Spring Budget 2024: Non-UK domiciled individuals policy summary (2024)

The government wants the UK to have a fair and internationally competitive tax system, focused on attracting talented individuals and investment that contribute to the growth of the economy. The Government has also consistently maintained that those with the broadest shoulders should contribute a bit more.

The concept of domicile is outdated and incentivises individuals to keep income and gains offshore. The government is therefore modernising the tax system by ending the current rules for non-UK domiciled individuals, or non-doms, from April 2025.The government is introducing a new residence-based regime taking effect from April 2025. This is the latest modernisation of the non-dom regime, following the government’s 2017 reforms which abolished permanent non-dom status.

The government’s new approach will ensure we remain internationally competitive and attract the best international talent. New arrivals to the UK will benefit from 100 per cent UK tax relief on foreign income and gains for the first four years that they are tax resident here, and there will be transitional arrangement in place for current non-doms.

Those who have established ties with the UK and benefit from our public services should contribute accordingly. Therefore, under the new system anyone who has been tax resident in the UK for more than four years will pay UK tax on any foreign income and gains, as is the case for other UK residents.

This reform raises £2.7 billion per year by 2028-29, which is in addition to the current £8.5 billion which non-doms pay in UK tax each year.

Changes to the ‘non dom’ regime

Non-doms are individuals whose permanent home, or domicile, is considered to be outside the UK. The current non-dom regime is a favourable tax regime which allows non-doms who are UK resident to opt to use the remittance basis of taxation. This means that whilst they pay tax on their UK income and gains in the same way as UK domiciles, they pay tax on their foreign income or gains (FIG) only when they are remitted, or brought to, the UK.

This reform removes preferential tax treatment based on domicile status for all new foreign income and gains (FIG) which arise from April 2025. This reform will abolish the remittance basis of taxation for non-doms and replace it with a modernised regime that is simpler and fairer.

For new arrivals, who have a period of 10 years consecutive non-residence, there will be full tax relief for a 4-year period of subsequent UK tax residence on FIG arising during this 4-year period, during which time this money can be brought to the UK without an additional tax charge.

Existing tax residents, who have been tax resident for fewer than 4 tax years and are eligible for the scheme, will also benefit from the relief until the end of their 4th year of tax residence.

This is much simpler and more attractive than our current approach, as these individuals will be able to bring FIG into the UK without attracting any tax charge, encouraging them to spend and invest these funds in the UK.

Non-doms taxed on the remittance basis are eligible for Overseas Workday Relief (OWR) during their first 3 years of UK tax residence. OWR will be retained and simplified under the new system.

Under the new system, regardless of where an individual is domiciled, and after transitional arrangements (see below), anyone who has been tax resident in the UK for more than 4 years will pay UK tax on any newly arising FIG, as is the case for all other UK residents.

This new regime is more generous than countries which have no equivalent scheme, and will be competitive against countries who operate similar systems for new residents.

Liability to inheritance tax (IHT) also depends on domicile status and location of assets. Under the current regime, no inheritance tax is due on non-UK assets of non-doms until they have been UK resident for 15 out of the past 20 tax years. The government will consult on the best way to move IHT to a residence-based regime. To provide certainty to affected taxpayers, the treatment of non-UK assets settled into a trust by a non-UK domiciled settlor prior to April 2025 will not change, so these will not be within the scope of the UK IHT regime. Decisions have not yet been taken on the detailed operation of the new system, and we intend to consult on this in due course.

Transition from the old regime to the new simpler modern system

Given that these reforms represent a significant change for those existing non-doms affected, the government is announcing targeted transitional arrangements for existing non doms. There will be:

• A temporary 50% reduction in the personal foreign income subject to tax in 2025-26 for non-doms who will lose access to the remittance basis on 6 April 2025 and are not eligible for the new 4-year FIG exemption regime.

• Re-basing of capital assets to 5 April 2019 levels for disposals that take place after 6 April 2025 for current non-doms who have claimed the remittance basis. This means that when foreign assets are disposed of, affected individuals can elect to be taxed only on capital gains since that date.

• Non-doms will be able to remit foreign income and gains that arose before 6 April 2025 to the UK at a rate of 12% under a new Temporary Repatriation Facility in the tax years 2025-26 and 2026-27.

• While the government is removing protections on non-resident trusts for all new FIG that arises within them after 6 April 2025, FIG that arose in protected non-resident trusts before 6 April 2025 will not be taxed unless distributions or benefits are paid to UK residents who have been here for more than 4 years.