The Spring Budget - What's next for "non doms"?

After watching one of the rowdiest budget speeches that I can recall we are now dealing with the aftermath of significant changes to the taxation of “non doms”.  Having worked in UK tax for a number of years the proposal that the status of “non dom” and remittance basis of taxation will become redundant is quite sobering.  But I do like a budget that causes a stir and provides another reason for us to engage with our clients to find the best solution for them.

As a reminder, the remittance basis currently allows individuals who do not have a UK domicile and have not been resident in the UK for more than 15 of the past 20 tax years, to elect to be subject to income tax and capital gains tax only on their UK source income and gains in addition to foreign source which is remitted to the UK.

The proposed changes

From April 2025 onwards overseas income and gains will be exempt from UK tax for the first four years of residence, regardless of whether it is brought into the UK or kept offshore. From year five onwards “non doms” (as they were once known) will be taxed on worldwide income and gains in the same way as any other UK resident.   Arguably a simpler way forward relying on the fact of residence and the UK statutory residence test (SRT) to determine taxation than the status of being non domiciled.

For those Individuals considering coming to the UK for the first time, assuming they have not been resident in the UK for the last 10 tax years, will be able to benefit from this new foreign income and gain (FIG) rules . This may suit individuals who are coming to the UK for a relatively short stay, employees on assignment for example.  There have also been changes proposed to Overseas Workday Relief which will no longer require qualifying individuals to keep their foreign employment income offshore. 

For those “non doms” that are already in the UK using the remittance basis there are three transitional provisions to ease them into paying UK tax on a worldwide basis. 

• Those individuals who have been in the UK for four years, and who will pass from being remittance basis users in the 2024/25 tax year to being taxed on an arising basis in 2025/26, will only pay tax on 50% of their foreign income for the 2025/26 tax year.
• There is the option for rebasing the value of capital assets held personally to their 5 April 2019 value for disposals which take place on or after 6 April 2025
• There will also be a two year “Temporary Repatriation Facility” in the 2025-26 and 2026-27 tax years. This will allow accumulated foreign income and gains to be remitted to the UK and subjected to a rate of tax of only 12%.

Changes to Inheritance Tax

In addition to above the proposals, there are plans to move Inheritance Tax to a residence based regime where an individual's assets would be subject to UK IHT on the basis of that person being UK resident. If they have been resident for 10 years they will be subject to UK IHT on their worldwide assets and they will continue to have this “tail” for another 10 years after leaving. The plan is to consult on these changes.

The announcement that protected trusts will lose that status from 6 April 2025, no matter when they were settled, excluded property trusts established by 5 April 2025 will retain that status and the treatment of a trust established on or after 6 April 2025 will depend on the IHT status of the settlor has changed the landscape for trusts as a planning tool.

We are still waiting for the draft legalisation to be published on all of these changes and by the time the proposals are planned to be introduced in  

Written by Sue Doran, Director