Changes to the ‘non dom’ regime
Since it was widely publicised that Mrs Sunak’s offshore assets were escaping UK tax, the spotlight has once again been shone on the non domicile regime, so it was unsurprising that the Chancellor has chosen to include it within his budget.
The current non domicile regime (non-dom) regime is a favourable tax regime which allows non-doms who are UK resident to opt to use the remittance basis of taxation.
This means that whilst they pay tax on their UK income and gains in the same way as UK domiciles, they pay tax on their foreign income or gains (FIG) only when they are remitted, or brought to, the UK.
The term non-dom refers to individuals whose permanent home, or domicile, is considered to be outside the UK
Foreign income and gains
From April 2025 the preferential tax treatment based on domicile status for all new foreign income and gains (FIGs) will be removed. The Chancellor has said that he is introducing a modernised regime that is simpler and fairer.
For new arrivals, who have a period of 10 years consecutive non-residence, there will be full tax relief for a 4-year period of subsequent UK tax residence on FIGs arising during this 4-year period, during which time this money can be brought to the UK without an additional tax charge.
Existing tax residents, who have been tax resident for fewer than 4 tax years and are eligible for the scheme, will also benefit from the relief until the end of their 4th year of tax residence.
Regardless of where an individual is domiciled, and after transitional arrangements, anyone who has been tax resident in the UK for more than 4 years will pay UK tax on any newly arising FIGs, in line with all other UK residents.
Inheritance Tax
UK domiciled individuals are taxed on their worldwide assets, however for non doms Inheritance tax (IHT) depends on domicile status and location of assets. Currently, no inheritance tax is due on non-UK assets of non-doms until they have been UK resident for 15 out of the past 20 tax years.
Consultation will take place on the best way to move IHT to a residence-based regime.
Transition
Given that the changes represent a significant change for those existing non-doms, we will be hearing more from the government on how targeted transitional arrangements will come into play.
If you have any questions for our Tax experts as a result of this Budget, please contact us on 01242 776000 or tax@randall-payne.co.uk.
