The four-year FIG regime: why arriving Americans should do the maths before claiming

Figures relate to tax year 2025-26 (UK) · 2025 (US)

You arrive in London in 2026. You bring a US brokerage account, a rental property in Austin and a salary from a British employer. Someone mentions the FIG regime, and it sounds like a straightforward win. For an American it usually is not, because the IRS keeps taxing everything either way.

The regime is still worth claiming in plenty of cases. But the decision needs both returns in front of you, not just the British one. So this guide covers what the relief does and what it costs. Then it covers how the answer changes for someone who files in two countries.

Key takeaways

• The FIG regime exempts foreign income and gains for the first four years of UK residence.
• You qualify after ten consecutive tax years of non-residence before arriving.
• Claiming it costs you the personal allowance and the capital gains annual exempt amount for that year.
• US-source income counts as foreign for this purpose, so it can escape UK tax entirely.
• Exempting income in Britain removes the UK tax that would have credited against your US bill.
• The claim is made year by year, so a bad year for one claim does not bind the next.

What is the FIG regime?

According to HMRC guidance, it is the relief that replaced the remittance basis from 6 April 2025. For your first four years of UK residence, you can claim exemption from British tax on foreign income and gains. Bringing the money here no longer matters. The old distinction between remitted and unremitted money has gone.

Two conditions matter. You need ten consecutive tax years of non-residence immediately before the first year. The four-year window then runs from that first year, whatever you do afterwards. Leaving and returning inside the window does not reset the clock.

Who actually qualifies?

Anyone becoming UK resident after a decade abroad, regardless of nationality or domicile. An American moving to Britain for the first time almost always qualifies. Someone returning after six years away does not. The ten-year test looks at consecutive years of non-residence immediately before arrival.

Residence itself is decided by the statutory residence test rather than by intention or visa status. Our guide to the statutory residence test sets out how the day counts and ties actually work.

What claiming costs you

Two allowances disappear in any year you claim. The personal allowance goes, which is worth £12,570 of tax-free income at 2025-26 rates. The capital gains annual exempt amount goes as well.

For someone with a large British salary, losing the personal allowance costs around £5,000 in higher rate tax. So a small foreign income claim can cost more than it saves. That arithmetic is the whole decision for many arrivals.

Couples should look at this together. Each spouse claims separately, so one may gain while the other loses. The household answer is rarely a single decision.

There is also an administrative cost. Claiming still requires you to report the exempt foreign income and gains on your return. So the paperwork does not disappear with the tax.

Why the answer differs for Americans

Because America taxes citizens on worldwide income wherever they live. Exempting foreign income in Britain does not make it tax free. It moves that income from the British system to the American one, at American rates.

That shift cuts both ways. UK rates on investment income usually run higher than US rates. So moving that income across the Atlantic often saves real money. But the saving is the rate difference, not the whole British tax.

The trap sits in the foreign tax credit. If Britain does not tax the income, no British tax exists to credit. The IRS then collects in full. Claiming the FIG regime can therefore turn a year with no US liability into a year with a real one.

What about employment income?

Per HMRC guidance, overseas workday relief now sits alongside the FIG regime for the same four years. It exempts the portion of your employment income earned on duties performed outside Britain, subject to a cap. The cap runs to the lower of 30% of qualifying employment income or £300,000 a year.

That helps anyone with genuine travel in the role. It does nothing for a person who works every day in a London office. HMRC also expects a workday record rather than an estimate.

Keep a diary from the first week. Reconstructing a travel pattern eighteen months later is miserable work. The relief stands or falls on it.

What if you leave before the four years end?

The window keeps running. It attaches to your first year of UK residence, not to the years you claim. Time spent abroad inside it is simply lost. Arrive in 2026, leave in 2027, return in 2028, and two years of relief remain rather than four.

That makes early planning valuable. If a large gain is coming, the timing of the disposal can matter more than the claim itself.

Split years complicate the count. A split year still counts as a year of residence here. So check the position rather than assuming a part-year escapes.

A worked example

The figures below are illustrative. Take an example. An American arrives in April 2026 on a £90,000 British salary. She also has £40,000 of US dividends and rental profit.

