With effect from 6 April 2025 the current tax rules available to non UK domiciled individuals (non-doms) will end. The rules will be replaced by a system based on tax residency instead.
What is domicile?
There are various types of domicile. As a simplification, it often refers to where someone is born. However, this is not always the case as it can also follow those they are legally dependent on and can be chosen.
An individual will become deemed UK domicile if they have been tax resident in the UK for at least 15 out of the previous 20 tax years.
What are the current rules?
Under the current rules, non-doms who are UK tax resident can choose to be taxed on what is called the ‘remittance basis’, which effectively means they only pay tax on foreign income and gains which they bring into the UK.
Although, if that individual has been tax resident in the UK for at least 7 out of the previous 9 tax years there are significant charges imposed to use the remittance basis.
What will the new rules be?
In short, the domicile rules are being scrapped. This means that from April 2025 there will be no separate rules for non-doms. Instead, non-doms will be taxed under the same rules as UK domiciled individuals, known as the arising basis.
This means any individual who is UK tax resident will be taxed on all their worldwide income, regardless of whether their foreign income and gains are brought into the UK or not.
However, there will be a regime available to individuals in their first four years of UK tax residency, which will apply 100% relief to foreign income and gains.
There will also be a temporary facility available to individuals who have previously claimed the remittance basis, allowing them to designate and remit foreign income and gains that arose prior to the changes at a reduced rate.
The current domicile-based system of Inheritance Tax will also be replaced with a new residence-based system.
Given these significant changes, if you are concerned about your tax status please get in touch on 01242 776000 or tax@randall-payne.co.uk.
