End of Non-Dom Status? The tax changes you can’t ignore

Recent indications from the Labour government suggest a potential softening of the approach, perhaps in response to analysis suggesting that the policy may generate little or no revenue. However, given that both major UK political parties have advocated for significant reform in this area in recent years and that Labour campaigned on this policy while in opposition, it remains unlikely that any major alterations to the proposed changes will be made.

With the new rules set to take effect from 6 April 2025, individuals and trustees who may be impacted should consider whether they need to act quickly. Understanding the changes and exploring available options is crucial before the new regime applies. Below, we highlight some key considerations you should be aware of:

End of the UK domicile regime: The new rules are expected to largely end the current UK domicile regime, which allows individuals without a UK domicile to live in the UK and potentially benefit from a favourable tax position for up to fifteen UK tax years (and possibly longer).

Impact on remittance basis and long-term UK residents: Individuals who currently benefit from the “remittance basis of taxation” (which broadly allows non-UK domiciled individuals to receive non-UK income and gains free of UK tax, unless these are brought into the UK). Those who are “long-term UK residents” (broadly by being UK residents for more than four UK tax years) are likely to be affected.

Inheritance tax changes for non-UK domiciled residents: Non-UK domiciled UK residents are expected to become subject to UK inheritance tax on their worldwide assets within a shorter timeframe than under the current rules.  Under the new rules, ten tax years of UK residence may bring an individual’s worldwide assets within the IHT net.

Potential benefits for new UK residents: Those who have been UK residents for less than four tax years and who were non-UK residents for a sufficient period before their arrival may actually receive greater benefits under the new regime than under the current rules in that four-year period.

Exit rules for UK residents: There are rules in place that prevent immediate relief for individuals leaving the UK. They may need to be non-UK residents for a prescribed period (depending on the tax in question and their prior UK residency) to return to the UK and be treated as a “new arriver” under the new rules.

Impact on trusts: Individuals who have contributed assets to a trust and are UK residents and trustees who administer them should take note, as trusts that were not previously subject to UK tax may now be. Trustees should understand how the changes impact the trusts they manage.

Advice for individuals moving to the UK: Those planning to move to the UK are advised to seek professional advice before making the move, as it may be too late to benefit from certain tax advantages once they are considered residents in the UK.

The coming months will be crucial for currently non-UK domiciled individuals as further details emerge regarding the final shape of the new tax regime. Proactive planning is essential to consider these changes effectively and to ensure tax efficiency under the new system. If you believe these changes may affect you, we strongly recommend seeking legal and tax advice as soon as possible.

We have previously written on the expected changes, and while further details are awaited, the key aspects remain largely unchanged. You can read our previous insights here:

Four-year Foreign Income and Gains regime confirmed – how will this affect ‘non-doms’?

Will the forthcoming changes to the tax regime for non-domiciled individuals deter people from coming to the UK?

Trusts Transformed: The four-year foreign income revolution

Contact our Wealth Preservation team today for further information or to discuss how these reforms may impact your personal circumstances.