New FIG Regime for Australian Expats in UK

The UK’s tax system is changing, and it’s big news for Australian expats planning to move there. From 6 April 2025, the new Foreign Income and Gains (FIG) regime will replace the long-established non-domicile tax rules. While this creates exciting opportunities, it also brings unique challenges that Australian expats need to consider.

Whether you’re relocating for a new job, growing your career, or exploring life abroad, understanding the FIG regime is critical to making the most of your move to the UK. In this post, we’ll aim to clarify exactly what you need to know.

What is the FIG Regime?

The FIG regime is a tax framework designed to simplify UK taxation for individuals who are new arrivals. Under this system, qualifying expats can enjoy significant tax relief on their foreign income and gains for up to four years. This includes income earned from investments, property, and employment overseas. Unlike the outgoing non-domicile tax system, the FIG regime is available to anyone who hasn’t been a UK tax resident in the previous ten years, regardless of their long-term intentions to settle in the UK.

Here’s some of the key points regarding the FIG regime:

• Tax-Free Foreign Income: During the first four years of UK tax residence, you won’t pay UK taxes on most foreign income and gains, even if you bring those funds into the UK.
• Simplified Rules: The FIG regime removes complicated requirements like keeping foreign income outside the UK or setting up special overseas accounts.
• Short-Term Focus: After four years, worldwide taxation applies, meaning all your income—whether UK or foreign—is taxed in the UK.

For Australian expats, the FIG regime offers a unique opportunity to manage your finances strategically while enjoying the perks of living in the UK.

Who is Eligible for the FIG Regime?

To qualify for the FIG regime, you need to meet certain criteria:

• Non-UK Residency: You must not have been a UK tax resident for at least ten consecutive years before your arrival.
• New Arrival Status: You can qualify whether you are an Australian professional moving to the UK for the first time or a returning UK-born individual who has lived abroad (such as in Australia) for a decade.
• Four-Year Window: FIG relief is only available for your first four tax years as a UK resident. After that, standard UK tax rules apply.

It’s worth noting that the FIG regime isn’t automatic—you’ll need to elect to use it when filing your UK tax returns each year. This makes proper planning and paperwork essential. It’s important to seek professional tax advice here to ensure that you’re not missing out on opportunities.

Why the FIG Regime Matters for Australian Expats

The FIG regime is particularly appealing to Australian professionals for several reasons:

• Career Growth: Many Australians move to the UK for job opportunities in sectors like finance, law, healthcare, and education. The FIG regime allows you to keep more of your overseas income during your initial years, giving you financial flexibility as you settle into life in the UK.
• Tax Savings: If you have income from property, investments, or businesses in Australia, the FIG regime lets you bring these earnings to the UK without extra tax burdens for four years.
• Business Opportunities: Australian entrepreneurs or investors can take advantage of the tax-free window to realize gains on overseas assets or dividends from Australian businesses.

Let’s break this down with a quick example:

• Emma’s Scenario: Emma is a 34-year-old marketing executive from Sydney who moves to London in April 2025. She earns £80,000 annually in the UK but also has a rental property in Melbourne generating AU$20,000 (£10,500) per year. Under the FIG regime, Emma can bring her rental income into the UK without paying UK tax on it for her first four years, significantly boosting her disposable income. Whilst in the UK, her tax implications may be nil, Emma would still need to consider the Australian tax implications, and any options to reduce the tax liability on her income in Australia.

Key Considerations After the Four-Year Window

While the FIG regime offers benefits in the short term, it’s important to plan for what happens once the four years are up. After this period, Australian expats will be taxed on their worldwide income under standard UK tax rules. This means any foreign income or gains—including those from property, investments, or businesses in Australia—will be subject to UK taxation. It’s also important to seek advice and consider how your negative gearing benefits in Australia would apply in the UK.

