The UK’s tax changes from 6 April 2025 affect how some Indian families should review savings and estate plans across two countries. The first question is UK tax residency: a person’s status for each tax year shapes how foreign income is treated. An Indian tax exemption does not, by itself, settle the UK position. This guide explains the main rules and the checks worth making with a qualified cross-border adviser.
Start with the Statutory Residence Test
UK tax residency is decided under the Statutory Residence Test (SRT), not by nationality, visa type or a simple count of years living in Britain. HM Revenue and Customs applies automatic overseas tests and automatic UK tests first. If neither gives an answer, the sufficient ties test considers days in the UK alongside connections such as family, accommodation, work and prior UK presence.
Some thresholds are familiar: spending 183 days or more in the UK during a tax year is one automatic UK test. But other tests turn on details such as previous residence, workdays and whether someone has a UK home as well as an overseas home. Use the current HMRC RDR3 guidance to assess the full facts; this summary cannot determine an individual’s status.
For Indian families, residence status is the hinge point. Check it afresh for each tax year and keep a record of travel and relevant workdays. Do not infer UK tax residence only from a visa, a home address or years spent in the country.
How the 2025 foreign-income rules affect Indian savings
From 6 April 2025, the UK replaced the remittance basis with taxation on the arising basis for foreign income and gains, subject to specific reliefs. In general, a UK tax resident may need to account for foreign income as it arises rather than only when money is brought to the UK. The precise treatment depends on the income, tax year and any relief claimed. HMRC sets out the change in its guidance on UK residence and foreign income.
That makes Indian deposits a question to review, not a blanket rule that every account holder owes the same amount. NRE, NRO and FCNR accounts can have different Indian tax treatment, while UK treatment depends on UK tax residency and the character and timing of the income. For NRE interest, an Indian exemption does not automatically remove a UK reporting or tax question. Keep bank statements and interest certificates for the relevant UK tax year. Readers new to NRE and NRO accounts can also see NRI Affairs’ account guide.
Some new arrivals may qualify for the four-year foreign income and gains regime. Broadly, an eligible person must be within their first four years of UK tax residence after at least ten consecutive tax years of non-UK residence. Relief is claimed through Self Assessment on eligible foreign income or gains; it is not automatic, and claiming can mean losing specified UK allowances for that year. Read HMRC’s current FIG eligibility and allowance guidance before relying on it.
For families comparing Indian savings with UK tax, the FIG rules are a reason to check eligibility early, not to assume an exemption. The relevant dates, years of prior non-residence, the type of income and a claim for the specific tax year all matter. The phrase “four-year relief” should not be read as automatic relief on every overseas asset or on every return.
The separate 10-year test for UK inheritance tax
UK inheritance tax changed from a domicile-based system to a long-term-residence test for many overseas assets from 6 April 2025. A person can generally meet the long-term UK residence test after ten consecutive UK-resident tax years or at least ten UK-resident years within the previous twenty. If the test applies, some assets outside the UK may be within the scope of inheritance tax. That does not mean every estate automatically owes tax.
The residence link may continue after a person leaves. HMRC says the period can run from three to ten tax years, depending on residence history. For example, its guidance gives a three-year tail for someone resident for ten to thirteen years, increasing with additional years of residence. The details and transitional rules matter, so check HMRC’s long-term UK residence guidance against the person’s dates and estate.
For Indian families, estate planning may therefore require a longer timeline than the date of a move back to India. A residence history, ownership structure, asset location and any applicable exclusions can affect the result. A cross-border adviser should assess the specific estate; the ten-year marker alone is not a tax calculation.
A practical checklist before filing or moving
First, establish residence status for the tax year using the SRT and retain a dated travel record. Second, list interest and other foreign income from Indian accounts, noting when it arose and what tax was paid in India. Third, check whether the FIG regime could apply and whether a claim is appropriate for that year. Finally, count UK-resident tax years across the previous twenty and ask how long long-term-residence status could continue after departure.
Together, these checks connect residence status, foreign income and gains, NRE interest and estate exposure without treating them as one rule. They also give an adviser a concrete starting pack: travel records, account statements, tax certificates, residence history and details of assets held in both countries.
Questions Indian families ask about UK tax residency
Does an NRE account’s Indian tax treatment decide whether its interest is taxed in the UK?
No. The Indian treatment and UK treatment are separate questions. UK tax residency, the tax year, the type of income and any available relief need to be considered. Keep the account records and ask an adviser to review both jurisdictions.
Can a recent arrival claim the four-year FIG regime automatically?
No. A qualifying person must meet the residence-history conditions and make a claim for eligible foreign income or gains through Self Assessment. The person should also weigh the effect on allowances before claiming.
Does leaving Britain immediately end UK inheritance tax exposure on overseas assets?
Not necessarily. A person who meets the long-term UK residence test can remain within it for a period after departure. The length depends on residence history and the rules that apply to that person.
What should a family check first?
Start with the person’s residence status for the relevant tax year. Then gather account, travel and residence records needed to assess foreign income and gains and possible estate exposure. This article is a reporting guide, not individual tax advice.
