UK tax changes: What they mean for international private clients

On 6 April 2025, the UK tax landscape for non-UK domiciliaries and new UK residents was radically altered, with the introduction of a new framework for taxing UK residents’ non-UK income and gains.

For some, the new rules make the UK more attractive than ever. For others, the changes could present a compelling reason to leave the UK, with jurisdictions such as France and Monaco presenting interesting options for those finding themselves in that position.

We set out below:

1. a summary of the new UK regime for “new arrivals”, for those who may be seeking to relocate from their current jurisdiction; and
2. some of the key tax considerations for those considering relocating to Monaco or France as a result of the UK’s new tax regime for international private clients.

UK

Under the new rules, all UK tax residents - regardless of domicile - will be taxed on their worldwide income and gains.

This is subject to an important exception for ‘new arrivers’ (broadly, those who are in their first four-years of UK tax residence after ten years of consecutive non-UK tax residence). Those new arrivers can claim 100% exemption from UK tax on foreign income and gains arising in that four-year period. No fee is payable for accessing this regime and, unlike the previous remittance basis regime, those foreign income and gains can be brought into the UK at any time - tax-free. 

For some, this regime looks very attractive indeed - for example, individuals who have not previously been UK resident who have non-UK assets standing at a substantial gain or who are due to receive a substantial amount of non-UK source income. Such individuals could relocate to the UK and realise those income / gains free of UK tax under the new regime.

Other ‘winners’ include those intending to be UK resident for a short period in any event, and those who did not qualify for the remittance basis regime but will qualify for relief under the new rules (e.g. UK domiciliaries who have been outside the UK for ten years or more). 

For such individuals, the new regime provides significant opportunities for tax planning, particularly given that foreign assets held by new arrivals will remain outside the scope of UK inheritance tax for ten years and the UK will not impose an exit tax when the individual subsequently ceases to be  UK resident.

On the other hand, the changes pose a dilemma for UK residents who do not qualify for the new regime: should they stay and accept the financial burden of their worldwide income and gains falling within the UK tax net or should they leave  the UK altogether? For those in the latter camp, the tax regimes in France and Monaco are worthy of consideration.

France

Relocation to France offers several potential tax advantages:

• the French impatriation regime allows eligible professionals moving to France to benefit from a 50% income tax exemption on professional income for up to eight years. This can reduce income tax from the standard marginal rate of 49% to 24.5%, provided certain conditions are met (including a requirement that the person has been non-resident in France for at least five consecutive years);
• a five-year exemption from French real estate wealth tax on non-French assets; and
• a six-year exemption from French gift or inheritance tax on receipt of non-French assets from a donor/deceased who is/was not resident in France.

Newcomers to France should be aware that if they remain tax resident in France for more than six years (over a period of ten consecutive years), they will become subject to the French exit tax regime. Under this regime, an exit tax can be triggered on unrealised capital gains when a person with a shareholding worth more than €800,000 or representing more than a 50% participation ceases to be tax resident in France. Payment of the exit tax can be deferred (i) automatically, for moves within the EU and for certain non-EU destinations, or (ii)  upon request, with payment guarantees, for non-EU destinations.

Effectively, the exit tax only becomes due if a sale of the shares occurs within five years of ceasing French tax residence. If the shares are still held at the end of this five-year period, the exit tax is waived.

Monaco

Like France, Monaco potentially also presents significant advantages for individuals relocating from the UK:

• residents in Monaco are not subject to personal or direct taxes (income tax, capital gains tax or wealth tax), regardless of the nature or source of their income, gains or wealth; and 
• only assets located within Monaco are subject to Monaco gift or inheritance tax, with a 0% rate for transfers between direct heirs and spouses and rates ranging between 4% and 16% in other cases. Since 2022, the transfer of assets located in Monaco into a foreign trust is subject to tax in Monaco, with the applicable rate depending on the relationship between the settlor and the beneficiaries.

To date, Monaco has only entered into a tax treaty on inheritance tax with France.  In principle, this applies only to French and Monegasque nationals domiciled in one of these two States, but a decision handed down by the Court of Cassation has indicated that the treaty may potentially also apply to deceased individuals who are nationals of a third country, subject to certain conditions.

As for any jurisdiction, careful management of the tax residence status of individuals relocating to Monaco is essential as other jurisdictions may still claim taxing rights. French nationals relocating to Monaco face unique tax considerations in this regard. Under the double tax treaty between France and Monaco, French nationals may still be tax resident in France for income tax purposes and, therefore, subject to French income tax on their worldwide income unless they meet certain strict criteria. In addition, French nationals relocating to Monaco remain liable to French wealth tax on their worldwide taxable assets.

What is next?

The UK’s tax shake-up presents potentially lucrative tax planning opportunities for some. For example, French residents who have not previously been UK resident could relocate to the UK and realise significant capital gains free of UK tax under the new UK regime. 

Careful planning would be required where such persons have been resident in France for more than six years. To fall within the French exit tax waiver, they must not sell relevant assets until five years have elapsed since their change of residence. However, any gains on those assets realised more than four years after moving to the UK would be subject to UK tax. Interim relocation to another jurisdiction before becoming  UK tax resident may therefore be advisable in this scenario.

For those currently or previously UK resident and ineligible for the new regime, relocation to France and Monaco present potentially attractive options.

Our tax specialists across London, Paris, and Monaco are available to help navigate such complex cross-border tax rules.