Part 3 of 4

This is the Finance Act 2025 version of this article. It is relevant for candidates sitting the ATX-UK exam in the period 1 June 2026 to 30 June 2027. Candidates sitting STA-UK after 30 June 2027 should refer to the Finance Act 2026 versions of the articles (to be published on the ACCA website in 2027).

So far in this article we have looked at tax residence, the taxation of overseas income, and the liability to UK capital gains tax. We are now going to look at the foreign income and gains (FIG) regime in more detail.

The foreign income and gains regime (FIG)

Qualifying new resident
The FIG regime applies for an individual in the first tax year of UK tax residence (and in each of the next three tax years if UK tax resident) following a period of at least 10 consecutive tax years of non-UK tax residence. 

Remember the split year basis from Part 1 of this article. Any year in which the split year basis applies is treated as a full year of UK tax residence for the purpose of the FIG regime. 

For each of these first four tax years, such an individual (‘a qualifying new resident’) can make a foreign income claim and/or a foreign gain claim.

Foreign income and foreign gain claims

Figure 5 illustrates the stages to consider in scenarios involving overseas aspects of IT and CGT, and shows how the basic rules are extended for a qualifying new resident.

Figure 5 – foreign income and foreign gain claims

Assessing whether FIG claim(s) are beneficial

Given there are other consequences of FIG claims, it may not be beneficial to make a particular claim. 

When advising whether FIG claims should be made, you may need to consider:

• the amount of income and gains
• the rates of tax applicable
• the loss of allowances and reliefs due to the claim(s)
• double tax relief (DTR). 

Example 2 – Adele
Adele came to the UK in 2025/26 but only became UK tax resident for the first time from 2026/27. Adele has employment income in respect of her job in the UK of £35,000 and interest arising on an overseas bank account of £4,000 per year. Adele’s liability to UK IT is as follows:

• Her employment income is in respect of UK duties. Accordingly, it will be subject to UK IT in both 2025/26 and 2026/27.
• In 2025/26, the overseas bank interest will not be subject to UK IT as Adele is not tax resident in the UK.
• In 2026/27, Adele is UK tax resident and will be taxed on her overseas bank interest as well as her UK source employment income. However, she can make a foreign income claim as she is a qualifying new resident in 2026/27. This is because she was non-UK resident for at least 10 consecutive tax years, and this is her first tax year of UK tax residence. The overseas bank interest would then not be taxable if the claim is made.
• However, if Adele makes the foreign income claim for 2026/27, she would not be entitled to a personal allowance (£12,570) and this exceeds the amount of the overseas bank interest relievable by the claim (£4,000), meaning her income tax liability would increase as a result of the claim. Therefore, the claim should not be made, and Adele will pay income tax on her UK and overseas income as normal for a UK tax resident.
• DTR may be available to reduce the UK income tax payable on the overseas interest if Adele is charged overseas tax on the interest.

Tax year 2025/26 and subsequent tax years

The FIG regime began to apply in the tax year 2025/26, so a qualifying new resident who first became UK tax resident before then, qualifies from 2025/26 for however many tax years remain of the first four tax years. 

For example, an individual who first became UK tax resident in the tax year 2024/25 after being non-UK tax resident for at least 10 consecutive tax years, qualifies for the relief in the tax years 2025/26, 2026/27 and 2027/28 if UK tax resident in those years. 

Conclusion

You need to be able to explain the taxation of overseas income and gains in a logical manner, starting at the beginning of the story in the same way as the diagrams in this article. It is important to note that if an individual is not UK tax resident the FIG regime does not apply but overseas income and gains will not be subject to UK tax in any case.

Written by a member of the ATX-UK examining team

The comments in this article do not amount to advice on a particular matter and should not be taken as such. No reliance should be placed on the content of this article as the basis of any decision. The authors and the ACCA expressly disclaim all liability to any person in respect of any indirect, incidental, consequential or other damages relating to the use of this article.