The Arising Basis vs Remittance Basis: When to Choose Which

The choice between the arising basis and the remittance basis was one of the most consequential annual decisions a UK-resident non-domiciled individual could make. For tax years up to and including 2024–25 (the last full year of the old non-dom regime), non-doms with foreign income and gains needed to evaluate — ideally with professional advice — which basis of assessment produced the better outcome for that specific year.

Following the abolition of the remittance basis from April 2025 and its replacement with the Foreign Income and Gains (FIG) regime for new arrivals, the arising vs remittance basis decision is now primarily a historical matter. However, it remains directly relevant for:

• Completing or correcting returns for years up to 2024–25
• Responding to HMRC enquiries into prior-year claims
• Understanding transitional provisions for those who claimed the remittance basis in the past
• Advising individuals who became deemed domiciled during the period when the choice applied

This guide explains both bases, when each applied, and the decision framework that shaped the annual choice.

The Arising Basis: The Default

The arising basis is the standard basis of assessment for UK-resident individuals. Under the arising basis, you are taxed on all income and gains as they arise, regardless of:

• Where the income or gain arises (UK or overseas)
• Whether the income or gain is received in the UK or kept abroad
• Your domicile status

For a UK-domiciled individual, the arising basis always applied (and still does). For a non-domiciled individual resident in the UK, the arising basis was the default — unless they chose to claim the remittance basis instead.

Under the arising basis, all worldwide income and gains are included in the annual UK self-assessment return, and tax is calculated on the full amount at UK rates. There is no benefit from keeping funds overseas.

Advantages of the arising basis:

• Simplicity: no need to track which funds are "clean" and which are contaminated by remittance-basis income
• Full access to the UK personal allowance and CGT annual exemption (the remittance basis claimant loses both)
• No remittance basis charge to pay
• No mixed fund record-keeping obligations

Disadvantages:

• All foreign income and gains are immediately taxable, even if kept overseas indefinitely
• No deferral of tax on large offshore gains or income

The Remittance Basis: The Alternative

The remittance basis was an opt-in system available to UK-resident non-domiciled individuals. Under the remittance basis:

• UK income and gains were taxed in full, as on the arising basis
• Foreign income and gains were taxed only if (and when) remitted (brought) to the UK

A "remittance" was broadly any use of overseas money to benefit yourself or a relevant person (broadly, close family or entities you controlled) in the UK. This included bringing cash to the UK, using offshore funds to pay for goods or services enjoyed in the UK, and certain "deemed" remittances under anti-avoidance rules.

Until 2007–08, the remittance basis was automatic for non-doms — all non-domiciled individuals were taxed on this basis by default. From 2008–09, claiming the remittance basis required an affirmative election on the self-assessment return, and from that year the remittance basis charge applied to long-term residents.

When the Remittance Basis Was Worth Claiming

The decision framework for each year compared:

Arising basis tax (UK tax on all worldwide income and gains in the year, including foreign amounts)

versus

Remittance basis + RBC + UK tax on actual remittances

The remittance basis was typically worth claiming if the unremitted foreign income and gains in the year significantly exceeded the applicable remittance basis charge (£0 for those in the UK fewer than seven years; £30,000 for those in the UK seven to eleven years; £60,000 for those in the UK twelve to fourteen years).

Key variables:

• Quantum of foreign income and gains: The larger the unremitted foreign income and gains, the more valuable the remittance basis. For a 45% taxpayer, the £30,000 RBC "paid for itself" if it sheltered more than approximately £66,700 of foreign income from immediate UK tax.

• Intention to remit: If you were planning to remit substantial funds to the UK in the near future anyway (e.g., to purchase a property), deferral under the remittance basis produced only limited benefit. It was most valuable where overseas funds would genuinely remain offshore indefinitely or for many years.

• Personal allowance and CGT exemption: Claiming the remittance basis meant forfeiting the UK personal allowance (£12,570) and the CGT annual exemption (£6,000 in 2023–24, £3,000 in 2024–25, now abolished). For individuals with modest UK income, losing the personal allowance could cost more than the remittance basis saved.

• Year-specific analysis: The optimal choice could — and often did — change year by year. A year with a large overseas capital gain warranted careful analysis; a year with only modest foreign income might have been better handled on the arising basis.

