Now that we’re past 05 April 2026, it’s time to get on with the 2025-26 self assessment tax return in the UK. The tax landscape has undergone some changes in the recent past which affects how the 2025-26 tax return gets prepared. For those with offshore income and gains, self-employed individuals, company directors, and those with income side hustles, keeping up with these updates is vital to remaining compliant with the legislation and avoiding unnecessary fines.
HMRC are widening the nets in terms of data collection and introducing new frameworks with a view to what they call ‘closing the tax gap’.! With some success if their latest data are to be believed.
This post outlines the important legislative changes affecting the 2025-26 tax return which is due for filing now, the deadline being 31 January 2027.
Non-dom status abolished
Starting 6 April 2025, the UK has abolished the remittance basis of taxation, replacing the domicile-based tax system for those with offshore income and gains with one determined solely based on tax residence. For the 2025-26 tax year, all UK residents are now taxed on their worldwide income and gains as they arise, unless they qualify for and make a claim under the new 4-year Foreign Income and Gains (FIG) regime.
The long-standing “de minimis” exemption enjoyed by non-doms under s.809D ITA 2007 has also been removed. Previously this allowed them to avoid having to report and pay tax on it. This means that for individuals who are not eligible for the FIG regime (primarily those who have been resident in the UK for more than four tax years), every penny of overseas income must be declared on their self-assessment return, regardless of whether or not the income and/or gains were remitted to the UK.
The new foreign income and gains (FIG) regime
The new Foreign Income and Gains (FIG) regime, (s.730 ITA 2007) replaces the old remittance basis with a simplified, residence-based system starting from the 2025-26 tax year. Under FIG regime, eligible individuals can claim 100% relief from tax on their foreign income and gains for their first four years of UK tax residence. Qualifying new residents (s.845B ITTOIA 2005) for income tax purposes, for example, are those who have been non-UK resident for at least 10 consecutive tax years before the tax year in question, and for the following next 3 tax years. For example an individual who became tax resident in the UK for the first time in their life in 2022-23 can claim this relief in tax year 2025-26 being the last eligible year (of the 4 tax years) of their UK tax residence. Unlike the previous regime, these funds can be brought into the UK at any time without triggering a tax charge, effectively removing the complex “mixed fund” tracking rules for those within the four-year window. However, making a claim under this regime is not automatic; it must be explicitly made via the self-assessment system, and doing so would result in the loss of the personal allowance (s.845E ITTOIA 2005) for income tax purposes and the annual exempt amount (1K(6)(b) TCGA 1992) for capital gains tax purposes for that year.
But there is a catch here – if the FIG includes foreign property or trading income and the thresholds are breached then there may be digital obligations that the individual may have to meet, even though no tax may be payable on the FIG as such (see our separate blog here).
The temporary repatriation facility (TRF)
TRF (Schedule 10, FA 2025) has introduced a transitional window for three tax years beginning with 2025-26 for former non-dom remittance basis users to regularise their untaxed offshore income and gains position that arose before 6 April 2025. Under this facility, individuals can make a “designation election” in their self assessment tax return to pay a reduced flat-rate tax charge of 12% for tax years 2025-26 and 2026-27, rising to 15% for 2027-28. Once this “TRF charge” is paid on the designated “qualifying overseas capital,” the unremitted (to 05 April 2025) offshore funds get dry cleaned and are treated as clean capital and can be remitted to the UK at any time, including after the three-year window, without having to pay any further UK tax.
This regime (s.809RZA et seq. ITA 2007) establishes “TRF capital accounts” to help taxpayers avoid the complex mixed fund ordering rules by allowing designated funds to be held and remitted in priority to other offshore income. The facility is available to any UK resident individual who was subject to the remittance basis (under the old s.809B, 809D, or 809E ITA 2007) in any tax year prior to 2025-26.
Designation deadline:
- Tax Year 2025-26 12% rate: by 31 January 2028.
- Tax Year 2026-27 12% rate: by 31 January 2029.
- Tax Year 2027-28 15% rate: by 31 January 2030.
The scope of TRF Capital not only covers personally held foreign income and gains but also trust – attributed gains and offshore income gains matched to capital payments made during the TRF period under s.87 TCGA 1992.
When making remittances from a mixed fund, the designated TRF capital is treated as remitted in priority to other categories of income or gains within a mixed fund (Step A1, s.809Q(3) ITA 2007).
No foreign tax credit: As the TRF charge is a charge on capital and is calculated net of relevant foreign tax paid, or is payable, only so much of the amount as remains after deducting the amount of relevant foreign tax paid, or payable, may be designated. This means no foreign tax credit relief is available (Para 8(3) of Schedule 10.
