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history book | accountingweb | Spring Budget – Non-UK Domiciled Individuals
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Chancellor consigns non-dom tax reliefs to history


In reforms that he claims will bring in almost £2.7bn per year by 2028/29, the Chancellor has removed the tax reliefs offered to non-UK domiciled individuals.

6th Mar 2024
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Although it was flagged in the week leading up to the Budget, it was still something of a surprise to learn that a Conservative government would seek to remove the tax reliefs offered to non-UK domiciled individuals.

After all, for generations the party line was that this would have a net negative impact on the economy, since rich individuals would leave the country taking their wealth with them, more than offsetting any increase in taxation.

However, Jeremy Hunt has introduced reforms which he claims will bring in almost £2.7bn per year by 2028/29, a small but welcome addition to government coffers. The fiscal impact during the early years of the new scheme may be limited or even negative, since individuals will be able to remit amounts tax-free that would have been taxable under existing legislation.

The change is not quite as simple as it seems since, in addition to eliminating this status from April 2025, there will also be a new residence-based regime commencing at the same time as well as transitional rules.

Colonialists tax

This status was originally created to assist colonialists working in far-flung corners of the Empire some 200 years ago. In recent years, it has offered great tax advantages on a random basis, typically to individuals whose fathers happened to have had overseas roots.

As long as they could afford to keep various sources of income from overseas offshore, these would remain outside the scope of UK taxes.

Considering all of the fuss, the numbers involved are minuscule. Only approximately 68,000 people registered as non-UK domiciled on tax returns and approximately 55,000 of these are UK tax resident.

New regime for income and gains

The new reform removes preferential remittance-basis tax treatment for those domiciled overseas from April 2025.

Instead, there will be special rules for what they describe as “new arrivals”. These are individuals who have been non-resident in the UK for a period of 10 consecutive years.

While losing the remittance basis benefits, they will be able to claim full tax relief on foreign income and gains for the first four years of UK tax residence. Such claims must be made annually and will result in the loss of personal allowances and capital gains tax annual exemptions. In addition, during that period they will be able to remit this income to the UK, which will often lead to a more favourable position than the existing treatment.

This extends to those already in the UK by April 2025 who have not yet completed four years of tax residence (following a period of 10 years non-residence). In such cases, they will effectively be treated as new arrivals until the end of the fourth year after arrival.

For these purposes, periods will be determined under the current statutory residence test with treaty residence and split years ignored.

Not too simple

To ensure that the new simplification is not too simple, for those that claim the new basis, overseas workday relief is to be retained during the first three years of UK tax residence. However, this only applies to income tax, not national insurance contributions and will be based both on an employee’s residence and whether they opt to use the new four-year regime in respect of foreign income and gains.

Business investment relief will continue to be available for qualifying investments of pre-6 April 2025 income and gains made on or after that date and for qualifying investments made before then.

Inheritance tax

It appears that this new legislation may have been rushed through at a relatively late stage. As a result, removing the exemption from inheritance tax which currently applies to non-doms until they have been UK resident for 15 out of the past 20 years has not been fully considered and a consultation is to be issued, presumably in the near future.

It is currently anticipated that inheritance tax will become chargeable on worldwide assets owned outright when a person has been UK resident for 10 years and will continue to apply until 10 years after they have left the UK.


Current inheritance tax treatment will continue for any non-UK property settled by a non-UK domiciled settlor in a settlement prior to 6 April 2025, that is with careful planning they will often remain outside IHT as “excluded property”. New trusts and additions to existing trusts made by a non-UK domiciled settlor on or after 6 April 2025 will be subject to the new regime.

As such, foreign income and gains in protected non-resident trusts will generally be taxed on the settlor or transferor on the arising basis unless that individual has not been UK resident for more than four years. 

A consultation will take place with regard to future tax treatment but UK situs assets will remain in charge to UK tax, regardless of residence.

The treatment of non-UK assets settled by a non-UK domiciled settlor that become comprised in a settlement prior to 6 April 2025 will not change. 

Provided that these assets continue to meet the current legislative requirements to be excluded property, and subject to any future anti-avoidance provisions, there will be no inheritance tax charges on those assets.

The interaction between the gift with reservation provisions and excluded property trust rules will also remain. This means that excluded property remains outside an inheritance tax charge on the settlor’s death, even if the settlor retains a benefit in the trust assets.  

The treatment of non-UK property comprised in a settlement that currently comes back into scope where the settlor is a formerly domiciled resident will be subject to consultation.

From 6 April 2025, the matching of pre-6 April 2025 foreign income and gains (FIG) rules for trust distributions will continue, but UK resident non-domiciled individuals will no longer be entitled to the remittance basis in respect of worldwide trust distributions. 

Transition period

In order to smooth the process, there will be a temporary 50% reduction in taxable personal foreign income in 2025/26 for non-doms who are not eligible for the new four-year FIG exemption regime. 

It is emphasised that this relief does not apply to capital gains. Instead, current non-doms who have claimed the remittance basis, will be able to elect for a rebasing of any asset to its value at 5 April 2019. This seems to apply to all future foreign asset sales, not just those in 2025/26.

Non-doms will be able to remit foreign income and gains that arose before 6 April 2025 to the UK at a rate of 12% under a new temporary repatriation facility in 2025/26 and 2026/27. This will not include funds generated within trusts or trust structures.

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Replies (2)

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By FactChecker
06th Mar 2024 19:05

Glad that's all so simple then ... just as well that those needing to avail themselves of these new generous terms have the wherewithal with which to pay all those expensive advisers.

Really the only 'winners' are those advisers - a defined captive market that can afford to pay through the nose is what they dream about - whilst it seems unlikely that either the ex-non-doms or the UK treasury will generally notice any material differences.

Thanks (3)
By Justin Bryant
07th Mar 2024 09:59

There is now a short window for non-UK domiciles who are currently UK resident, or planning on moving to the UK, to use EPT planning. Any EPT set up by a non-UK domicile before 6 April 2025 will remain sheltered from IHT indefinitely. If the settlor becomes UK resident then there may well be structuring that can be put in place to shelter overseas income and gains from being taxed on the settlor as they arise. So it's not quite right to say non-dom tax reliefs have been consigned to history.

Thanks (0)