The Temporary Repatriation Facility

This article is the fourth in our monthly tax series in which TLT’s team of tax specialists look at specific tax issues arising in the financial services sector.

UK resident but non domiciled clients of UK banks may find themselves navigating the complexities of the recent abolition of the “non-dom” tax regime and transition to the new Temporary Repatriation Facility (TRF). In this month’s article, we take a look at the TRF - how it works, who is impacted and what tax is payable.

What is the new TRF?

The TRF is a new disclosure and tax payment option for certain individuals who have claimed relief under the ‘remittance basis’ income tax and capital gains tax regime. It was announced in October 2024, and implemented in April 2025, together with the changes to the ‘non-dom’ tax regime generally.

In very general terms, the TRF provides a mechanism by which these individuals can elect to pay tax on offshore assets (e.g. a sum of cash in a bank account, or a piece of artwork) now at a flat rate of tax, rather than pay much higher rates when/if they bring those offshore assets to the UK in future. The TRF avoids the complexity of working out that higher rate at that future time.

Which overseas assets does the TRF apply to?

The TFR is entirely optional, and eligible individuals can pick and choose which overseas assets should benefit from the election under the TRF.

Assets which will remain outside the UK do not need to form part of the election as they will already be free from UK tax.

How “temporary” is the TRF?

The TRF is available for three years, after which the TRF will no longer apply. The applicable tax rate will be higher in the third of those years to encourage people to act quickly.

Who is eligible for the TRF?

There are three criteria for an individual to qualify for the TRF:

• they must be UK resident in 2025/26, 2026/27 or 2027/28;
• they must have been subject to the ‘remittance basis’ of taxation for at least one tax-year when that regime was in place; and
• they must have appropriate assets that qualify, either in their own name, or because they are receiving benefit from a non-UK resident Trust.

Therefore, anyone who wishes to benefit from the TRF must make sure they are UK resident (under the statutory residence test) for at least one of these tax years. This may catch out some people who are temporarily non-UK resident.

Some people have been misinformed that it is a requirement that they were non-UK domiciled (or deemed-domiciled) in 2024/25. This is not a requirement, and the TRF is intended for use by anyone who has used the ‘remittance basis’ and is still UK resident, however long ago they might have become UK domiciled.

What is the standard tax charge on the assets?

There are a few main categories of assets which can qualify under the TRF (there are others but outside the scope of this summary):

1) Overseas income or capital gains which the individual had accrued while UK resident under the ‘remittance basis’.

• The ‘remittance basis’ was an optional regime available to anyone who was UK resident but not UK domiciled (it is no longer available since April 2025). For some years it will have been necessary to pay a fee (the remittance basis charge) of up to £90,000 to claim the benefits of this regime. It was a very valuable tax status for anyone with significant overseas income and gains but who did not need to bring those funds to the UK.
• Under that regime these funds were not subject to UK tax provided they are never ‘remitted’ to the UK (brought to the UK or used in respect of the UK in any way). It remains the case that these assets can be kept outside the UK until death, at which point they will cease to be subject to these rules. Therefore, the TRF is relevant for those who think it will at some stage be necessary to bring these assets to the UK, or those who accept the lower rate of tax for the convenience of bringing these assets to the UK.
• Some people will have carefully structured their overseas assets before becoming UK resident to make sure that all income and all gains were segregated from the ‘clean capital’ that that they already had. If this was not done correctly, there will be mixed funds (or assets purchased from mixed funds), which are treated as untaxed income unless the individual can prove otherwise to HMRC.
• If these assets are ever remitted to the UK, they will typically be taxed at the individual’s current marginal rates of up to 45% for income and up to 24% for capital gains.
• Typically, tax credit is applied in the UK where another country has already taxed the income or gains (subject to appropriate double tax agreements).

2) Overseas income and capital gains accrued in a non-UK resident Trust

• There are various rules which can match income and gains in a non-UK resident Trust to UK residents, particularly when a benefit is conferred on them by the Trust.
• In those cases, the individual receiving the benefit typically must pay income tax on the value of the benefit (if the Trust holds enough untaxed income to match it) or capital gains tax on the value of the benefit (if not covered by income and if the Trust has sufficient untaxed gains to match it).
• The TRF applies only to sums which are actually taxable to the individual in the tax-year for which they are making the TRF election.
• The tax rates applicable to the UK resident beneficiary can be up to 45% for income and up to 38.4% for capital gains (depending on how long the gains have remained untaxed).
• This charge can be in addition to tax paid by the Trust, if the Trust is subject to tax in another country.

What is the tax payable under the TRF election?

Any assets which form part of a TRF election will be taxed at a flat rate of 12% for the first two years (2025/26 and 2026/27) and at a flat rate of 15% for the final year (2027/28).

There is no credit given for any foreign tax paid on these assets, or for any remittance basis charge which may have been paid under the ‘remittance basis’ regime. It is a single flat charge over the assets, replacing the other tax treatment they would receive under the standard regime above. The payment of the TRF is itself a remittance to the UK, and so must be made from either clean capital, UK assets, or funds which themselves have been claimed (and taxed) under the TRF.

If the individual is claiming the TRF for their personally held overseas income and gains (or a mixed fund), they can at any time bring those funds to the UK without paying the other taxes. They do not need to do so immediately, and for mixed funds their elected assets are deemed to be brought to the UK first.

What is the timeline for a TRF election?

The TRF election is made within one year of the tax return deadline for the tax-year.

The first eligible tax-year is 2025/26, for which the tax return deadline is January 2027. Therefore, the deadline for claiming the TRF for that first tax-year is January 2028.

The second eligible tax-year is 2026/27, for which the tax return deadline is January 2028. This means that the deadline for claiming the TRF for that second tax-year is January 2029. This is the final deadline for the TRF rate of 12%.

The final eligible tax-year is 2027/28, for which the tax return deadline is January 2029. Therefore, the deadline for claiming the TRF for that second tax-year is January 2030. For this year the tax rate is increased to 15%.

For any individuals wishing to make use of the TRF for income/gains in a Trust, they must ensure that they receive the benefits/distribution from the Trust before 6 April 2027 (at 12%) or 6 April 2028 (at 15%), so that they are eligible for the election for that year. The deadline to make the election is later, but they will not be eligible if they have not received the benefit in the applicable tax-year.

TLT comment

For some individuals, the TRF will represent a great opportunity to bring overseas income/gains to the UK at lower tax rates, in some cases less than a quarter of the standard rate. This will be very important for those who have realised they need those funds in the UK (now or in the future), or those who never properly segregated their assets and so cannot prove the existence of clean capital. It may also be attractive to anyone who no longer wants the administrative burden of keeping track of their historic unremitted income/gains and is willing to pay the flat rate of tax to simplify their tax affairs.

For others, this presents no advantage at all, as they can fund their life in the UK using a combination of UK source wealth, clean capital from overseas, or future income/gains which will be taxable anyway.

Any financial service providers that have specialised products to support clients with the segregation of their overseas assets should be speaking with their clients about these options and identifying whether the TRF is beneficial to them. Those who were best prepared under the old rules are likely to have less need for the TRF, but for others it represents a very large potential tax saving, as long as advice is taken before the TRF expires.

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This publication is intended for general guidance and represents our understanding of the relevant law and practice as at June 2025. Specific advice should be sought for specific cases. For more information see our terms & conditions.