UK Ends Non-Dom Taxation Regime

03 Apr 2024

Introduction

As the UK anticipates the upcoming general election, the political landscape contains policy shifts. Among the critical areas under scrutiny is the taxation of non-domiciled (also known as non-dom) individuals.

From 6 April 2025, the UK is set to scrap the non-domiciled tax status system and introduce a simpler and fairer approach based on where people live, not their domicile.

Understanding the Non-Domiciled Tax Status

The non-domiciled (non-dom) status has been a component of the UK tax system for over two centuries, offering a scheme where individuals residing in the UK but with their permanent home elsewhere can use the 'remittance basis.' This provision allows them not to be taxed in the UK on their foreign income and gains (FIG) unless those funds are brought into the UK. Additionally, this status provides an exemption from Inheritance Tax on assets situated outside the UK. The regulations surrounding non-dom status have seen numerous adjustments and updates, with significant changes enacted in 2017, including a 15-year limitation on how long non-doms can access these tax benefits under the rules.

Manifesto Policies and Potential Changes

During the Budget on the 6th of March 2024, the Conservative Party Chancellor announced that the government will abolish the current non-domiciled taxation scheme and replace it with a residency-based regime by the 6th of April 2025. Similarly, the Labour Party have also made it clear that they will abolish the non-dom tax status if they are elected. Their aim is to increase tax revenue from current non-dom individuals. As a result, regardless of the result of the next general election, it is likely that the non-dom taxation scheme as it is known today will be abolished.

Considering Overseas Trusts, Family Investment Companies, and Inheritance Tax

Non-dom individuals frequently use overseas trusts and family investment companies to improve their wealth management. These structures offer a range of benefits, including asset protection, tax optimisation, and the preservation of family wealth across generations. However, it's essential to recognise the significant implications that Inheritance Tax may pose for non-doms. In particular, navigating its complexities requires careful consideration of various tax-efficient strategies, such as potentially exempt transfers (PETs), lifetime gifting, and trust structures. By incorporating these strategies into their estate planning efforts, non-domiciled individuals can mitigate the impact of Inheritance Tax on their estates. In light of the upcoming changes, it is essential that non-doms within the UK seek professional advice to tailor these strategies to their unique circumstances and objectives.

Anticipating Changes and Planning Ahead

With the closure of the non-dom taxation scheme anticipated, regardless of the results of the imminent elections, individuals must take a proactive approach to financial planning. Staying informed about all current developments and future legislative changes will allow non-doms to adapt their approach to taxation to optimise their wealth and minimise the financial risks associated with the changing regulatory landscape. Proactive planning ensures that individuals can navigate the upcoming changes effectively, safeguarding their assets and financial standing even in times of uncertainty.

Residency Options

As the UK prepares for the general elections, the taxation of non-domiciled individuals remains a key point of debate and an area of almost certain reform. With both the Conservative Party and the Labour Party now proposing changes to the non-dom taxation system, individuals should expect an impact on tax revenue, international competitiveness, and tax planning strategies. By staying informed and maintaining a proactive approach, non-doms can adapt to these changes and optimise their tax positions in the evolving tax landscape.

If you are a don-domiciled individual residing in the British Overseas territory of Gibraltar, The Gibro Group can be your trusted local partner in navigating the complexities of these anticipated changes. Our team of expert professionals are well-versed in tax legislation and remain up to date with all updates that may be brought about by the election, offering strategic insights tailored to your unique financial circumstances. We aim to provide you with proactive guidance to help you adapt and stay ahead. You can get in touch with us via email at enquiries@gibro.com or phone at +350 200 76222.

David Revagliatte
Director of Marketing, Communications and Digital

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