The abolition of the UK 'non-dom' regime from 6 April 2025 has fundamentally reshaped the tax landscape for US individuals considering relocating to the UK. US individuals considering relocation (and those who are already UK resident) need to understand the implications of the new UK tax rules, including the new Foreign Income and Gains (FIG) regime, while maintaining compliance with US tax obligations.
From our experience, comprehensive planning undertaken well before arrival in the UK is key to successfully navigating the interaction of the UK and US tax rules.
FIG regime planning
The FIG regime offers newcomers to the UK a four-year period during which foreign income and gains can remain outside the UK tax net. For Americans, this creates an unusual dynamic – non-UK income and gains will be taxable in the US (due to citizenship-based taxation) but potentially exempt from UK tax during the FIG period.
For US clients we help identify which income and gains qualify and how to structure their affairs before UK arrival to maximise the benefit of the four-year FIG window. Advance planning is critical as certain strategies become unavailable or less effective once UK residence begins.
Pre-arrival planning
Key pre-arrival considerations for relocating clients, to address the unique challenges of dual US-UK tax exposure, include:
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Trust planning – reviewing existing trust structures and/or establishing new trusts before commencing UK residence to maximise the possibility of favourable UK tax treatment under the US/UK Tax Treaties. If favourable treaty relief is available, trust income and gains could potentially remain outside the UK tax net even after the four-year FIG period expires and, in some cases, the trust assets themselves could remain outside the scope of UK inheritance tax (IHT). We co-ordinate with US advisers to ensure structures satisfy both US and UK objectives and navigate the complex interaction between the US grantor trust rules and UK trust taxation.
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Asset restructuring – including, reorganising investments to concentrate growth assets in structures that benefit from the FIG regime, while positioning income-producing assets appropriately. In particular, restructuring LLC interests before UK residence to minimise ongoing UK tax exposure while maintaining US tax efficiency and commercial flexibility will be key for some clients. This might involve converting LLCs to corporations, restructuring ownership through trusts established before arrival, or implementing other strategies tailored to the specific business and family circumstances. In all cases, we work with US advisers to ensure that any restructuring proposed for UK tax purposes is efficient from a US tax perspective.
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Retirement account planning – clients with US retirement accounts (401(k)s, IRAs, Roth IRAs) need to understand how distributions during UK residence can trigger unexpected tax consequences. While the US/UK Tax Treaty may provide some relief, our experience shows that planning before arrival provides the best chance of successfully navigating these charges.
Strategic timing
Depending on a client's circumstances there may be an optimum time to commence UK tax residence. The UK's Statutory Residence Test provides some flexibility, and we help clients plan strategically around the tax year boundaries (6 April in the UK versus 1 January in the US) to optimise tax outcomes. Ensuring a client meets the conditions for 'split-year' treatment (meaning they are treated as UK tax resident for only part of the UK tax year) can provide additional planning opportunities for realising gains or receiving income before full UK tax exposure begins. This requires careful management of UK presence and ties, to avoid inadvertently triggering earlier UK residence.
Integrated estate planning
Once an individual has been UK resident for 10 out of the 20 previous tax years, they will be considered a 'long term UK resident' and the starting point is that they will be subject to UK IHT on their worldwide estate; for US citizens who are subject to US estate tax on their worldwide estate this results in potential double taxation.
US estate planning techniques (such as spousal lifetime access trusts or generation-skipping trusts) may require modification to work effectively for long term UK residents. We review US clients' estate plans before UK arrival to ensure any planning they have put in place remains effective in the new tax environment and determine whether they can benefit from favourable provisions under the US/UK Estate Tax Treaty.
For US individuals already UK resident, we advise on optimising existing structures in light of the new regime, reviewing trust arrangements for continued effectiveness, ensuring ongoing compliance with both UK and US reporting obligations, and planning for the point when an individual becomes a 'long-term UK resident'.
Our perspective on the new landscape
Through our work with US clients, we have observed that the new regime creates a more level playing field compared to the old 'non-dom' rules. For those planning to relocate, the four-year FIG window provides meaningful planning opportunities when combined with comprehensive pre-arrival structuring. For those already UK resident, the key issue is optimising existing structures and ensuring ongoing compliance with both UK and US obligations.
The complexity of dual US-UK obligations combined with the temporary nature of FIG relief, requires sophisticated advice well before relocation as decisions made before establishing UK residence can have lasting consequences for both UK and US tax efficiency.
How can we help
We provide integrated advice addressing both US and UK tax issues, coordinating with specialist US counsel to ensure cohesive planning across both jurisdictions. Our approach helps clients navigate the complexities of the dual tax systems with confidence.
Whether you are considering relocating to the UK or are already UK resident, we would be pleased to discuss your planning needs and how we can support you in navigating the new regime.
