The New Foreign Income & Gains (FIG) Regime – What Japanese Business Owners Need to Know

As many of our Japanese clients have directors, shareholders, employees and family members moving between Japan and the UK, one of the most important UK tax developments is now fully in force.

From 6 April 2025, the UK’s long-standing “non-dom” tax regime was abolished and replaced by a new residence-based Foreign Income and Gains (FIG) regime.

This change represents one of the biggest reforms to UK international taxation in decades.

What Has Changed?

Historically, individuals who were UK tax resident but non-UK domiciled could often claim the “remittance basis”, meaning certain overseas income and gains were only taxed when brought into the UK.

From 6 April 2025:

• The non-dom regime has ended.
• Domicile is no longer the key determining factor for income tax and capital gains tax.
• Most UK residents are now taxed on worldwide income and gains as they arise.
• A new FIG regime has been introduced for qualifying new arrivals to the UK.

Who Can Benefit From the New FIG Regime?

The new FIG regime is available to individuals who:

Become UK tax resident after a period of at least 10 consecutive tax years of non-UK residence.

Qualifying individuals may claim relief from UK tax on most foreign income and gains for up to their first four years of UK tax residence.

Importantly, unlike the previous remittance basis, foreign income and gains can generally be brought into the UK without triggering a UK tax charge during the qualifying period.

Why Is This Important for Japanese Businesses?

This change may affect:

• Japanese directors relocating to the UK.
• Employees arriving under Skilled Worker visas.
• Japanese entrepreneurs setting up UK subsidiaries.
• Investors receiving dividends from Japan.
• Individuals holding Japanese investment portfolios.
• Shareholders receiving income from overseas businesses.

Many individuals who previously relied on non-dom planning may now face different tax outcomes.

Existing UK Residents Should Review Their Position

Individuals who have already been UK resident for several years should not assume that the new FIG regime automatically applies.

Eligibility depends on residence history and the number of qualifying years available.

In many cases, foreign income and gains may now be fully taxable in the UK unless specific reliefs are available.

A detailed review should be undertaken where individuals receive:

• Dividends from Japanese companies.
• Rental income from Japanese property.
• Interest from overseas bank accounts.
• Capital gains on overseas investments.
• Cryptocurrency gains.
• Trust distributions.

Temporary Opportunity for Historic Overseas Funds

The Government has introduced transitional provisions that may allow certain individuals who previously used the remittance basis to bring historic overseas income and gains into the UK at reduced tax rates under the Temporary Repatriation Facility (TRF).

This may present planning opportunities for individuals with accumulated overseas funds.

However, the rules are complex and professional advice should be obtained before transferring significant funds to the UK.

Action Points for Japanese Businesses

We recommend that Japanese businesses operating in the UK:

1. Review the residence status of directors and key employees.
2. Identify any overseas income streams received by UK-resident individuals.
3. Consider whether any employees qualify for the FIG regime.
4. Review planned transfers of funds from Japan to the UK.
5. Assess the impact on remuneration and dividend strategies.
6. Obtain tax advice before disposing of overseas assets.

How CloudAcc Can Help

CloudAcc specialises in supporting Japanese businesses and individuals operating in the UK.

Our team can assist with:

• UK-Japan cross-border tax planning.
• FIG regime eligibility reviews.
• UK Self Assessment filings.
• Foreign income reporting.
• Director and shareholder tax planning.
• UK subsidiary compliance.
• Payroll and expatriate tax matters.

If you need assistance, our team is here to help. You can get in touch with us to schedule a review or consultation.

This newsletter is for informational purposes only and should not be considered legal or professional advice. Accurate guidance can only be provided with a full understanding of the specific circumstances. If you would like to explore any topic in more detail, please do not hesitate to reach out to us.