The Complete UK Guide to Claiming the Remittance Basis: 2024 Tax Update

Everything Non-Domiciled UK Residents Need to Know

The remittance basis is a valuable tax relief for UK residents who are not domiciled in the UK (non-doms). It allows them to pay UK tax only on income and gains brought into the country, while foreign income and gains kept offshore remain untaxed. This guide explains when to claim the remittance basis, its advantages and disadvantages, and how to decide whether it’s right for you. We also cover key updates for 2024 to ensure you stay compliant while optimising your tax strategy.

What Is the Remittance Basis?

The UK tax system usually taxes residents on their worldwide income and gains. However, non-doms can opt to use the remittance basis, where only UK income and gains, and foreign income and gains brought into the UK, are taxable.

This system is optional and particularly useful for those with substantial foreign income who keep their wealth offshore. If you’re eligible, understanding when to claim the remittance basis—and when it’s unnecessary—can save you significant tax while avoiding potential pitfalls.

Is the Remittance Basis Optional?

Yes, the remittance basis is optional. By default, UK residents are taxed on the arising basis, meaning all worldwide income and gains are taxed as they arise. Non-doms can choose the remittance basis if they meet the eligibility criteria and if it benefits their situation.

Illustration of the remittance basis tax system for non-domiciled UK residents, highlighting key factors like foreign income, remittance charges, and eligibility criteria, updated for 2024 UK tax rules.

When Is the Remittance Basis Advantageous?

Claiming the remittance basis is beneficial in the following scenarios:

  1. Significant Offshore Income:

    If you earn substantial foreign income or gains and keep these funds offshore, the remittance basis can help minimise UK tax.

  2. Minimal or Controlled Remittances:

    If you rarely bring foreign income or gains into the UK, the remittance basis ensures you are not taxed unnecessarily.

  3. Long-Term Tax Efficiency for Non-Doms:

    For non-doms planning to live in the UK for fewer than 15 years (the point at which you become deemed domiciled), the remittance basis can form part of a wider tax-efficient strategy.

  4. Foreign Income Exceeds the RBC (Remittance Basis Charge):

    • £30,000 if resident in the UK for at least 7 of the last 9 years.

    • £60,000 if resident for 12 of the last 14 years.

If your untaxed foreign income and gains exceed these thresholds, the remittance basis may provide significant savings.

When to Avoid Claiming the Remittance Basis

1 Foreign Income Below £2,000 Per Year:

Non-doms with foreign income and gains below £2,000 do not need to claim the remittance basis. By default, such income remains untaxed in the UK, and you retain access to personal allowances.

2. Frequent Remittances:

If you regularly bring foreign income or gains into the UK, the remittance basis might not be cost-effective, as remitted funds are subject to UK tax.

3. Low Foreign Income:

If your foreign income or gains are modest, the cost of the RBC and the loss of personal allowances may outweigh any tax savings.

4. Eligible for Personal Allowances:

Claiming the remittance basis means forfeiting your UK personal allowance (£12,570) and the CGT annual exemption (£6,000 for 2024/25). For those with modest incomes, this could make the arising basis more advantageous.

5. Long-Term UK Residents:

After 15 years of UK residence, non-doms become deemed domiciled and lose access to the remittance basis. Planning for this eventuality is crucial.

 

Pros and Cons of the Remittance Basis

Pros:

  • Tax Efficiency: Offshore income and gains retained abroad are not taxed in the UK.

  • Flexibility: Enables careful planning of which funds to remit.

  • Ideal for High Earners: Particularly beneficial for those with significant offshore wealth.

Cons:

  • RBC Cost: £30,000 or £60,000 for long-term residents.

  • Loss of Allowances: You forfeit personal allowances and CGT exemptions.

  • Complexity: Detailed record-keeping of offshore income and gains is required.

  • Inheritance Tax Risks: After 15 years, you may become deemed domiciled, exposing worldwide assets to UK inheritance tax.

 
Visual explanation of the remittance basis for non-domiciled UK residents, showcasing when to claim, key benefits, and 2024 tax updates.

Impact of the 2024 UK Tax Updates

  1. Stricter Reporting Requirements:

    HMRC has tightened rules on offshore income disclosures, requiring more detailed record-keeping to prove remittance status.

  2. Freezing of Allowances:

    With personal allowances and CGT exemptions frozen, forfeiting them by claiming the remittance basis becomes a less attractive option for some taxpayers.

  3. Global Tax Implications:

    International tax reforms, including OECD minimum tax rules, could affect how offshore income is taxed in the future.

 

Conclusion

The remittance basis is a flexible and powerful tax relief for eligible UK residents, but it requires careful consideration. If used correctly, it can provide substantial tax savings. However, the decision depends on your financial circumstances, future plans, and willingness to forgo UK allowances.

At Bambridge Accountants, we specialise in international and cross-border tax matters, helping individuals navigate complex rules around UK and US tax. Contact us today for personalised advice on whether the remittance basis is right for you.