Disclosures for company directors
Finance Act (FA) 2024 amended s.8 of the Taxes Management Act (TMA) 1970 requiring a person required to make and deliver a return to include in the return any information that is specified in regulations made by the Commissioners which is relevant for the purpose of the collection and management of any income tax and/or capital gains tax. Consequently we have The Income Tax (Additional Information to be included in Returns) Regulations (“Regulations”) 2025 which mandates that directors must now explicitly separate their dividend income received from a close company from other types of dividend earnings. HMRC implemented this change to gain clearer visibility into corporate profit extraction by small and micro-entities generally owned by the director(s). The following information to be disclosed in the tax return:
a) whether the person was a director of a company during the relevant year;
b) if so, whether any such company was a close company.
If the person was a director of a close company during the relevant year, the person must include in the return the following additional information
(c) the name and registered number of the close company;
(d) the amount received by the person by way of dividend income from the close company during the relevant year (which may be zero);
(e) the percentage of the share capital of the close company held by the person (which may be zero); and if that percentage has changed during the relevant year, the figure to be included is the highest such percentage.
For these purposes a ‘company’ means any body corporate or unincorporated association (s.1121 CTA 2010).
A close company is a company controlled by 5 or fewer participators (generally shareholders) or participators (any number) who are directors (s.439 CTA 2010). Even if this test is not met, if on a wind up should the assets be distributed 5 or fewer participators or participators who are all directors still it would be a close company. A non-UK resident company is not a close company (s.442 CTA 2010).
So, whilst a company includes foreign companies if the person was a director of a foreign company only that fact should be disclosed in the return not the rest of the information, as a non-resident company is not a close company for the director to be obliged to disclose other information.
Failing to separate the dividend income received from close companies from other dividend income on the 2025-26 return may trigger an automatic compliance check.
Commencements and cessations – unincorporated businesses
If you are self-employed or in a partnership or a trustee, the way you report the start or end of your business has become stricter. Previously, estimating the month or year of business commencement or cessation was sometimes accepted without consequence. This change is now formalised in the Regulations. For the 2025-26 tax year, you must provide the exact dates for when a business began trading or ceased operations. This update aligns with broader efforts to calculate tax liabilities more precisely, especially as the tax system moves away from basis period rules to tax year basis reporting.
The new £60 penalty
Failure to provide the above information on the tax return now invites a new penalty of £60 (s.8(1K) TMA 1970) even if you submit the return on time. It is a charge separate from the standard late filing penalties as the goal is to discourage incomplete submissions that force HMRC to manually request missing details.
Other changes
MTD: Please see our blog here for the new MTD compliance obligations.
Trust protection removed: From 6 April 2025, the long-standing “protected settlement” status for offshore trusts is abolished for any settlor who does not qualify for the new 4-year FIG regime. Schedule 12, FA 2025 has removed protections previously found in the settlements legislation (ITTOIA 2005) and the capital gains code (TCGA 1992), meaning that all foreign income and gains arising within a settlor-interested trust are now attributed and taxed on the UK-resident settlor as they arise. This shift effectively ends the ability for long-term UK residents to use offshore structures to defer tax, bringing trust taxation in line with the standard “arising basis” applied to individuals..
Capital Gains Rebasing: For disposals on or after 6 April 2025, the 2017 rebasing rule allows former remittance basis users to reset the cost base of their foreign assets to their market value as of 5 April 2017. This transitional relief (Schedule 11, FA 2025) ensures that only the growth in value occurring from 06 April 2017 is subject to UK capital gains tax. To qualify, you must have held the asset on 5 April 2017, been a remittance basis user at some point between 2017 and 2025, and remained non-domiciled until the new regime began. It is a relief that reduces the taxable gain on long-held offshore investments, though you can elect out of it on an asset-by-asset basis if the 2017 value would actually create a loss than the original cost.
Data from Airbnb etc: For the 2025-26 tax year, HMRC’s enforcement capabilities are significantly bolstered by the full integration of automated data from digital platforms under the Platform Operators (Due Diligence and Reporting Requirements) Regulations 2023. These rules require platforms like eBay, Airbnb, and Uber to report seller data directly to HMRC if an individual exceeds 30 sales or earns over €2,000 in a calendar year (picked up from the OECD model rules). This automated cross-referencing creates a transparent “digital trail” for your 2025-26 personal tax return, making it much easier for authorities to spot discrepancies. While the reporting threshold is specific to the platforms, your personal tax obligation typically begins once your gross income exceeds the £1,000 trading or property allowance, meaning even relatively small-scale “side hustles” are now subject to rigorous digital oversight.
