March 14, 2024 Budget 2024: Changes for Non-UK Doms
In the Budget 2024 the Chancellor announced an overhaul of the current non-dom tax regime. Here we break down the current regime and what’s changing.
The current regime
What is “non-dom” status?
A ‘non-dom’ is someone who is:
- resident in the UK; and
- domiciled outside the UK
What advantages do non-doms currently have?
Normally UK residents will be taxed on the ‘arising basis’ which means they are liable to pay UK tax on their worldwide income and gains, whenever they arise or accrue.
Under the current regime non-dom UK residents may elect to be taxed on the remittance basis which means they have to pay tax on their foreign income or gains (FIG) only when funds are remitted or brought to the UK. However, claiming the remittance basis may result in losing their entitlement to UK personal allowances and to the Annual Exempt Amount for Capital Gains Tax.
Remittance basis charge (RBC) for long-term residence
Long term Non-dom UK residents claiming the remittance basis are required to pay the RBC which is:
- £30,000 if they have been UK resident in at least 7 out of the preceding 9 UK tax years
- £60,000 if they have been UK resident in at least 12 out of the preceding 14 UK tax years
In some cases, one may find that the loss of their personal allowances, Annual Exempt Amount, and payment of RBC (where appropriate) would outweigh any savings in tax on their unremitted income or gains, so they may prefer to be taxed on the arising basis.
Changes coming into effect from April 2025
The remittance basis of taxation for non-doms will be abolished and replaced with a simpler and modernised regime.
New arrivals to the UK
For new arrivals to the UK who have a period of 10 years consecutive non-residence, there will be full tax relief for a 4-year period on any FIG arising, during which time this money can be brought to the UK without an additional tax charge.
Existing Tax residents
Individuals who have been tax residents for fewer than 4 tax years as of April 2025 and are eligible for the scheme, will also benefit from the relief stated above until the end of their 4th year of tax residence.
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.
Transitional arrangements
The government is announcing targeted transitional arrangements for existing non-doms which are as follows:
- 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, will benefit from a temporary 50% reduction in their personal foreign income subject to tax in 2025-26.
- Under a new Temporary Repatriation Facility in the tax years 2025-26 and 2026-27, 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%.
- For current non-doms who have claimed the remittance basis, capital assets may be rebased to their values as at 5 April 2019 (for disposals that take place after 6 April 2025) This means that when foreign assets are disposed of, affected individuals can elect to be taxed only on capital gains since that date.
- 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.
Elemental’s view
As under the current regime, a UK resident non-dom is taxed on their FIG as soon as it is remitted to the UK. Our view is that this change to the non-dom rules brings the UK into line with other OECD nations, whilst also giving individuals an incentive to bring FIG into the UK tax-free for the first 4 years of their residency, rather than needing to remit capital pre-arrival under the current rules and maintain complex segregated accounts thereafter.
The new regime also appears fairer to UK-domiciled individuals by leveling the playing field between them and long-term non-dom residents.
However, the changes will impact long-term non-dom residents significantly and might bring in to question their reasoning to remain in the UK.
How we can help
Our Tax and Accountancy team can help you understand the implications of the reforms coming into effect from April 2025 and of the legislation still in place for the tax years ending 2024 and 2025. Our team is experienced in preparing Self-assessment tax returns for individuals and will be able to advise if the remittance basis claim is a suitable choice for you.
If you think you are affected by the changes, please get in touch with your usual contact or here.
