What is the remittance basis of taxation?

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Accepted Answer

Here is a comprehensive explanation of the remittance basis of taxation, drawing on both legislation and HMRC guidance.

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## The Remittance Basis of Taxation

> ⚠️ **Important note:** From **6 April 2025**, it is **no longer possible** to use the remittance basis of taxation. The explanation below is therefore of historical relevance, applying to tax years up to and including **2024–25**.

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### What the law says

The remittance basis was an **alternative basis of taxation** available to certain UK-resident individuals under **ITA 2007, Chapter A1 of Part 14** (ss. 809B, 809D and 809E).

**Who could claim it:** Under ITA 2007 s.809B, the remittance basis applied to an individual for a tax year if:
- the tax year was 2024–25 or earlier;
- the individual was **UK resident** for that year; and
- the individual was **not domiciled in the United Kingdom** in that year; and
- the individual **made a claim** under that section for that year.

**How it worked for foreign income:** Under ITTOIA 2005 s.832, where the remittance basis applied, income tax was charged only on the amount of the individual's **relevant foreign income that was remitted to the United Kingdom** — either in that tax year, or in the UK part of a split year. This applied whether or not the source of the income still existed when the income was remitted.

**How it worked for employment income:** Similarly, under ITEPA 2003 s.26, where the remittance basis applied to an employee, the full amount of any qualifying foreign earnings **remitted to the United Kingdom** in a tax year constituted taxable earnings in that year.

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### HMRC guidance / practice

**Definition:** HMRC defines the remittance basis as *"an alternative basis of taxation which could be used only by individuals who are resident in the UK but not domiciled in the UK up to 5 April 2025."*

**Core principle:** Under the remittance basis, a UK-resident non-domiciled individual was only taxed on their **foreign income and gains to the extent they were brought to (remitted to) the UK**. Foreign income and gains left outside the UK were not subject to UK tax in the year they arose.

**Historical evolution:**
- Before 6 April 2013, the remittance basis also applied to individuals who were UK-domiciled but **not ordinarily resident (NOR)**, though only in respect of foreign income (not capital gains).
- From **6 April 2013**, ordinary residence was removed from statute for most tax purposes, and the remittance basis could only be claimed by individuals **not domiciled in the UK**.
- From **6 April 2017**, the remittance basis did not apply to individuals who were **deemed domiciled** in the UK.
- From **6 April 2025**, the remittance basis was **abolished entirely**.

**The remittance basis charge:** Long-term UK residents who wished to use the remittance basis were required to pay a **remittance basis charge**, which consisted of income tax, capital gains tax, or a combination of both. Double taxation relief could be claimed under relevant Double Taxation Agreements.

**Transitional rules post-abolition:** Although the remittance basis no longer applies from 6 April 2025, **any foreign income or gains that arose before that date** to a former remittance basis user will continue to be taxed at the usual tax rates if and when they are **remitted to the UK on or after 6 April 2025**, subject to any amounts designated under the **Temporary Repatriation Facility (TRF)**.

**Replacement regime:** From 6 April 2025, eligible individuals may instead claim relief under the new **4-year Foreign Income and Gains (FIG) regime** for their first four years of UK residence.

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