The Conservatives have beaten Labour to it in abolishing the current non-dom regime, announcing a Temporary Repatriation Facility at the same time. Learn what you need to know, and what to watch out for as the details are fleshed out.
In a move no doubt intended to strike a populist note and help prevent the 6 March Spring Budget from being his last ever, Chancellor Jeremy Hunt has announced the abolition in just one year of the currently generous – and undeniably controversial – non-dom tax regime.
Non-domiciled individuals are, of course, those who are based in the UK but whose permanent home or “domicile” is deemed to be abroad for tax purposes. This means they have been able to enjoy a seven-year starter period of paying no UK tax at all on income or gains derived from overseas assets before going on to be able to pay a £30,000 annual remittance charge to maintain this state of affairs (until being in the UK for 12 out of 14 years, at which point the levy doubled to £60,000).
But following the Spring Budget announcement, from April 2025 new non-doms will have to pay the same taxes as Britons after only four years. Those who are already in the UK will be able to benefit from tax relief up to the end of their fourth year of tax residence.
A temporary 12% tax rate to take advantage of
To soften the blow, there will be a temporary 50% reduction on foreign income subject to tax in 2025-26 for non-doms losing access to the remittance facility and an ability to re-base capital assets to 5 April 2019 levels when disposing of them after April 2025, meaning that their tax exposure is only on capital gains from those six years. And, perhaps most significant of all, there will be a “Temporary Repatriation Facility” for the 2024/25 to 2026/27 period which will allow non-doms to remit overseas income and gains to the UK at a tax rate of just 12%.
International tax advisers are predicting a rush of non-doms seeking to benefit from the temporary 12% tax rather than be hit with top rate taxes
International tax advisers are predicting a rush of non-doms seeking to benefit from the temporary 12% tax rather than be hit with top rate taxes. However, it has also been suggested that up to a fifth of the non-doms we currently have will simply leave the UK for more favourable regimes. It should be noted that some countries offer tax relief on foreign income and gains for a decade or even more. In Greece, for instance, non-doms can pay a remittance of €100,000 per tax year, irrespective of the amount of income earned abroad, for up to 15 years; in Italy, the regime is similar, and even allows for the remittance basis to be extended to family members for a €25,000 levy.
Top Tip
Lee Goggin
Co-Founder
Estate planning for internationally mobile families
Furthermore, the UK government is removing protections on non-resident trusts for all new foreign income and gains arising within them from April 2025, although those stemming from before this point will not be taxed unless distributions or benefits are paid to UK residents who have been here for more than the crucial four-year residency period.
There are clearly some further important details related to wealth structuring and estate planning that the current Conservative government still has to work out and internationally mobile families will be watching closely for the results of its consultation on inheritance tax (IHT) in a non-dom context
There are clearly some further important details related to wealth structuring and estate planning that the current Conservative government still has to work out and internationally mobile families will be watching closely for the results of its consultation on inheritance tax (IHT) in a non-dom context. What is being signalled is a new residence-based scheme whereby IHT only kicks in if the deceased had been based in the UK for a decade. The fact that the tax regime could be overhauled completely again if Labour wins this year’s General Election (as many expect) is naturally a further complicating factor. Given that Labour already had abolishing the non-dom regime as a key pledge, they could be looking for even more eye-catching ways to be seen to be making ‘those with the broadest shoulders’ bear more of the tax burden.
Responsiveness will be key
While it is easy to understand the raid on non-doms in political terms, these sweeping tax reforms threaten to make life difficult for wealthy families with international business and other financial interests. Indeed, it is difficult for anyone to know how the land will lie in the years ahead for all manner of wealth management issues. Having truly expert – and truly proactive – advisers fighting your corner is going to be paramount to ensure that you can benefit fully from the Temporary Repatriation Facility or any other benefits and reliefs you may be eligible for.
While it is easy to understand the raid on non-doms in political terms, these sweeping tax reforms threaten to make life difficult for wealthy families with international business and other financial interests
Luckily, there are scores of leading wealth managers on our panel with just this kind of tax expertise, and all the internationally investment and wealth structuring capabilities you will need alongside. Why not hear in person what the industry’s leading lights are thinking on non-dom solutions currently? We can set up conversations at a time to suit, fast and free. Simply take our short wealth manager matching questionnaire or get in touch with our knowledgeable and friendly team to find out more.
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