The UK government is scrapping a tax benefit for some residents, known as “non-domiciled” or non-dom status. Chancellor Jeremy Hunt, who previously supported the arrangement, announced the change in the March 2024 Budget.

What is non-dom status?

Non-dom refers to a UK resident’s tax status. It’s independent of nationality or citizenship but can be influenced by them. For tax purposes, non-doms consider another country their permanent home (domicile).
The advantage of non-dom status? They only pay UK tax on income earned within the UK. Earnings from elsewhere aren’t taxed by the UK government, unless brought into a UK bank account.
This offered significant tax savings for wealthy individuals who established a domicile in a lower-tax country. For example, the wife of Prime Minister Rishi Sunak, Akshata Murty, is a well-known non-dom.

What’s changing?

The non-dom regime will be phased out. Here’s the timeline:
  • From April 2025: New UK residents won’t pay UK tax on overseas earnings for the first four years.
  • After four years: If they remain in the UK, they’ll be taxed like everyone else.

Existing non-doms?

They get a two-year transition period to potentially integrate their foreign wealth into the UK tax system.

Expected revenue gain?

The government estimates this change will raise £2.7 billion annually by 2028/29.

Opposition’s view?

Labour, the main opposition party, plans to further tighten these reforms if they win the next election. Their proposals include:
  • Removing a tax break offered in the first year of the new rules.
  • Including foreign assets held in trusts within the UK’s inheritance tax system.
Labour estimates their changes could raise £2.6 billion over the next Parliament.

How to become a non-dom?

There are two main ways:
  • Domicile of origin: Applies if you were born outside the UK or if your father was from another country.
  • Domicile of choice: For those over 16 who choose to leave the UK and live permanently elsewhere.

What are the current rules for non-dom status?

Non-Dom Status in the UK (Pre-April 2025)

Here’s a breakdown of the non-domiciled (non-dom) status rules that were in effect before April 2025:

Tax on Overseas Earnings:

  • Non-doms generally didn’t pay UK tax on income earned outside the UK, as long as they kept it outside the UK (not deposited in a UK bank account).

Charges for Long-Term Residence:

  • To maintain non-dom status, a charge applied if you were a UK resident for an extended period:
    • £30,000 if resident for 7 out of the last 9 tax years.
    • £60,000 if resident for 12 out of the last 14 tax years.

Losing Non-Dom Status:

  • You automatically lost non-dom status if:
    • You were a UK resident for 15 out of the previous 20 tax years.
    • You were born in the UK.
    • Your “domicile of origin” (permanent home for tax purposes) was the UK.
    • You’d been resident in the UK for at least a year since 2017.

Exemption for Low Earners:

  • If your foreign income was less than £2,000 per year and you didn’t bring it into the UK, you weren’t required to take any action regarding non-dom status.

Statistics on Non-Doms:

  • As of 2022, around 68,800 people claimed non-dom status, mostly from Western Europe, India, the US, with a rise from China and former Soviet states.
  • The majority were born abroad or lived abroad for a significant period.
  • The benefit was concentrated among high earners, with a much higher proportion of non-doms earning over £5 million compared to those earning less than £100,000.
  • London, particularly affluent areas like Kensington and Westminster, had a high concentration of non-doms. More than one in 10 adults in these areas were, or had been non-dom

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