Spring Budget 2024 – Abolition of Non-Dom Status
The government has announced their intention to scrap the non-dom regime from April 2025 across all taxes, pre-empting Labour’s well publicised plan to do likewise.
Broadly, the non-dom regime currently allows individuals who are “resident” but not “domiciled” (effectively those who consider themselves to only be temporarily living in the UK) to only pay UK tax on their UK based income/ assets. At a basic level the current legislation ensures that non-dom individuals do not pay UK income tax or capital gains tax on foreign income and gains (“FIG”) unless such FIGs are remitted to the UK . For inheritance tax (“IHT”), non-dom deceased individuals are only liable for UK IHT on their UK based assets, and not on their worldwide estates.
However, today Jeremy Hunt has announced that the non-dom regime will be abolished from 6 April 2025, and replaced with a residence-based system. We await full details, but the individual technical guidance indicates that qualifying individuals will not pay UK tax on FIG arising in the first 4 tax years after becoming UK tax resident and will be able to bring these funds to the UK free from any additional charges. After the initial 4 year period, such qualifying individuals will then be subject to UK based tax on their worldwide income and gains. In addition, the government has indicated that they plan to also move inheritance tax to a residence-based regime at the same time, but this will be subject to consultation, with further details to therefore follow in due course.
This will represent a major change in how such individuals are taxed, and anyone who may be affected should consider taking advice as a matter of urgency.
