlement arose under a will or the law relating to intestacy.

(8) Where the conditions in paragraphs (a) to (d) of section 74A(1) (arrangements involving acquisition of interest in settled property etc) are satisfied, none of subsections (2) to (4) applies at the time when the conditions are first satisfied or at any later time to make the relevant settled property (within the meaning of section 74A) excluded property.

(9) If—

(a) an amount is payable in respect of property (“the existing property”) comprised in a settlement, and

(b) the amount represents an accumulation of income which (once accumulated) becomes comprised in the settlement,

subsection (4) has effect in the case of the amount as if the reference to the time when it became comprised in the settlement were to the time when the existing property became comprised in the settlement.

(10) Subsections (2) to (4) are subject to Schedule A1 (overseas property with value attributable to UK residential property).

(11) The reference in subsection (1) to property comprised in a settlement does not include a reversionary interest in the property (and accordingly this section does not apply to such an interest and section 6(1) does).”

(4) This section comes into force on 6 April 2025.

46 Consequential, connected and transitional provision U.K.

In Schedule 13—

• Part 1 contains amendments to IHTA 1984 and related legislation that are consequential on, connected with or incidental to the new excluded property tests introduced by sections 44 and 45;

• Part 2 contains provision about commencement and transitional provision.