The UK tax regime for non-domiciled (non-doms) individuals underwent significant changes in this year’s Spring Budget. As discussed in our recent article, these measures aim to tighten tax rules so that everyone who is a long-term resident in the UK pays their taxes here.

The new Labour government has published a policy paper clarifying some of its plans for non-doms and their trusts. The key points to note from the new paper are set out below, although we will need to wait for the Budget which will be on 30 October 2024 for much of the detail.

6 April 2025 is still very much the target for when the new rules will become effective.

For individuals

• The preferential tax treatment based on domicile status for all new foreign income and gains (FIG) that arise from 6 April 2025 will be removed.
• The Remittance basis of taxation is to be replaced by providing 100% relief on FIG for new arrivals to the UK, provided they haven’t been UK tax residents in the preceding decade – this will be available for up to four tax years.

Note: Any FIG that arose before 6 April 2025, while an individual was taxed under the remittance basis, will continue to be subject to tax when brought into the UK, following the existing rules. This applies to remittances of FIG from before 6 April 2025 for those eligible for the new four-year FIG regime.

• There will be two transitional rules:
  • For those who are ineligible for the four-year FIG regime (or who choose not to make a claim for a tax year), they will be subject to Capital Gains Tax (CGT) on foreign gains in the normal way. To help with the transition, current and past remittance basis users will get a one-time rebasing opportunity, allowing to rebase foreign assets to their value at a rebasing date which will be confirmed at the upcoming Budget on 30 October (the previous government proposed a rebasing date of 5 April 2019).
  • A Temporary Repatriation Facility (TRF) will become available from 6 April 2025. This new facility will allow individuals who have used the remittance basis to remit FIG at a reduced tax rate for a limited time. The rate of tax and the length of time is yet to be confirmed but it “will be set to make use as attractive as possible”. The government is also exploring ways to allow the TRF to be used for stockpiled income and gains within overseas structures and will confirm further details the Budget.

Note: In the Spring Budget, the former government proposed a 50% reduction on foreign income subject to tax for individuals who lose access to the remittance basis in the first year under the new regime. This will no longer be implemented.

• From 6 April 2025, Inheritance Tax (“IHT”) will be based on residence rather than domicile. UK residents for ten years will be liable for IHT on worldwide assets and there will be provisions “to keep the person in scope for ten years after leaving the UK”.

For trusts

• Protected trust status will be abolished from 6 April 2025.
• The government intends to conduct a review of offshore anti-avoidance legislation including the Transfer of Assets Abroad and Settlements Legislation. This will mean that income and gains arising in non-UK resident trusts could be subject to tax on UK resident settlors unless such settlors can (and do) claim the four-year FIG regime. The intention for this review will be “to remove ambiguity and uncertainty in legislation, make the rules simpler to apply in practice”. However, any material changes will not come into force till at least 6 April 2026.
• The government will end the use of Excluded Property Trusts to keep assets out of the scope of IHT. However, the government recognises that trusts will already have been established and structured to reflect the current regime. They are therefore deciding how these changes can be implemented to ensure the appropriate adjustments to existing trust arrangements can be made, but that the IHT treatment is the same for all long-term residents in the UK.

There will be no formal consultation on any of the core proposals and instead the government says it will be engaging with stakeholders and review feedback provided following the Spring Budget.

How Gerald Edelman can support Non-UK Domiciled Individuals

Gerald Edelman offers expert advice to non-UK domiciled individuals navigating these complex tax regulations. Our team specialises in international tax planning, providing tailored solutions to help manage and minimise tax liabilities.

To discuss your individual circumstances and how these changes may affect you, get in touch with International Tax Partner, Sonal Shah, or a member of our team today.