Changes to UK Non-Dom Tax Reforms

We wanted to keep you informed about the latest developments regarding the UK government’s non-domiciled (non-dom) tax reforms.

These changes, announced during October’s Budget, are undergoing adjustments in response to concerns raised by the non-dom community.

What’s Changing?

Chancellor Rachel Reeves has outlined amendments to the Finance Bill to address the concerns of non-doms and encourage overseas wealth to be repatriated to the UK. Key changes include:

Temporary Repatriation Facility Extension:
This facility allows non-doms to bring foreign income and gains made before April 2025 into the UK at a discounted tax rate. The rates will be 12% for the 2025-26 and 2026-27 tax years, rising to 15% in 2027-28, compared to the maximum income tax rate of 45%. The facility has been refined to make it more accessible.
End of the Current Non-Dom Regime:
From April 2025, the 15-year tax exemption for non-doms will be replaced by a four-year residence-based tax system designed to maintain international competitiveness.
Inheritance Tax Concerns:
While some provisions have been adjusted, changes to inheritance tax (IHT) on offshore trusts remain a significant concern for many non-doms, cited as a major factor behind an exodus of wealthy individuals.

Why It Matters

These reforms aim to raise £33.8 billion over the next five years while making the UK’s tax system fairer. However, they have also contributed to a rise in the number of millionaires leaving the UK, with over 10,000 departing in 2024 - a 157% increase from 2023.

What’s Next?

The government is keen to balance fairness with competitiveness. Reeves reassured stakeholders that the reforms will not impact double-taxation agreements, and the Treasury is open to further ideas to make the UK an attractive place for entrepreneurs and business leaders.

What You Should Do

If you are a non-dom or affected by these changes, it’s vital to review your financial plans now. The new regime may significantly impact your tax liabilities and investment decisions.

At LSR Partners, we’re here to help you navigate these changes with tailored advice. Whether you need to reassess your tax strategy, explore the temporary repatriation facility, or ensure compliance, we can guide you every step of the way.

For a more comprehensive deep dive, see our original Podcast on the abolition of the Non-Domicile scheme and Overseas Workday Relief following the Budget announcements:

Definitions:

*Non-dom (Non-domiciled) – this is an individual whose permanent home, or domicile, is considered to be outside the UK.

**Non-Dom status - this allows for UK residents whose permanent home is not in the UK, not to be taxed on foreign income and gains which are not brought into or used in the UK. This also includes not subjecting non-UK assets to UK Inheritance Tax when a non-dom dies.

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