Non-doms who choose the remittance basis of taxation pay UK taxes only on income and gains that are either generated in the UK or brought into the UK. Essentially, this allows non-doms to defer or not pay UK taxes on income and gains kept offshore, even if they have lived in the UK for many years, a benefit not available to UK-origin individuals.

The domicile rules have been a contentious issue for a long time and have been tightened over the years, notably with the introduction of the remittance basis charge in 2008 and the deemed domicile rules in 2017.

The rules on when income is considered remitted to the UK are among the most complex and require meticulous planning and record-keeping to avoid accidental remittances.

Non-doms are taxed in the UK on amounts brought into the country, which can complicate UK investments unless relief is claimed under the intricate business investment relief rules.

In March 2024, the UK Government announced changes effective from April 2025. Non-doms who have lived in the UK for at least four years will be taxed on their worldwide income and gains as they arise, similar to UK residents. Transitional measures include a 50% reduction in foreign income (not gains) tax in the 2025-26 tax year for those losing access to the remittance basis on 6 April 2025.

Labour's Plans for the Non-Dom Regime

Labour's proposals extend beyond the current Government's plans and include:

Eliminating Transition Relief for Foreign Income: Labour plans to remove the 50% tax discount on foreign income during the first year of the new regime. If Labour comes to power in July, affected individuals will not have transitional relief and will be taxed on worldwide income and gains from 6 April 2025. Labour argues this would generate an additional £600 million in revenue.

Encouraging Repatriation of Offshore Assets: Non-doms are taxed at their marginal rate on foreign income and gains brought into the UK. The current government plans a temporary repatriation facility for 2025, allowing non-doms to bring in pre-6 April 2025 income and gains at a flat 12% tax rate for two years. Labour supports encouraging the repatriation of these assets but has yet to detail its plan.

Inheritance Tax on All Foreign Trust Assets: Labour intends to include all foreign assets held in trusts within UK inheritance tax, regardless of when they were placed into trust. This change could lead to substantial tax liabilities. Labour claims this would prevent the government from foregoing approximately £430 million in inheritance tax annually. Non-doms using trusts for tax planning should seek inheritance tax advice promptly.

Investment Incentives: Labour is considering whether there should be an investment incentive during the four-year window to make UK investment income free of UK tax, ensuring it is not disincentivised compared to investments elsewhere.

Labour supports many aspects of the Conservatives' proposed non-dom rules, including the four-year arrival window and the ten-year window for inheritance tax. However, they aim to address what they consider to be loopholes in the current government's plan, ensuring no one permanently living in the UK can avoid paying UK inheritance tax on their worldwide estates.

If you think you may be affected by any of the topics covered here, you should seek professional advice promptly. Moving your residency could offer significant tax benefits and a more stable financial future for those considering relocating to more favourable jurisdictions like Gibraltar. 

Contact enquiries@gibro.com to set up a call with one of our experts in Gibraltar Residency.