Foreign Income as a UK Resident: What Changes in 2026?

If you have foreign income as a UK resident, the way that income is taxed is changing. From 2025/26 onwards, the removal of the remittance basis and the introduction of new rules mean that overseas income and gains may be taxed differently than in previous years.

For individuals with international income, understanding how foreign income UK resident rules apply is essential. Small misunderstandings around residence, reporting or reliefs can lead to unexpected tax exposure, particularly as the new framework beds in through 2026.

How Foreign Income Is Taxed for a UK Resident

As a starting point, UK tax is based primarily on residence. In general, UK residents are taxed on their worldwide income and gains. HMRC’s overview sets out how foreign income is taxed and what needs to be reported.  

From 6 April 2025, the UK moved to an “arising basis” approach for UK residents, and the old remittance basis rules apply only to earlier tax years (up to and including 2024/25).  

What Counts as Foreign Income for UK Residents?

Foreign income can arise in many forms. Common examples include:

• Overseas employment income
• Rental income from foreign property
• Dividends from overseas companies
• Interest on foreign bank accounts
• Profits from an overseas business
• Foreign capital gains

The category matters because reporting requirements and reliefs can differ depending on the type of income and the country it arises in. HMRC sets out the broad position and what you may need to report.  

Foreign Income UK Resident: The End of the Remittance Basis

For tax years up to 5 April 2025, some UK residents were able to claim the remittance basis, meaning foreign income and gains were taxed in the UK only if they were remitted (brought to, used in, or enjoyed in the UK). HMRC’s helpsheet explains how the remittance basis operated and what counts as a remittance.  

This is still relevant for:

• historic tax years where the remittance basis was claimed, and
• ensuring historic remittances were treated correctly on returns for those years.  

Transitional Rules: Moving From the Remittance Basis to the Arising Basis

From 6 April 2025, the remittance basis no longer applies for income tax and capital gains tax. Individuals who previously relied on it are instead taxed on the arising basis, meaning worldwide income and gains are taxable in the UK as they arise.

However, the transition does not automatically crystallise historic foreign income or gains. Transitional provisions apply in several areas.

Foreign income and gains arising in tax years up to 2024/25 under the remittance basis remain outside UK tax unless and until they are remitted to the UK (subject to transitional provisions). As a result, historic segregation between foreign income, foreign gains and clean capital remains important.

Transitional measures may also permit certain historic foreign income and gains to be remitted during a limited window under specific rules. Eligibility and tax treatment depend on the legislation in force and individual circumstances.

In some cases, rebasing provisions may apply to foreign assets where the remittance basis was previously claimed. This can affect how future capital gains are calculated.

Where offshore trusts were established under the previous regime, their ongoing tax treatment requires review in light of the new framework.

Domicile Still Matters

Although “non-dom” status no longer determines whether foreign income is taxed on the arising or remittance basis from 6 April 2025, domicile remains relevant in other areas of UK taxation.

In particular, domicile and deemed domicile status continue to matter for:

• Inheritance Tax (IHT), which remains influenced by domicile rather than residence alone
• The treatment of certain offshore trusts
• The application of some transitional provisions linked to historic remittance basis claims

Accordingly, while the income tax regime for foreign income is now residence-based, domicile continues to play a role in broader UK tax planning.

Non-Dom Reforms and the Direction of Travel

From 6 April 2025, the tax system changed so that the previous remittance basis regime is replaced by a new residence-based approach to foreign income and gains. HMRC’s guidance and manuals reflect this shift, and LITRG summarises the same change from the taxpayer perspective.  

The practical point for UK residents with overseas income is that “non-dom” in the historic sense is no longer the determining factor for whether foreign income is taxed on an arising or remittance basis going forward.  

The Foreign Income and Gains Regime

From 6 April 2025, a new Foreign Income and Gains (FIG) regime applies for people who meet the conditions.

At a high level:

• It is aimed at qualifying new UK residents.  
• HMRC states it is available to individuals who come to the UK after at least 10 consecutive tax years of non-UK residence, and it applies to foreign income and gains accruing in their first 4 years of UK residence, provided a claim is made.  
• Unlike the old remittance basis, it is not framed around whether funds are brought into the UK; it operates as a relief based on residence/eligibility criteria.  

HMRC provides a checker on whether you can claim the 4-year FIG regime.  

What Changes in 2026 for UK Residents With Overseas Income

The key legislative change took effect from 6 April 2025 (tax year 2025/26), so 2026 is best treated as a “check you’re applying the right rules” year rather than “the year the rules begin”.  

In practical terms, by 2026 you may need to confirm:

• Whether you’re taxed on the arising basis (the general position for UK residents from 2025/26 onwards).  
• Whether you are eligible to claim the FIG regime, and for which tax years.  
• Whether your historic returns (up to 2024/25) involved the remittance basis, and whether remittances were treated correctly for those years.  

Double Taxation Relief and Overseas Tax Paid

If the same income is taxed overseas and in the UK, relief may be available so that tax is not paid twice.

This is typically through double taxation relief (often a foreign tax credit mechanism), which depends on:

• the nature of the income,
• the overseas tax suffered, and
• the relevant double taxation agreement and UK rules on credit relief.

LITRG explains the general position for UK residents with foreign income and gains and how reliefs may apply.  

Common Issues HMRC Sees With Foreign Income

The problems that most often create exposure are usually practical:

• Overseas income not reported on a UK return where it is taxable in the UK
• Confusion (for earlier years) over what counts as a remittance and when it must be reported  
• Missing evidence of overseas tax suffered when claiming relief
• Inconsistent exchange rate treatment and record keeping

HMRC’s overview makes it clear that foreign income may need to be reported and taxed depending on residence and circumstances.  

What UK Residents With Foreign Income Should Review Now

A sensible review should cover:

• UK residence status and what basis applies for the relevant tax year  
• A full list of overseas income and gains (by country and type)
• Whether the remittance basis was claimed for years up to 2024/25, and whether any remittances were correctly identified  
• Whether you may qualify for the FIG regime from 2025/26 onwards  
• Evidence for any overseas tax paid (to support double taxation relief claims)

How Nichols & Co Support UK Residents With Overseas Income

Nichols & Co support UK residents with overseas income and international reporting obligations, including:

• Reviewing foreign income and gains and how they should be reported in the UK
• Assessing whether the FIG regime may apply and supporting claims where appropriate  
• Advising on historic remittance basis years and compliance where relevant  
• Supporting double taxation relief claims and record keeping

The emphasis is on accurate reporting, correct relief claims, and a position that stands up to HMRC scrutiny.

If you are UK resident with overseas income, or you have previously relied on the remittance basis, a review can clarify which rules apply to you now and what needs to be reported, get in touch with a member of our team.

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This article is for general information only and does not constitute tax advice. Tax treatment depends on individual circumstances and may change.