Claiming the FIG regime exempts the £40,000 in Britain. But the personal allowance goes, costing roughly £5,000 in extra tax on the salary. The US return then taxes the £40,000 with no British credit to offset it.

Not claiming leaves the £40,000 inside the British system at UK rates. That tax is then credited on the American return. Which version wins depends on the rate difference and the source mix. So both returns need modelling together rather than in sequence.

Does the regime change your US filing?

Not in form, only in outcome. You still file the same returns, still report worldwide income, and still complete Form 1116 wherever credits exist. What changes is the size of the credit, because exempting income in Britain removes the tax that produced it.

Watch the separate categories on Form 1116. Dividends and rental profit sit in different baskets. Losing British tax in one does not free up credits in another.

Carryforwards deserve a look as well. Credits you already hold can offset American tax in a claim year. That sometimes tips the decision toward claiming after all.

State tax can intrude too. A few American states apply their own residence rules. A move abroad does not always end the filing obligation there.

What happens to money earned before you arrived?

Old income sits outside the FIG regime entirely, because the relief covers income and gains arising during the four years. Money earned before UK residence was never within the British net in the first place. Bringing it here afterwards is not a taxable event on its own.

Former remittance basis users face a different question. A temporary facility taxes previously untaxed foreign income and gains at reduced rates, for a limited period. Review it before that window closes.

Mixed accounts remain the practical obstacle. Where salary, dividends and capital sit in one account, untangling which pound moved is a documentation exercise. The law is rarely the hard part.

How do you decide whether to claim?

By running the two returns together for the year in question. The British computation shows what the relief saves and what the lost allowances cost. The American computation shows whether the missing foreign tax credit creates a bill on the other side.

1. Confirm you meet the ten-year non-residence condition before the first UK year.
2. Identify which income is foreign for British purposes, including anything US-source.
3. Value the personal allowance and capital gains exemption you would give up.
4. Calculate the British tax with the claim and without it.
5. Rebuild the American return for each version, watching the foreign tax credit.
6. Compare the combined tax across both countries rather than either one alone.
7. Decide again next year, because the claim binds only the year you make it.

What records should you keep from day one?

More than most arrivals expect. Keep the arrival date and the day counts behind your residence position. Keep the source of each item of income, plus a workday diary where travel forms part of the job. Build that file as you go rather than at the deadline.

Bank records matter as well. Where foreign income lands in a British account, HMRC may ask which pounds arrived when. Answering from memory two years later is close to impossible.

Does the regime affect National Insurance?

No. National Insurance follows where you work rather than where your investment income sits. An arriving American on a British payroll pays Class 1 contributions from the first payday, whatever the FIG regime does to the income tax position.

The American side has its own answer. A certificate of coverage under the social security agreement decides which system applies, and that question is settled separately from any claim here.

So treat the two as separate decisions. We see arrivals assume one claim settles both, then meet a payroll charge nobody budgeted for.

Mistakes and traps we see with the FIG regime

• Claiming automatically on arrival without checking what the lost allowances cost.
• Forgetting that US-source income counts as foreign here, which changes the size of the claim.
• Ignoring the American side, then meeting a US bill that the British saving does not cover.
• Assuming the four years reset after a short period back abroad.
• Missing the workday records that overseas workday relief depends on.
• Treating the claim as permanent when it has to be made year by year.

Penalties follow the usual British pattern. A return filed without a valid claim can be amended. An inaccurate one carries penalties based on behaviour, and interest runs from the original due date either way.

Does inheritance tax change too?

Yes, and separately from all of this. According to the current guidance, Britain now decides inheritance tax exposure on long-term residence rather than domicile. The test catches people resident for ten of the previous twenty years. The FIG regime does not protect against that clock.

So an arrival planning a long stay should look at the estate position early. The end of the four years is far too late. Our guide to US and UK inheritance tax covers how the two systems interact.

How US UK Tax Accountants helps

We model the claim on both returns before your first British filing deadline. Then we revisit it each year while the window lasts. In our practice, roughly half of American arrivals do better by not claiming in at least one year.

Moving soon, or just arrived? Get in touch with your income mix. We will run both versions alongside our treaty and cross-border work.

Last reviewed 20 September 2026. This article is general information and not personal tax advice. The rules changed substantially in April 2025 and continue to develop, so check the current position before making a claim.