Test your understanding: answers

(1). Wren was UK tax resident in the tax years 2021/22, 2022/23, 2023/24 and 2024/25. The year of the split year treatment (2021/22) counts as a full year of UK residence for the purposes of the FIG regime. As a result, Wren is not entitled to make a foreign income claim for the tax year 2025/26 as four tax years have already passed since Wren first became UK tax resident, that is, she is not a qualifying new resident in 2025/26.

(2). Robin is able to make claims under the FIG regime as he is tax resident in the UK and a qualifying new resident, having been non-resident for at least 10 consecutive years prior to the tax year 2025/26.

If he makes a foreign income claim, his overseas income of £38,000 will not be taxable, although he will lose his entitlement to his personal allowance of £12,570. Overall, the claim will result in his taxable income being reduced by £25,430 (£38,000 – £12,570).

However, the foreign income claim will also result in Robin losing his entitlement to his annual exempt amount (£3,000) for capital gains tax purposes. This would otherwise cover the overseas gains of £1,900. Therefore, Robin should make the foreign income claim but should also make a foreign gain claim such that this gain is not taxable.