In his Budget last week, the Chancellor announced that non-dom status for UK tax purposes will disappear. Our Private Client Team consider his announcement and, in particular, what this might mean for Inheritance Tax.Our Team are available on 01225 462871 or by completing the Contact Form below. |
In his Budget last week, the Chancellor announced the abolition of non-dom status – a massive change for foreign domiciliaries living in the UK.
The remittance basis
As a non-domiciled person, the current rules enable you to claim on the remittance basis for the first fifteen years of your UK residence. That means you are liable to UK income and capital gains taxes in the usual way on any UK source income and gains. However, you are only liable to UK tax on amounts of foreign income remitted to the UK.
In this context, the definition of ‘remit’ is not straightforward, as funds do not necessarily have to be brought to or received in the UK. For example, remitting might include satisfying a UK debt outside the UK.
What does non-domiciled mean?
Non-domiciled means a person living in the UK and tax resident here but whose permanent home is outside the country. They must demonstrate to the satisfaction of HMRC that their domicile – at least for tax purposes – is elsewhere.
As they are tax resident in the UK, a non-domiciled person is typically not tax resident in their country of domicile. Accordingly, they are not liable for tax on their worldwide income in either country.
Cost of opting for the remittance basis
There is no charge for opting for the remittance basis for the first seven years. But there is a £30,000 annual charge from year eight, rising to £60,000 after twelve years.
How are the rules changing?
The Chancellor announced that from 6 April 2025, the concept of domicile will disappear. Instead, there will be a new residence-based system so that anyone who has been a UK tax resident for four years will pay UK tax on their worldwide income and gains.
Inheritance Tax
Unlike the changes for income and capital gains taxes, there is currently less detail on inheritance tax (IHT) changes, which are subject to consultation. However, with no changes before 6 April 2025, there is an opportunity for current non-domiciled people to put their non-UK property into trust before next year’s deadline.
Discover more about Inheritance Tax Planning. |