While many employers and their internationally mobile teams have already finalised their tax strategies for the 2025/26 tax year, the transition to the new Foreign Income and Gains (FIG) regime has left others, especially SMEs, scrambling.
If you are an employer anxious about compliance or an expat employee unsure how to navigate your upcoming Self Assessment, you are not alone. Here are the three critical traps to avoid during the first year of the new rules.
1. "Report then relieve": The exemption is not automatic
Under the old non-dom rules, simply keeping your money outside the UK was often enough to keep it off your tax return. The FIG regime operates completely differently: it is a "report then relieve" system.
You must proactively quantify and declare your eligible foreign wealth on your Self Assessment tax return, actively making a claim for the relief on a source-by-source basis. If you assume the relief is automatic and fail to declare it, you risk losing the exemption entirely and facing an unexpected tax bill on your worldwide income.
2. The tax allowance trade-off
Claiming the FIG exemption comes with a strict mathematical cost: you must voluntarily forfeit your UK Personal Allowance (£12,570 for the 2025/26 tax year) and your Capital Gains Tax annual exempt amount (£3,000).
This means claiming the relief is not always the smart move. If you are an expat with a substantial UK salary but relatively low foreign savings or dividend income, sacrificing your £12,570 tax-free allowance might actually increase your overall tax bill. Never opt in without running a comparative calculation first.
3. The tax holiday will end
The FIG tax holiday is strictly limited to your first four years of UK residence, provided you were non-resident for the 10 consecutive years prior. If you relocated to the UK before the regime launched on 6 April 2025, you are already partway through this window.
Do not make assumptions and wait to assess your position. You need to know exactly when your eligibility expires so you can prepare for the "tax cliff" of moving to the arising basis. Pre-planning now, such as rebasing offshore assets or restructuring investment portfolios, is essential to optimize your taxes once your holiday is over.
4. Act now
Making the wrong call on the FIG regime could cost you thousands in lost allowances or unexpected tax bills.
Whether you are unsure about what to do or are still looking for a competitive bespoke solution for yourself or your employees, send me a message.
I am an experienced global mobility tax professional with over 20 years of experience working in tax in the Big 4, mid tier firms and a US bank. I am a chartered tax adviser with a passion to…
