Following on from the Spring Budget, there were several notable changes announced by the Chancellor, Jeremy Hunt. One of these topics was around Non-Domiciles – brought into the spotlight by Rishi Sunak’s wife Akshata Murty – and changes to simplify the system.
Non-Domiciled Regime
The Non-Domiciled Regime, or ‘Non-Dom’ individuals for short, can protect their income and wealth from UK taxation on assets kept outside of the UK. There are several factors that can determine whether someone has a domicile inside or outside the UK. In a nutshell, domicile refers to an individual’s permanent home or ‘homeland’.
Domiciled rules and residency rules operate separately from each other, so it is possible to be a UK tax resident for a particular tax year under the Statutory Residence Test, but then also be non-UK domiciled under these rules.
Individuals who are not domiciled in the UK, but are UK tax resident, can opt to be taxed on the remittance basis, whereby they are taxed only on income and gains remitted to the UK, rather than their worldwide income. Therefore, they can lower or completely mitigate their UK tax liability on their overseas sources of income and capital gains.
Recent Changes to the Non-Domiciled Regime
The recent Budget announcement on 6th March 2024 by Jeremy Hunt published the government’s agenda to abolish and phase-out the non-dom regime.
From 6 April 2025, the remittance basis will be scrapped and replaced with a residence-based tax system under which new arrivers to the UK, or individuals returning to the UK after at least 10 years overseas, can elect not to be taxed on their foreign income or gains during the first four years of UK tax residence (the FIG regime).
Furthermore, individuals who have already been resident in the UK for four tax years on 6 April 2025 (i.e., a tax resident since 5th April 2022) will not be eligible for the FIG regime and will be subject to UK taxation on their worldwide income and gains as it arises.
The changes announced in Budget 2024 represent a significant development in the evolution of the non-domiciled regime in the UK. While aimed at enhancing tax transparency and fairness, these amendments also raise important considerations for affected individuals and stakeholders across various sectors. As the new measures come into effect, it will be crucial for non-domiciled individuals and their advisors to carefully navigate the evolving regulatory landscape and adapt their tax strategies accordingly.
If this upcoming change is likely to affect you then don’t hesitate to get in touch with our tax experts to make sure you are prepared for these big changes.
