Introduction
From April 2025, the UK is introducing a new system for taxing foreign income and gains.
If you live in the UK and receive income from overseas — whether that’s rental income, dividends, investment gains or employment income — these changes may affect you.
This new system is referred to as the 4-year Foreign Income and Gains (FIG) regime.
It replaces the old remittance basis and works very differently.
Understanding how it works — and whether it applies to you — is important before making any decisions.
🎥 Prefer to watch instead of read? I’ve also recorded a short video explaining how the new 4-year Foreign Income and Gains regime works and who it is designed for.
You can continue reading the full guide below
What Has Changed from April 2025?
From the 2025/26 tax year onwards, individuals who become UK resident may be able to claim relief on certain foreign income and gains for up to four tax years.
This is not automatic.
It must be claimed.
And it only applies if specific conditions are met.
The old remittance basis system is being replaced with this new approach.
Under the new regime:
- Relief is time-limited (up to four years)
- You must qualify based on your residence history
- You must actively claim it
- It comes with consequences that many people overlook
Who Can Potentially Use the 4-Year Regime?
Broadly speaking, the regime is aimed at individuals who:
- Become UK tax resident after a period of living outside the UK
- Have been non-UK resident for a significant number of years before returning
- Receive foreign income or gains after becoming UK resident
One key requirement is that the individual must have been non-UK resident for at least 10 consecutive tax years before becoming UK resident.
If you have been UK resident at any point in the previous 10 tax years, the relief will not be available.
Example
If you left the UK in 2014 and returned in the 2025/26 tax year, you may meet the 10-year non-residence requirement.
But if you were UK resident at any point during those 10 tax years — even for just one year — the 4-year relief would not be available.
This is based on the Statutory Residence Test — not nationality, not where you hold a passport, and not where you “feel” resident.
If you do not meet this condition, the 4-year relief will not apply.
Whether you qualify depends entirely on your UK residence position under the Statutory Residence Test.
What Does “Foreign Income and Gains” Mean?
Foreign income can include:
- Rental income from property outside the UK
- Dividends from overseas companies
- Interest from non-UK bank accounts
- Employment income relating to duties performed overseas
Foreign gains can include:
- Gains on overseas property
- Gains on foreign investments
What matters is where the income arises – not where it is paid or which bank account receives it.
Is Foreign Income Automatically Exempt?
No.
This is one of the biggest misunderstandings.
Foreign income is not automatically exempt from UK tax simply because it arises overseas.
If you are UK resident, the starting position is that your worldwide income is taxable in the UK.
The 4-year regime is a relief from that default position — not the default itself.
If you do not qualify, or if you do not claim, foreign income will usually be taxed in full in the UK.
If you’re unsure how foreign income is normally taxed when you are UK resident, I’ve explained the general rules in How Foreign Income Is Taxed in the UK: A Guide for Residents.
The Relief Is Optional — But Not Always Beneficial
The 4-year regime is optional.
You do not have to claim it.
But claiming it is not always automatically beneficial.
Relief under this regime comes with trade-offs.
In particular, claiming the 4-year Foreign Income and Gains relief can mean giving up certain UK tax allowances.
For some people, that can result in a higher overall UK tax bill than expected.
The relief applies separately for each tax year within the 4-year window.
Importantly, the 4-year period begins from the first tax year in which you become UK resident again — not from the year you decide to claim.
You cannot delay or “save” the four years for later.
Once that 4-year period ends, the normal rules apply again — meaning UK residents are generally taxed on their worldwide income in full.
This is why claiming the relief should never be a default decision.
One of the most important consequences of claiming this relief is the potential loss of UK tax allowances, which I explain in more detail in the next article in this series Claiming Foreign Income Relief? You Could Lose Your Personal Allowance.
When Does This Start?
The new 4-year Foreign Income and Gains regime begins from the 2025/26 tax year.
That is the earliest tax year for which a claim can be made.
It does not apply to earlier years, and it cannot be backdated.
Only foreign income and gains arising from 6 April 2025 onwards can fall within this regime.
Claims must be made through your UK Self Assessment tax return.
It is not automatic, and it is not a simple tick-box — the relevant income must be identified and calculated.
Why This Matters
These changes affect:
- New arrivals to the UK
- Returning UK residents
- Individuals with overseas investments
- People with foreign rental income
- Employees with overseas work or bonuses
Assuming that foreign income is either ignored or automatically protected can lead to unexpected UK tax bills.
Understanding whether you qualify — and whether claiming is sensible — matters.
Who This Is Not For
This regime is not designed for individuals who have been continuously UK resident in recent years.
If you have lived in the UK and been UK tax resident during the previous 10 tax years, the 4-year Foreign Income and Gains relief will not be available to you.
It is aimed at new arrivals and long-term non-residents returning to the UK — not long-standing UK residents with ongoing foreign income.
Final Thought
The new 4-year Foreign Income and Gains regime is a significant change from April 2025.
It is not automatic.
It is not available to everyone.
And it is not always beneficial.
Whether you qualify depends on your residence history.
Whether you should claim depends on your wider tax position — including the allowances you may give up.
Assumptions in this area can be costly.
If you have overseas income or gains and are becoming UK resident — or returning to the UK — it is worth reviewing your position properly before making a claim.
If you would like a structured review of your residence status and foreign income position, you can book a paid initial consultation to understand whether the 4-year regime applies to you and whether claiming it is actually in your best interest.