Here’s what you need to consider:

• Long-Term Financial Planning: If you’re planning to stay in the UK beyond four years, it’s crucial to understand how your foreign income will be taxed. This may require restructuring your finances or seeking professional advice.
• Inheritance Tax Implications: After living in the UK for 15 out of 20 years, you’ll be deemed domiciled for inheritance tax purposes. This could have significant implications for your global assets.
• Employment Considerations: If you’re earning in both the UK and Australia, tax equalisation policies or double tax treaties may come into play. Understanding these rules can help you avoid double taxation.

How to Claim FIG Relief

Claiming FIG relief is relatively straightforward but requires careful attention to detail. As an Australian expat, here’s what you need to do:

1. File a UK Tax Return: You must submit a self-assessment tax return for each year you wish to claim FIG relief.
2. Elect for FIG Relief: Indicate on your tax return that you are opting into the FIG regime.
3. Keep Records: Maintain clear records of your foreign income, gains, and any tax paid in Australia. This is particularly important for avoiding errors or penalties.
4. Assess Annually: Each year, evaluate whether claiming FIG relief is still beneficial, as it results in the loss of UK personal tax allowances (currently £12,570 for income tax and £6,000 for capital gains).

Tips for Australian Expats Moving to the UK

The FIG regime creates an exciting opportunity, but thoughtful planning is essential to make the most of it. Here are some tips to guide you:

• Plan Your Move Strategically: If possible, time your relocation to maximize your eligibility for FIG relief. For example, arriving at the start of the tax year (after 6 April) can help you claim the full four years.
• Keep Assets Separate: If you’re planning to remit foreign income or gains to the UK, consider setting up dedicated accounts to simplify tracking and compliance.
• Understand Double Tax Agreements: The UK-Australia double tax treaty can help reduce the risk of being taxed twice on the same income. Be sure to familiarize yourself with its provisions.
• Seek Professional Advice: The FIG regime is complex, and your unique circumstances may require tailored strategies. Consulting with a tax advisor familiar with UK-Australia cross-border tax issues can save you money and headaches.

FAQs About the FIG Regime

What happens if I leave the UK during the four-year period?
If you leave the UK temporarily, you can still claim FIG relief for any remaining years when you return. However, you won’t receive additional years beyond the original four-year window.

Does the FIG regime apply to all types of income?
Most foreign income and gains are eligible, but there are exceptions, such as certain pensions and offshore investment bonds.

Can I claim FIG relief if I’m a dual citizen of Australia and the UK?
Yes, as long as you meet the eligibility criteria, including the requirement of not being a UK tax resident for the previous ten years.

What are the tax rates after the FIG regime ends?
After four years, UK tax rates will apply to your worldwide income. This includes a basic rate of 20%, a higher rate of 40%, and an additional rate of 45% for high earners.

What if I already live in the UK before April 2025?
Transitional rules may apply to you, but you won’t qualify for the FIG regime unless you meet the non-UK residency requirement.

Is the FIG regime guaranteed to remain in place?
There is a possibility of policy changes, especially with upcoming UK elections. Staying updated on legislative developments is key.

Conclusion

The FIG regime is a game-changer for Australian expats moving to the UK, offering substantial tax savings and simplified rules during your first four years of residence. However, like any tax framework, it requires careful planning and a clear understanding of your financial situation. By leveraging the benefits of the FIG regime and seeking professional advice where needed, you can make your move to the UK both financially rewarding and professionally fulfilling.

Ally Wealth Management is the trusted ally in finance for Australians at home and across the globe. As both Australian expats and residents, the founders of Ally have a unique understanding of the common personal financial challenges faced.

Book your complimentary appointment with our team at Ally Wealth Management to discuss how we can help you to achieve your financial goals.

Ally Wealth Management Pty Ltd is a Corporate Authorised Representative of Sentry Advice Pty Ltd ABN 77 103 642 888. Sentry Advice holds an Australian Financial Services Licence (AFSL) No. 227 748.

General Advice Warning: The information contained herein is of a general nature only and does not constitute personal advice. You should not act on any recommendation without considering your personal needs, circumstances, and objectives. We recommend you obtain professional financial advice specific to your circumstances.