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Understanding the changes to non-dom rules

29th Apr 2024
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Do you know Resident Non-Domiciled (RND) rules have been around for a long time – 226 years in fact – but this is all going to change in April 2025.

Understanding the changes to non-dom rules | Davenport Thomas | Big Ben and westminster bridge in London at spring
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Spring Budget 2024

The Chancellor announced in the Spring Budget that changes and restrictions would be brought to the regime, although the intention is to continue to attract entrepreneurs and foreign talents to emigrate to the UK.

The main changes

The notable changes are the abolition of the notion of domicile and the concept of remittance. These are the main proposed changes:

  • The current regime will be abolished, to be replaced with a four-year, residence-based regime, with effect from 6 April 2025
  • There will be transitional provisions, which will allow for a repatriation of foreign income and gains, taxable on remittance to the UK, for two years from 6 April 2025 at a flat rate of 12%
  • For current non-domiciled individuals there will be a 50% reduction in personal foreign income subject to UK tax in 2025/26 (i.e. in the year of transition) and capital assets can be rebased to 5 April 2019 values for disposals after 6 April 2025
  • It is so far understood that excluded property trusts established prior to 6 April 2025, should retain protections for earlier years, but from 6 April 2025 any income and gains arising within them will be taxable on the settlor. It is believed that Inheritance Tax (IHT) protections should remain
  • Under the new rules, individuals who come to the UK will only be taxable on their UK income and gains for the first four years of UK tax residence, assuming they’ve not been UK tax resident in the preceding 10 years. They will be able to remit foreign income and gains (arising in those four years) to the UK during that time, with no further tax charges.

IHT

IHT for RND is also following the changes. The government is moving the assessment to be exclusively based on residence and no longer on domicile and will publish a policy consultation followed by draft legislation later this year.

The Chancellor described the new system as “A modern, simpler and fairer residency-based system” but obviously a change in government following a General Election could mean it’s all change again.

 

At Davenport Thomas we have been helping clients craft retirement and investment strategies for over 18 years. So, for a discussion about how we can help you and your clients, you can book directly into Richard’s diary here, email us or call us.

[email protected]
Contact number – 0208 6182077
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