Non-domicile tax regime set to be abolished
- TBA
- Jan 15
- 3 min read
Updated: Mar 13
With the announcement of the Autumn Budget, several tax increases have caused widespread confusion.
For many immigrants with global income and assets, the abolition of the non-domicile (‘non-dom’) tax regime and the introduction of a residence-based tax system mean that individuals will be subject to ‘global taxation’ on any income or gains earned outside the UK.
What does the abolition of the non-domicile tax regime mean for immigrants?
How will the new system work, and how should we prepare for it?
Current rules for non-domicile
For immigrants living in the UK for at least 183 days, if their permanent home (or family base) is abroad, they may qualify as non-domiciled residents (‘non-doms’). Under the current system, they can avoid paying tax on overseas income for up to 15 years.
Non-doms currently have two taxation options:
Global Taxation: Pay UK tax on worldwide income and capital gains.
Remittance Basis: Pay UK tax only on foreign income or gains brought into the UK, while overseas earnings not remitted to the UK remain tax-free.
Those opting for the remittance basis lose UK income and capital gains tax allowances and may incur annual charges:
£30,000 if they’ve been UK residents for 7 of the last 9 tax years
£60,000 if they’ve been UK residents for 12 of the last 14 tax years
For wealthy individuals domiciled in low-tax countries, this system offers significant and completely legal savings.
In 2022-23, around 74,000 individuals claimed non-dom status.
A high-profile example is Akshata Murty, wife of former UK Prime Minister Rishi Sunak, who faced controversy for her tax arrangements. Following public backlash, she agreed to pay UK tax on her global income.
Changes to the rules
According to the Autumn Budget, the non-dom tax regime will be abolished on 6 April 2025 and replaced with a new residence-based system.
While details are sparse, it is estimated that these measures will generate an additional £12.7 billion for the UK over five years. The new plan may align with proposals from a previous Conservative government budget, offering insights for financial planning.
Proposed alternative: the 4-year Foreign Income and Gains (FIG) regime
Under this regime:
Immigrants will receive 100% tax relief on foreign income and gains for their first 4 tax years in the UK.
Overseas funds, including distributions from non-resident trusts, can be brought into the UK tax-free during this period.
UK-sourced income and capital gains will remain taxable.
After 4 years, global income and gains remitted to the UK will be taxable.
Eligible individuals who become UK tax residents before 5 April 2025, and meet certain criteria, can still apply for FIG during the remainder of the 4-year period.
Transitional Rules
For existing non-doms or those using the remittance basis, transitional measures include:
Temporary Repatriation Facility
During the 2025/2026 and 2026/2027 tax years, previously unremitted overseas income can be brought into the UK at a reduced 12% tax rate.
From the 2027/2028 tax year onward, normal tax rates will apply.
Capital Gains Tax Base Reset
Non-doms can use the asset value as of 5 April 2017, as the tax base for disposing of overseas assets after 6 April 2025.
Inheritance Tax for Long-Term Residents
Individuals who have lived in the UK for at least 10 of the past 20 tax years will face inheritance tax on non-UK assets for up to 10 years after leaving the UK.
Overseas Workday Relief Adjustments
For individuals claiming Overseas Workday Relief:
The relief period will extend to 4 years to align with the FIG regime.
Relief will apply only to overseas income not remitted to the UK.
From 6 April 2025, limits will be introduced:
Relief will be capped at the lower of £300,000 or 30% of total employment income.
No income tax relief can be claimed for overseas income earned on or after this date.
Employers will no longer need HMRC approval to calculate PAYE deductions based on UK workdays.
Potential impacts and advice
While the government expects these changes to boost tax revenue and fairness, critics warn that wealthy non-doms might leave the UK, undermining revenue projections.
The abolition of non-dom benefits may also affect:
High-end property markets
Luxury consumption industries
Trust structures for wealth planning
For migrants or those considering moving to the UK, staying informed and preparing before April 2025 is essential to optimise tax strategies and secure long-term wealth stability.
We recommend that you consult with a professional financial advisor to navigate these changes effectively.
