With the newly elected Labour Government likely to implement new tax rules for non-doms, understanding these forthcoming changes is crucial for planning and compliance.

Despite fears of an exodus, recent data shows that the number of non-doms in the UK has actually increased, suggesting a complex relationship between tax policy and residency choices.

Current benefits and proposed changes

Under the current regime, non-doms benefit from significant tax advantages, including the option to be taxed on the remittance basis.

This means that foreign income and gains are only taxed if they are brought into the UK.

However, the Labour Government is expected to implement changes similar to those proposed by the previous Conservative Government, with some notable differences.

Key proposed changes:

Individuals moving to the UK or returning after being a non-UK resident for at least 10 years will benefit from a special tax regime for their first four years, rather than the current 15 years.

During this period, all non-UK income and gains will be exempt from UK tax, even if spent in the UK.

After the initial four years, they will be subject to UK tax on their worldwide assets, including income and gains from non-UK structures.

After 10 years of UK tax residency, individuals will face Inheritance Tax (IHT) on their worldwide assets.

This includes non-UK assets held in trusts, which are currently protected from IHT.

There is also a suggestion that individuals’ worldwide assets might remain exposed to IHT for a period after leaving the UK, although this period might be reduced in response to feedback.

Impact on non-doms and planning considerations

Despite the anticipated changes, the number of non-doms in the UK rose to 60,700 in the last year.

This increase indicates that the threat of stricter tax rules has not deterred non-doms from residing in the UK.

In fact, the total tax take from non-doms reached £8.9 billion in 2022-23, up £474 million from the previous year.

Strategic planning for non-doms

Given the likelihood of tax changes taking effect from 6 April 2025, non-doms should plan proactively.

Evaluate current asset holdings and consider restructuring to minimise future tax liabilities.

Familiarise yourself with the potential tax obligations under the new rules, especially regarding worldwide income and gains.

Although Labour has not been clear on these, the previous Government proposed incentives for existing non-doms to bring foreign profits into the UK. Keep an eye on updates.

With the possibility of IHT extending to worldwide assets, ensure your estate planning strategies are secure and compliant.

What to expect

The Government’s proposed changes aim to close loopholes and ensure non-doms contribute fairly to the UK tax system.

However, the exact details and transitional provisions remain unclear. Businesses and individuals must stay informed and be ready to adapt their tax planning strategies accordingly.

If you are a non-dom, our team can help you understand the implications of the new rules, optimise your tax position, and ensure compliance.

Contact us today to schedule a consultation and prepare for the forthcoming changes.