Britons returning from France may qualify for four-year tax break

Britons returning to the UK after living outside the country for at least 10 consecutive tax years can benefit from a four-year tax break on eligible foreign income and capital gains.

The foreign income and gains (FIG) regime came into effect last year, and means, for example, that a British person who has lived in France for 10 years and wishes to move back to the UK could claim relief on eligible income from French property, overseas investments and foreign bank interest.

Separate changes to inheritance tax mean that people who have lived abroad long enough to lose their ‘long-term UK resident’ status no longer pay UK inheritance tax on their overseas assets.

Tax advisers say some wealthy British clients living abroad are considering returning to take advantage of the new regime, which was introduced on April 6, 2025, by the Labour government under then-chancellor Rachel Reeves (although the reform was first proposed by the previous Conservative government).  

Who qualifies?

While the most likely beneficiaries of the scheme will be returning British citizens, it is open to anyone meeting the UK residence conditions. 

To be eligible, applicants must be UK tax residents under the Statutory Residence Test, have spent at least 10 consecutive tax years as non-UK residents before moving to the UK and be within their first four years of UK tax residence.

The four-year relief period begins when someone becomes a UK tax resident, not when they physically return to the UK or make their first claim.

What income is covered?

Eligible foreign income includes dividends from companies based outside the UK, interest from overseas bank accounts, profits from overseas property rentals, profits from businesses operating outside the UK and certain foreign pension income.

Qualifying capital gains from overseas assets can also be covered, meaning money covered by the scheme can be transferred to the UK without an additional tax charge.

How to claim the tax relief

Eligible people do not automatically receive the relief. They must claim it through their annual UK Self Assessment tax return and can choose which qualifying foreign income and gains to include.

However, the benefits do not come without disadvantages. Anyone making a FIG claim loses their UK personal allowance and annual Capital Gains Tax exemption for that tax year, as well as certain other allowances.

This means that people should consider the impact of these losses before deciding whether to make a claim.

If you are considering moving back to the UK, would these tax breaks influence your plans? Let us know at feedback@connexionfrance.com.