Hello, savvy taxpayers!
Are you ready for the big changes coming to the UK tax system? If you're a non-dom (non-domiciled individual) residing in the UK, there's a new tax regime coming your way starting on the 6th of April 2025. In this blog, we’ll break down everything you need to know in an insightful, engaging way so you can stay ahead of the curve and make the most of your financial planning.
Background on the Non-Dom Tax Regime
Britain’s 200-year-old non-dom regime is like a golden ticket for those living in the UK but officially calling somewhere else home for tax purposes. This nifty setup lets them mitigate taxes on income and capital gains earned overseas for up to 15 years. No wonder it’s been a magnet for the wealthy, offering them some pretty sweet tax perks.
In the tax year ending 2024, around 85 200 non-domiciled and deemed domiciled taxpayers called the UK home. These folks chipped in a whopping £12.5 billion in tax and National Insurance Contributions, with £9.1 billion from non-doms and £3.4 billion from those deemed domiciled.
What is the New Tax Regime for Non-Doms?
Starting from the 6th of April 2025, the UK is rolling out a shiny new residence-based tax regime for non-doms. This fresh approach aims to modernise and simplify the tax structure while keeping the UK a top contender on the global stage. The changes are expected to rake in an extra £2.7 billion per year by 2028-29. So, get ready to wave goodbye to the old remittance basis of taxation and say hello to a more comprehensive, all-inclusive tax system! This means all UK residents, including non-doms, will be taxed on their worldwide income and gains. It’s a bold new era for UK taxation!
Key Highlights of the New Regime:
Residence-Based Taxation
Non-doms will now be taxed based on their UK residency instead of their domicile. This means worldwide income and gains will be taxable.
Four-Year Foreign Income and Gains (FIG) Regime
New arrivals to the UK will enjoy a 100% relief on foreign income and gains for the first four years of UK residence — provided they have not been UK tax residents in the past 10 years. Making the UK a more attractive destination for high-net-worth individuals (HNIW) and professionals.
Temporary Repatriation Facility (TRF)
Non-doms will have the option to bring funds into the UK temporarily without triggering immediate tax liabilities. This offers flexibility, especially for those planning to invest in UK businesses.
Transitional Arrangements
To ensure a smooth shift to the new regime, a 12% flat tax rate will apply for non-doms remitting historic untaxed foreign income and gains to the UK for 24 months from 6th of April 2025. Non-doms who have been UK residents for less than four tax years (after 10 years of non-residence) can use the FIG regime during this period. This provides a clear roadmap for adjusting financial and tax planning.
Inheritance Tax Changes
In line with the new regime, changes to inheritance tax rules will also be introduced. This ensures that the system remains consistent and fair.
How Will This Affect You?
The shift to the new tax system will have different impacts depending on your situation.
Let’s dive into a few scenarios:
If You’re Moving to the UK in April 2025
If you're moving to the UK for the first time from 6th April 2025, you'll be taxed on your worldwide income and gains. However, you can benefit from the Four-Year FIG regime, which provides 100% relief on foreign income and gains during your initial years of UK residence.
If You’re an Existing Non-Dom Resident
If you’ve been living in the UK for some time, using the remittance basis, this change will likely increase your tax obligations. It’s time to reassess your financial and investment strategies.
If You Plan to Bring Funds to the UK
Through the Temporary Repatriation Facility, you can bring funds into the UK temporarily for business or investment purposes without facing immediate tax consequences.
Inheritance Tax Planning
The new regime will introduce changes to inheritance tax rules. It’s critical to review your estate planning strategies to stay compliant and optimise your inheritance tax position.
What This Means for Non-Doms: Strategic Planning
The new regime brings both challenges and opportunities. Here’s how you can navigate it effectively:
Stay Ahead of the Game!
The introduction of the new tax regime for non-doms represents a significant shift in the UK tax landscape. While it may mean higher taxes for some, it also opens up strategic opportunities to plan effectively. By staying informed and seeking expert advice, you can make the most of the available tax reliefs and minimize your liabilities.
Don’t wait until the last minute — planning ahead is key to optimizing your tax position under this new regime!
Ready to Plan Your Tax Strategy?
For personalised tax planning and expert advice, please book a consulation with me.
Author Bio
Lester Lombard
Partner
Meet Lester Lombard, a Partner at Grieve Lombard and a trailblazer in the field of tax planning. With a master's in UK tax and the creation of the pioneering Owner-Manager Tax Tool under his belt, Lester has set new standards in tax efficiency. His expertise in crafting unique tax strategies has helped countless high-net-worth individuals (HNWI) and SMEs achieve substantial tax savings and enhanced financial outcomes. Lester's commitment to excellence ensures that his clients receive top-notch local and cross-border tax solutions.