Four years of relief you may not want

It is relief from UK tax on foreign income and gains for somebody in their first four years of UK residence. The guidance sets three conditions: UK residence under the statutory test, a position within those four years, and at least ten prior years spent non-resident.

You claim it; nothing happens on its own. The FIG regime replaced the remittance basis for arrivals from April 2025.

So the relief rewards a clean break rather than a recent one. Ten years away is the price of entry.

Because the United States taxes its citizens wherever they live, and the FIG regime removes the very tax an American was going to use as a credit.

Picture US dividends received by somebody now living in London. Without the claim, Britain taxes them, and that British tax credits against the American charge on the same income.

With the claim, Britain charges nothing. The American charge does not move, and no British tax now stands against it.

So the total bill can be identical, with the personal allowance gone and the paperwork heavier. That is a worse outcome reached by claiming relief.

Somebody who has been non-resident in the UK for at least ten consecutive tax years before becoming resident here. That long gap is the gate, and it rules out a great many people who assume the relief is for every new arrival.

A British person returning after eight years abroad does not qualify. Nor does somebody who spent a year here in the middle of a long absence.

The statutory residence test settles residence, and it runs on its own arithmetic. Our note on the residence test sets out how that works.

So establish the ten years first. Everything else follows from whether that condition is met.

Foreign trading profits, overseas property profits, dividends from non-UK companies and foreign interest. Foreign capital gains sit inside it too.

The FIG regime reaches a long way for somebody with investments outside Britain. An American arriving with a US brokerage account is holding exactly the sort of income it reaches.

Rental profits from a property abroad sit inside it too, which matters to anybody who kept a house in the States. The profit escapes UK tax for those years and keeps its American treatment unchanged.

Foreign employment income is the notable exclusion. Earnings have their own relief, which works differently and gets its own section below.

So check what your income actually is before assuming the FIG regime reaches it. The labels matter more than the amounts.

The personal allowance for income tax and the annual exempt amount for capital gains, both for the year of the claim. Those are not small, and for somebody with modest foreign income they can exceed the relief.

Certain allowances tied to marriage or disability also go. That catches couples who had not thought about the interaction at all.

Losing the personal allowance hurts most where other income already fills it. A British salary taxed from the first pound costs more than many people expect when they run the comparison.

The claimed income still counts toward adjusted net income, which drives the high income child benefit charge and the childcare schemes. Relief from tax is not invisibility.

So price the loss as well as the gain. A claim that saves less than the allowance it costs is a claim worth skipping.

Take an American who moved to London last year with a portfolio of US shares and no other foreign income. The dividends are foreign income from the British point of view and domestic income from the American one.

If she claims, Britain takes nothing, the United States takes its usual slice, and she loses her personal allowance against her UK salary. The salary bill rises.

If she does not claim, Britain taxes the dividends, that tax credits on her US return, and she keeps the allowance. In our practice the second column usually wins on these facts.

Change the facts and the answer changes. Someone with large untaxed foreign gains sits in a very different position.

Where the income carries little or no US tax, the FIG regime pays for itself. Municipal bond interest, or gains falling inside the US rate structure at a low effective rate, leave little American charge for a British credit to reduce.

Where the amounts are large enough that the lost allowance barely registers. A seven-figure gain is not decided by the annual exempt amount.

Where the income is genuinely foreign to both countries, which happens with holdings in a third country. Then British relief is a straight saving.

Where a large gain falls in a single year, the window is worth planning around. Timing a disposal inside the four years can be worth more than every other consideration put together.

So the claim is a calculation, not a default. Run it on each year's own numbers.

No, and that counts among the better features of the design. Each year stands on its own, so somebody can claim in one year and not in the next without asking anybody's permission or explaining the change.

The four years run from the start of UK residence rather than from the first claim. Skipping a year wastes it rather than banking it.

A temporary departure does not pause the clock either. The unused years simply disappear.

So treat the four years as a window, not a balance. Decide each one on its merits and expect the window to close on schedule.

Earnings fall outside the FIG regime, and Overseas Workday Relief steps in instead. It exempts the part of an employee's duties performed outside the UK, where they qualify.

The HMRC manual ties eligibility to being a qualifying new resident for the year. Usefully, the employee need not actually claim the four-year relief, only be eligible for it.

A cap limits how much the relief can reach. The Budget documents set the annual limit at the lower of £300,000 or 30% of net employment income.

So an American on a global role should look at both reliefs together. They answer different questions about the same pay packet.

On the Self Assessment return for the year, by designating which foreign income and gains the claim covers. There is no separate application and no advance clearance.

The designation names specific amounts rather than a general category, so somebody works the figures out before the return goes in. Guessing is not an option here.

Registration for Self Assessment comes first for anybody not already inside the system. Our note on registering covers that step.

So build the calculation early. The deadline is the usual one and the work is not quick.

A US return claims credit for foreign tax actually paid or accrued. The Internal Revenue Service guidance is clear that the credit follows a real liability rather than a notional one.

A FIG regime claim therefore reduces the credit pound for pound, because the British tax never arises. A tax that never fell due leaves nothing to carry forward.

That interacts with carryovers from earlier years, which some people are relying on. Our note on the carryover explains how that pool behaves.

So model the US return before deciding the British one. The order most people work in is backwards.

Ordinary UK rules apply to worldwide income and gains, with no transition and no tapering once the FIG regime runs out. The fifth year arrives at full strength.

Planning for it belongs in year three rather than year five. Disposals, distributions and pension decisions all move more easily before the window closes.

Remittances of earlier untaxed amounts have their own transitional treatment, which is separate again and time-limited. Anybody holding pre-2025 foreign income should take advice on it specifically.

The inheritance tax position changes on its own timetable, which is longer and separate. That deserves its own review.

So mark the date. The relief ends on a known day and nobody sends a reminder.

The first is claiming because the relief exists. Somebody with a British salary and modest US dividends often does better paying the UK tax and crediting it.

The second is forgetting the personal allowance. It disappears for the whole year, not just against the sheltered income.

The third is assuming the FIG regime reaches earnings. They are not, and the separate relief has a cap the FIG regime does not.

A fourth is missing the ten-year condition entirely, which makes the rest of the analysis academic.

Not directly, because American reporting obligations run on their own rules and take no notice of British relief. The income still appears on the US return, in the same place it always did, whatever Britain decides to charge.

What changes is the credit, and that is a calculation rather than a disclosure. The figures move and the forms stay the same.

Account reporting carries on untouched as well. Our note on the two reporting regimes covers what still goes in each year.

So expect the same forms with different numbers. The relief is a UK event with a US consequence.

We prepare both years side by side, with the claim and without it, across both returns. One country's answer alone is not an answer.

Then we look at what is likely to happen inside the four years. A planned disposal or a liquidity event changes which years are worth using.

Our UK Self Assessment work covers the British return and the designation that goes on it, and you can get in touch before the first year closes.

So model it as early as you can. Year one decisions constrain year four.