In her statement on 29 July, UK Chancellor Rachel Reeves announced a series of economic reforms. Her tax announcements included some further clarity on the Government’s plans to overhaul the tax regime for non-UK domiciled individuals (non-doms).
What do we know from the announcement?
The Labour Government are firmly sticking to the pre-election direction of travel. We’ll have a new residency based tax regime; domicile as a concept will become pretty irrelevant to tax going forward, apart from for legacy disputes over historic years with HMRC.
For anyone coming to the UK for the first time (or for the first time in more than 10 years), there’s 100% relief for four years on foreign income and gains (FIG) that arise from 6 April 2025.
For those remittance-basis non-doms who have been here more than four years, there will be some transitional arrangements to allow remittances of pre-6 April 2025 foreign income or gains at lower tax rates and some sort of capital gains tax (CGT) rebasing for foreign capital assets for future disposals.
From 6 April 2025, settlor-interested trusts income and gains aren’t protected unless qualifying for the four-year relief. Excluded property trusts will be brought into the inheritance tax (IHT) net, again with some transitional arrangements to be announced by October for the latter.
From 6 April 2025, IHT will be based on tax residency within the last 10 years. This should clear some muddy waters for long-gone ex-pats with UK assets who feared that HMRC may argue that their worldwide estate should be brought into the UK IHT net.
What don’t we know yet?
Finer details will be pinned down by later announcements, including Autumn Budget 2024 on 30 October.
We’ll have to wait for announcements on a potential CGT rebasing date, excluded property trust grandfathering and plans to simplify anti-avoidance measures like Transfer of Assets Abroad by 2026/27. Interestingly, the Government have said that they will take into consideration consultation responses already submitted before the election, but won’t be focusing on further external consultation.
This leaves anyone with complex trust structures a short window from November 2024 to April 2025 to sort out what’s best to do.
Will the inbound regime be attractive enough to plug the tax gap left by those that leave?
Will the legislation be well-written given they haven’t consulted on the detail of it or will we be left with rushed and poorly drafted law that creates unintended ambiguity?
We look forward to bringing you more details in the coming months, including via our Autumn Budget 2024 coverage.
How BKL can help
There’s no escaping the fact that the UK’s non-dom tax landscape is changing dramatically. If you or your client is a non-dom resident, or you’re thinking about becoming one, seeking professional tax advice is crucial. This will help you navigate the new system and understand how it impacts your specific situation.
Our specialists in tax and trusts would be pleased to discuss the tax implications of your plans and what actions you should consider taking. Get in touch today to find out how we can help you.
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