For expatriates and professionals returning to the UK, the 2026/27 tax year presents a radically transformed landscape. The government has abolished the long-standing remittance basis, overhauled Inheritance Tax, and closed significant loopholes in the Temporary Non-Residence (TNR) rules. Advising clients on returning to the UK requires navigating these new statutory frameworks to legitimately mitigate tax exposure.
The FIG Regime: Why Most Returning Residents Miss Out
The Finance Act 2025 officially abolished the remittance basis of taxation for non-domiciled individuals, replacing it with a new residence-based Foreign Income and Gains (FIG) regime. This regime provides 100% tax relief on foreign income and gains for the first four years of UK residence.
However, the legislation imposes a strict barrier for returning residents. To qualify for the 4-year FIG regime, an individual must not have been UK tax resident in any of the 10 consecutive tax years immediately prior to their arrival.
Consequently, standard returning expatriates who lived abroad for a typical three-to-five-year stint will not qualify for the FIG regime and will immediately face UK tax on their worldwide income and gains upon return.
Transitional Relief: The Temporary Repatriation Facility (TRF)
For returning residents who previously lived in the UK and claimed the remittance basis before 6 April 2025, the government introduced the Temporary Repatriation Facility (TRF). This facility allows former remittance basis users to bring their historic, pre-April 2025 foreign income and gains into the UK at a significantly reduced flat tax rate.
For the 2026/27 tax year, the TRF rate is set at 12%. This rate will increase to 15% for the 2027/28 tax year before the facility closes entirely.
Temporary Non-Residence (TNR) Rules and the 2026 Dividend Trap
HMRC enforces strict Temporary Non-Residence (TNR) rules to prevent individuals from leaving the UK for a short period to extract wealth tax-free. If an individual returns to the UK within five years of their departure, they generally face tax on specific gains and income that accrued during their absence.
The First-tier Tribunal decision in Kevin McCabe v HMRC serves as a stark reminder that taxpayers must prove a “distinct break” and shift their centre of vital interests; otherwise, HMRC will treat them as UK resident throughout their absence, bypassing the TNR rules entirely and taxing them on a standard arising basis.
The 2026/27 Dividend Loophole Closure
Historically, returning business owners relied on a specific TNR carve-out to extract close company dividends tax-free while abroad, provided the dividends were paid from “post-departure trade profits”.
Effective for individuals returning to the UK on or after 6 April 2026, the government has entirely abolished the post-departure trade profits exemption.
This measure removes the concept of ‘post-departure trade profits’ from the TNR rules and ensures all distributions or dividends received from a close company whilst temporarily non-resident will be chargeable to UK income tax if caught by TNR rules.
This means all dividends extracted from UK or non-UK close companies during a temporary period of non-residence are strictly taxable in the year of return, regardless of when the company generated those profits.
These dividends will be subject to the newly increased 2026/27 dividend tax rates established by the Finance Act 2026:
| Tax Band | 2026/27 Dividend Rate | Statutory Reference |
|---|---|---|
| Dividend Nil Rate | 0% (on the £500 allowance) | N/A |
| Dividend Ordinary Rate | 10.75% | FA 2026 s 4(1)(a) |
| Dividend Upper Rate | 35.75% | FA 2026 s 4(1)(b) |
| Dividend Additional Rate | 39.35% | Current Law (Maintained) |
(Note: The standard Personal Allowance remains frozen at £12,570 for the 2026/27 tax year).
Inheritance Tax (IHT): The New “Long-Term Resident” Test
Finally, returning to the UK impacts a taxpayer’s exposure to Inheritance Tax (IHT). From 6 April 2025, IHT shifted from a domicile-based system to a residence-based system.
Under the new rules, an individual becomes a “long-term resident”—and thus liable for UK IHT on their worldwide assets—once they have been resident in the UK for at least 10 out of the last 20 tax years. Returning individuals must carefully calculate their past residence history, as they will remain in scope for worldwide IHT for between 3 and 10 years even if they subsequently leave the UK again.
Consider researching how split-year treatment applies in the year of return to ensure foreign income derived prior to the exact date of resumption of UK residence is appropriately shielded under the Statutory Residence Test.
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