The UK government has announced plans to abolish the current tax treatment for UK resident non-domiciled individuals (non-doms) from the 6th of April 2025.

Now that we know a Labour government will be reforming the non-dom tax regime, it’s worth getting to grips with their proposed reforms as any prior information – released while the Conservative government was still in power – may have changed.

This significant change will affect many high-net-worth individuals who have long benefited from the UK’s attractive tax regime. As trusted tax advisors to many individuals, we’re here to explain what these changes mean and how they might impact you.

What’s Changing for Non-Doms?

The non-dom regime has been part of the UK tax system for over 200 years.

This regime allowed eligible individuals to pay UK tax only on their UK income and gains while keeping foreign income and gains (FIG) exempt from tax unless they are remitted to the UK. It also provided inheritance tax benefits on non-UK assets.

The last big changes to non-dom status came in 2017, when a 15-year ‘cap’ was introduced which limited the number of years that a non-dom could benefit under the rules.

From April 2025, this system will be replaced with a new residence-based test. Here are the key points:

1. New Foreign Income and Gains (FIG) Regime
   • It is available for up to four years from April 2025 or when an individual becomes a UK resident.
   • During this period, new arrivals won’t be taxed on FIG or distributions from non-resident trusts.
   • It is only open to those who’ve been non-UK residents for at least the previous ten tax years.
   • Those opting in will lose entitlement to personal allowances and annual CGT exemption amounts.
2. After the FIG Period
   • Individuals will be taxed on their worldwide income and gains like other UK residents.
3. Transitional Provisions
   • For 2025/26, current non-doms will be taxed on 50% of their foreign income.
   • From 2026/27, foreign income will be taxed in the normal way.
   • A reduced 12% tax rate will apply to remittances of pre-April 2025 personal foreign income and gains for 2025/26 and 2026/27 (apart from that arising from offshore tax structures).
   • From 2026/27, remittances of pre-April 2025 FIG will be taxed at the normal rate, with Capital Gains Tax (CGT) rebasing of non-UK sited assets available to those who have claimed remittance basis.

1. Inheritance Tax

1. • Plans to move from a domicile-based to a residence-based system for inheritance tax from April 2025.
   • It’s believed that this may apply to individuals who have held UK residency for 10+ years.
   • Non-UK assets held by non-UK trusts with ‘excluded property’ status are unlikely to fall within the scope of IHT.

What Does This Mean for You?

If you’re currently benefiting from non-dom status, these changes could significantly impact your tax position. Here’s what you need to consider:

1. Review your current position: Assess your UK residence status and how long you’ve been in the UK. This will determine whether you’re eligible for the new FIG regime or transitional provisions.
2. Worldwide income and gains: Prepare for the possibility of UK tax on your global income and gains after the FIG period or transitional provisions end.
3. Asset structure: Review how your assets are held, especially those outside the UK. There may be opportunities for restructuring before the new rules take effect.
4. Inheritance tax planning: With the proposed move to a residence-based IHT system, you may need to revisit your estate planning.
5. Remittance planning: Consider the timing of bringing foreign income and gains to the UK, especially given the reduced rate available in the first two years of the new regime.
6. Overseas workday relief: If you’re an internationally mobile employee, be aware that this relief will still be available but tied to the new FIG regime.

Planning for Non-Dom Reforms

While these changes are significant, there’s still time to plan. Here are some strategies to consider:

1. Consider realising foreign income or gains before April 2025 if you don’t need to remit them to the UK immediately.
2. Assess any offshore trusts or companies in light of the new rules.
3. If your ties to the UK are not strong, you might consider leaving before becoming subject to worldwide taxation.
4. Review your investment portfolio with the new tax implications in mind.

At Hamlyns, we understand that these changes may seem daunting. Our team of expert accountants and tax advisors are here to help you navigate this new landscape. We can provide personalised advice based on your specific circumstances and help you develop a strategy to optimise your tax position under the new rules.

Remember, while the non-dom regime is changing, the UK remains an attractive place for international individuals and businesses. With careful planning and expert advice, you can still achieve tax efficiency while complying with the new rules.

Contact Hamlyns today to discuss how these changes might affect you and to start planning for the future.