Non-dom tax reforms - March 2024 Budget

Following on from what we deem to be a very desperate attempt riddled with erroneous judgment calls by Mr Hunt, this budget was less for the people but more about the party and politics.

Rajiv Mehta

Rajiv Mehta | 07th March 2024

Following on from what we deem to be a very desperate attempt riddled with erroneous judgment calls by Mr Hunt, this budget was less for the people but more about the party and politics.

There are many areas where we can talk about but the one single piece that has stirred much debate and argument since its announcement has been the non-domicile (non-dom) tax regime. This article carefully summarises this particular issue:

The Chancellor's proposed changes from April 2025 aim to bring non-dom tax regulations more in line with those applicable to UK domiciled individuals. This shift marks a significant departure from previous policies and has implications for both current non-doms and those considering residency in the UK.

Non-dom status has long been a contentious issue, subject to periodic revisions and tightening of regulations. The recent spotlight on this topic was intensified by revelations concerning the tax status of prominent figures, such as the Prime Minister's spouse.

Under the existing rules, non-doms benefit from the remittance basis of taxation, allowing them to defer UK tax on foreign income and gains until repatriated. Additionally, they enjoy exemptions from inheritance tax on foreign assets until meeting certain residency criteria.

One notable aspect of the proposed reforms is the reduction of the qualifying period for non-doms to access the remittance basis from 15 years to just 4 years. This change represents a substantial departure from the previous regime and is expected to generate significant tax revenue for the government.

For instance, consider a hypothetical scenario where an individual with non-dom status has been residing in the UK for 10 years. Under the current rules, they would not be subject to UK tax on their foreign income and gains until they have been resident for 15 years.

However, under the proposed reforms, they would become taxable on their worldwide income and gains after just 4 years of residency.

Transitional arrangements will be put in place to ease the transition for existing non-doms. These include options such as rebasing the value of capital assets and temporary tax exemptions on income.

In addition to changes in taxation, the proposed reforms also aim to address inheritance tax implications for non-doms. Currently, non-doms enjoy advantages in inheritance tax as they are only taxed on UK-sited assets. However, the government plans to consult on reforms that could subject non-doms to inheritance tax on their worldwide assets after a period of UK residency.

The potential impact of these reforms extends beyond tax considerations. For instance, non-resident trusts, which were previously subject to the remittance basis regime, will face changes in tax treatment. Settlors may need to reassess their trust structures in light of these alterations.

It is important to note that these proposed reforms are subject to consultation and may undergo further modifications before implementation. This will certainly be the case if a new government comes into power. Therefore, individuals affected by these changes should stay informed and seek professional advice to navigate the evolving landscape of non-dom taxation.

For personalised guidance on non-domicile tax matters, including offshore trusts, please do not hesitate to contact Rajiv by booking a discovery call on our website. 

Spring Budget 2024 summary


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