The Annual Election

The remittance basis had to be claimed each year on the self-assessment return (specifically on the SA109 supplementary page). There was no irrevocable election. A non-dom could:

• Claim the remittance basis for one year
• Switch to the arising basis the next year
• Switch back to the remittance basis the following year

However, switching between bases had significant implications for previously accumulated offshore income and gains:

Remitting income after an arising-basis year: If you switched to the arising basis in year 1 and subsequently remitted funds that arose in an earlier remittance-basis year, those funds were still subject to the remittance-basis rules — the arising-basis election for a later year did not retroactively change the treatment of earlier income.

Tax on arising-basis years: Any year in which you used the arising basis was fully assessed in that year, regardless of whether the income was ever remitted. You could not "un-elect" the arising basis for a prior year to obtain a remittance basis benefit.

Special Case: The First Year of UK Residence

In the first year of UK residence, and for non-doms who had been in the UK for fewer than seven years, the remittance basis was available without paying the RBC. The only cost was the loss of the personal allowance and CGT exemption.

For individuals arriving in the UK with large overseas wealth and high foreign income, the decision in these early years was frequently whether the benefit of deferring foreign income and gains outweighed the cost of losing the personal allowance. For additional-rate taxpayers, the personal allowance was worth approximately £5,600 per year (45% of £12,570). For modest foreign income, the arising basis was often preferable; for those with significant offshore portfolios generating substantial foreign returns, the remittance basis was worth claiming.

Deemed Domicile and the Loss of Choice

From April 2017, individuals who had been UK-resident for 15 or more of the previous 20 tax years were treated as deemed domiciled in the UK for income tax and CGT purposes. Once deemed domiciled, the remittance basis was no longer available — the arising basis applied compulsorily, and all worldwide income and gains became immediately taxable in the UK.

This cliff-edge at 15 years was one of the most significant drivers of the planning behaviour of long-term non-dom UK residents. Many individuals carefully managed their UK residence to stay below the 15-year threshold, sometimes leaving the UK for a year or two to "reset" the count. The rules around this — including anti-avoidance provisions to prevent manipulation — are complex and case-specific.

The New Regime: FIG from April 2025

The FIG (Foreign Income and Gains) regime, which replaced the remittance basis from April 2025 for new arrivals, is structurally different from the remittance basis in a number of important ways:

• FIG provides a complete exemption from UK tax on foreign income and gains for the first four tax years of UK residence — there is no charge and no remittance restriction
• The four-year period is fixed; you cannot extend it by partly using the arising basis
• There is no RBC — the exemption is free
• You do not lose the personal allowance or CGT exemption under FIG
• After four years, the arising basis applies automatically — there is no gradual introduction of the charge

For those arriving in the UK from April 2025 onwards (after a 10-year absence or as a first-time arrival), the FIG regime is considerably more generous and simpler than the old remittance basis for the first four years.

Transitional Provisions: Temporary Repatriation Facility

Individuals who claimed the remittance basis in years up to 2024–25 and have accumulated offshore income and gains that were never remitted to the UK have access to the Temporary Repatriation Facility (TRF). Under the TRF:

• Historical remittance-basis foreign income and gains can be remitted to the UK and taxed at a flat rate of 12% (in 2025–26 and 2026–27) or 15% (in 2027–28)
• The standard remittance and mixed fund ordering rules are suspended for TRF designations
• The TRF window closes after 2027–28

For those with large accumulated offshore pools, the TRF represents a significant planning opportunity — the flat rates are substantially below the income tax rates at which the income would normally be taxed on remittance. Assessment of whether to use the TRF should be done promptly, as the window is finite.

How Global Investments Can Help

The transition from the old non-dom regime to the new FIG system has left many clients with complex questions about their historical remittance-basis positions and how to manage them going forward. Global Investments works with specialist UK tax advisers to help clients understand their historical position, assess the TRF opportunity, and plan their ongoing affairs under the new rules.

Whether you are completing a final remittance-basis return, managing historical mixed fund accounts, or planning your first years of UK residence under the FIG regime, we can ensure you have the right professional support. Contact our team for a confidential conversation.

This article is for general information only. Tax rules are complex, change frequently, and depend on individual circumstances. Nothing here constitutes personal tax advice. Always seek independent professional guidance tailored to your situation. Investments can fall as well as rise in value.