Backdrop

Non-doms are individuals who are resident in the UK for tax purposes, but who are not domiciled in the UK (meaning the UK is not deemed to be their permanent home) – usually because they were not born in the UK, and they do not intend to stay in the UK forever.

As things stand, non-doms can choose to restrict their UK tax exposure on foreign income and gains (FIG) to the extent that they bring or ‘remit’ FIG to the UK. This is known as the remittance basis of taxation, and it allows very wealthy individuals who live in the UK to significantly reduce their exposure to UK tax. These individuals sometimes have to pay a charge to take advantage of this, but the charge will in many cases be significantly less than they would be paying HMRC if their worldwide income and gains were subject to tax in the UK.

Changes Announced

The Conservatives had already pledged to reform the regime from April 2026 when they delivered their March 2024 budget. Labour have to a large extent adopted the changes proposed by the Conservatives, but with some amendments. In simple terms however they will bring into the scope of UK tax all FIG which arise from April 2025.

There will be some protection available to new arrivals to the UK. Those who have a period of 10 years consecutive non-residence will enjoy full relief on FIG for their first 4 years of UK tax residence, and during this time they will be able to bring the money back to the UK without a tax charge.

Settlor-interested trusts that have been set up by non-UK domiciled settlors will also lose protection, although there will be some transitional provisions in respect of pre-2025 FIG.

The concept of domicile will also be removed for Inheritance Tax (IHT) purposes, and again a residence based system will be introduced, which in broad terms will mean that an individual who has been tax resident for at least 10 of the previous 20 tax years will be liable to IHT on their worldwide assets. Subject to transitional points, trusts containing assets settled whilst an individual was non-UK domiciled will lose their protection from IHT once the settlor becomes ‘long term resident’ in the UK.

Existing Non-Doms

There will of course be a number of UK tax residents currently using the remittance basis who will be affected. The Government have confirmed the following transitional measures to soften the impact on them:

  • For disposals after 6 April 2025 by current non-doms who have recently claimed the remittance basis, a re-basing of capital assets to the value at April 2017 (meaning only growth in value from that date will be taxed);
  • A 12% tax rate on remittances of pre-April 2025 FIG which take place in 2025/2026 or 2026/2027, and a 15% tax rate on remittances of pre-April 2025 FIG which take place in 2027/2028.

Please click here to go back to our full Autumn Budget 2024 analysis.