The current tax treatment for non-UK domiciled individuals (non-doms) is to be abolished and replaced with a new residence-based regime from 6 April 2025.
A non-dom only pays UK tax on the money they earn in the UK. They do not have to pay UK tax on income and capital gains earned overseas (unless they bring their money into Britain or deposit it into a UK bank account). They can retain the status for up to 15 years but there is an annual fee of at least £30,000 after seven years.
The previous government had announced the abolition of tax reliefs for those who are not domiciled in the United Kingdom. Under their changes, new arrivals will only be able to avoid tax on overseas income for the first four years of living in the UK. After that, they will be taxed in full on their worldwide income and gains. The new government will implement the 4-year foreign income and gains (FIG) regime announced by the previous government. However, certain aspects of these proposals are viewed as being overly generous and will be tweaked.
On 29 July 2024, the government issued a policy paper setting out changes to the tax regime from April 2025.
The table below summarises the government’s proposed changes to the current non-dom regime.
| Tax/policy | The UK government’s changes in policy paper published July 2024 |
| New residence-based regime for foreign income and gains | Removal of preferential tax treatment based on domicile status for all new foreign income and gains (FIG) that arise from 6 April 2025. |
| Introduction of an internationally competitive residence-based regime, providing 100% relief on FIG for new arrivals to the UK in their first four years of tax residence, provided they have not been UK tax resident in any of the 10 consecutive years prior to their arrival. | |
| From 6 April 2025, the protection from tax on income and gains arising within settlor-interested trust structures will no longer be available for non-doms who do not qualify for the 4-year FIG regime. | |
| A review of offshore anti-avoidance legislation, including the Transfer of Assets Abroad and Settlements legislation, to modernise the rules and ensure they are fit for purpose. This is anticipated to take place from 2026/27. | |
| A form of Overseas Workday Relief (OWR) will be retained. | |
| Transitional arrangements for affected non-UK domiciled individuals | The policy announced by the previous government, providing a 50% reduction in foreign income subject to tax for individuals who lose access to the remittance basis in the first year of the new regime, will not be introduced. |
| UK resident individuals who are ineligible for the four-year FIG regime (or who choose not to make a claim for a tax year) will be subject to Capital Gains Tax (CGT) on foreign gains in the normal way. There will be a form of rebasing relief for current and past remittance basis users. | |
| A new Temporary Repatriation Facility (TRF) will be available for individuals who have been taxed on the remittance basis. | |
| New residence-based regime for inheritance tax (IHT) | Replace current IHT system with a new residence-based system from 6 April 2025. |
| Individuals will have to IHT on worldwide assets following 10 years of residency in the UK. There will also be a 10-year tail, meaning that an individual will have to be non-resident in the UK for 10 years for international assets to be outside the scope of IHT. | |
| End the use of Excluded Property Trusts to keep assets out of the scope of IHT. |
Despite being seven months on from the original date that many of the above points were first raised, we still do not have detailed guidance as to how the new rules will operate. It is therefore hoped that guidance will be announced as part of the Autumn Budget on 30 October 2024, which will clarify the position.
Until this point, people currently benefitting from the non-dom regime are not yet able to plan their affairs with any certainty, in respect of the coming changes.
However, it is clear that action will need to be taken to maximise the benefit of remaining tax reliefs going forwards, and that detailed advice will need to be obtained in respect of this. In addition, if internationally mobile tax-payers want to rearrange their affairs before the new rules take effect, expected to be in April 2025, this will not give them long to do so.
We will continue to monitor developments and let you know of any updates.
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