UK Tax Update for Professional Sportspeople from 6 April 2025
With effect from 6 April 2025, the previous remittance basis for UK income and capital gains tax was abolished. Instead, a new foreign income and gains (FIG) regime came into effect. This means that an individual’s residence status, rather than their domicile, determines the extent to which UK tax is due. This insight sets out the particular issues relevant to professional sportspeople.
Replacement of the Remittance Basis
The new four-year FIG regime replaces the old remittance basis. It provides exemption from UK tax to foreign income and gains from 6 April 2025. Significantly though, the exemption does not apply to performance income.
Overseas Workday Relief
The revised overseas workday relief (e.g. a professional footballer spending time overseas on pre-season training, pre-season tours and European competitions) is also based on an individual’s residence. It will provide exemption for non-UK work duties for up to the first four years of UK tax residence. The previous requirements for the income to be received into an overseas bank account and not remitted no longer apply.
Overseas workday relief is, however, subject to an annual limit equal to the lower of 30% of the qualifying employment income or £300,000 per tax year.
Temporary Repatriation Facility (TRF)
The TRF allows professional sportspeople who previously claimed the remittance basis to bring previously unremitted foreign income and gains into the UK. Reduced tax rates will apply of 12% for the years 2025/26 and 2026/27 and 15% for 2027/28.
This relief may have limited use for professional sportspeople given that overseas income and gains are typically not remitted to the UK, especially for footballers who can use their club salaries to fund their day to day living needs.
Rebasing Opportunity
Professional sportspeople who previously claimed the remittance basis will be able to rebase their capital assets to their open market value on 5 April 2017.
Inheritance Tax (IHT)
A controversial change sees an individual’s exposure to IHT determined on the duration of UK residence. For the first 10 years of UK residence, only UK based assets will fall within the charge.
Afterwards, the scope of IHT expands to include worldwide assets. The controversy focusses on situations where individuals remain within the scope of being subjected to IHT even after leaving the UK – the so called IHT ‘tail’. This starts at three years for individuals who have been UK resident for between 10 and 13 years, increasing by one year for every further year of UK residence up to a maximum of 10 years.
Performance Income
The new legislation applying from 6 April 2025 defines ‘performance income’ as any income chargeable to income tax (however that charge arises) that results directly or indirectly from the performance of a relevant activity, whether performed in the UK or not.
Relevant activities include the performance of sport, participation in any sound or video recording and any activity in connection with a commercial occasion or event. This widely drafted definition means that income derived from match fees, media appearances, endorsement, sponsorship or image rights deals will, in almost all circumstances, be subject to UK tax without the benefit of the FIG regime.
The tax position of professional sportspeople has been scrutinised more closely by HMRC than a lot of other classes of taxpayer. It is unlikely this will change. These new rules are complex, so professional sportspeople are urged to seek appropriate advice from a suitably qualified and experienced advisor to get on top of compliance and apply planning considerations where possible.
If you would like to discuss further, please do not hesitate to contact Pete Fairchild or a member of your Crowe team.
