In the 2024 spring Budget, Chancellor Jeremy Hunt announced that non-dom tax status would be “abolished” as of April 2025, replaced by a “modern, simpler and fairer” taxation system. David Pickstone and Matt Greene, partners in our Tax Litigation and Resolution team, explain what these changes may mean for affected individuals and for HMRC.
The abolition of the non-dom regime will have significant consequences for those individuals who are currently claiming non-dom status, as well as those coming to the UK in the future (at least those planning to stay for more than 4 years). For those existing non-doms, there is some relief in the detail of the budget which tells us that the first year of the new regime will be 25/26, and that there will be transitional arrangements.
Additional details will be released in due course. Transitional measures announced today include an option to rebase the value of capital assets to 5th April 2019 (in other words limit their capital gains tax exposure) and a 50% exemption for the taxation of foreign income for the first year of the new regime. In addition, non-doms will be able to bring previously accrued foreign income onshore at a 12% rate of tax – a measure aimed at bringing money into the UK quickly, in exchange for a lower rate of tax.
Assuming this is not simply an election tactic aimed at undermining Labour’s policy by adopting it, the government will be hoping they have struck the right balance between a fair system of taxation and the risk of pushing wealthy international taxpayers to move to other jurisdictions. Time will tell, but tax and wealth planning advisers will now be looking at all the options available to their non-dom clients to mitigate the effects of these changes and HMRC will no doubt scrutinise any new planning very carefully when the time comes.
Other consequences might arise in relation to tax transparency. At the moment, non-doms do not usually need to disclose to HMRC details of their foreign source income unless it is brought into the UK. That will change when the new regime comes into force. HMRC will likely be poring over details of foreign source income when it is disclosed to check that non-doms have paid the right amount of tax in the past. In other words, skeletons might be revealed from the closet when HMRC review details of structures previously not shown to them.
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