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On 30th October 2024, significant changes will come into effect regarding the UK tax policy for non-domiciled individuals, commonly known as non-doms. These updates reflect the government’s ongoing efforts to address tax fairness, ensure compliance, and attract global talent, while also re-evaluating long-standing benefits previously enjoyed by non-doms. If you’re a non-dom residing in the UK or planning to relocate, these changes could have a direct impact on your tax situation.
Let’s break down what’s changing and how it might affect you.
Who Are Non-Doms?
A non-domiciled individual, or non-dom, is someone who resides in the UK but considers another country their permanent home (domicile). Non-doms have historically enjoyed certain tax advantages, particularly through the remittance basis, which allows them to only be taxed on UK income and any foreign income they bring into the UK. This has made the UK an attractive destination for international high- net-worth individuals, entrepreneurs, and professionals.
Key Changes Coming in 2024
The upcoming changes will alter several aspects of how non-doms are taxed. Here are the most important updates:
1. Remittance Basis Reform
One of the major benefits for non-doms has been the ability to use the remittance basis of taxation, which allows them to only pay UK tax on foreign income that is brought into the UK. Starting in October 2024, the government will introduce stricter rules on remittance, particularly for long-term UK residents.
- Long-term residents (15 years or more): Under the new rules, non-doms who have been UK residents for 15 of the last 20 years will lose the ability to use the remittance basis entirely. These individuals will now be subject to worldwide taxation on their income and gains, whether or not they bring it into the UK.
- Annual remittance charge: For those non-doms who remain eligible for the remittance basis, the annual charge for opting into this tax regime will increase. The charges for individuals who have been resident for 7, 12, and 17 years will see hikes, with the highest charge rising to £90,000 for those in the 17-year bracket.
2. Wealth Taxes and New Reporting Requirements
The UK government will introduce new reporting requirements for non-doms, particularly focusing on foreign assets and wealth. This includes:
- Wealth disclosure: Non-doms will be required to declare foreign-held assets above a certain threshold. These declarations will be part of a new transparency initiative aimed at preventing tax evasion and improving compliance.
- Foreign income and capital gains reporting: Even if non-doms do not bring their foreign income or capital gains into the UK, they will now be required to disclose these amounts annually. This change means increased scrutiny of worldwide income for all non-doms, even those using the remittance basis.
3. Capital Gains Tax on Foreign Property
Another major change concerns capital gains on foreign properties. Previously, non- doms who sold foreign property and did not remit the proceeds to the UK were not liable for UK capital gains tax. From 30th October 2024, capital gains on foreign properties will be subject to UK tax if the individual has been a resident for more than 15 years, even if the proceeds are kept abroad.
This could result in a higher tax burden for non-doms with significant foreign property portfolios, making careful planning essential.
4. Inheritance Tax (IHT)
The government is tightening rules around inheritance tax for non-doms. From 2024, non-doms who have lived in the UK for more than 10 years will be subject to inheritance tax on worldwide assets, regardless of their domicile status. Previously, only UK-based assets were subject to IHT for non-doms, but this expansion aligns with the broader move towards worldwide taxation for long-term residents.
Impact on Non-Doms
These changes mark a significant shift in how non-doms are taxed and are likely to lead to higher tax bills for many. Some of the key implications include:
- Increased Tax Liability: Non-doms, particularly those who have been in the UK for over 15 years, will now be treated as domiciled for tax purposes, which means worldwide income, capital gains, and inheritance will all be taxable in the UK.
- Greater Reporting Obligations: The increased reporting requirements will place a heavier administrative burden on non-doms, requiring more detailed records of foreign income, assets, and gains.
- Changes to Wealth Management Strategies: Non-doms will need to rethink their wealth management and tax strategies, as holding foreign assets and avoiding UK tax on foreign income will become more challenging. Consulting with tax advisors will be critical to ensure compliance and to explore tax- efficient ways to manage worldwide income and assets.
As of 30th October 2024, the UK tax landscape for non-doms is set to change dramatically. These reforms reflect the government’s commitment to ensuring tax fairness while balancing the need to remain an attractive destination for global investors and talent.
If you are a non-dom or considering relocation, it’s crucial to stay informed about changes and seek professional tax advice to optimize your financial situation.
By planning ahead, you can navigate these changes and continue to enjoy the benefits of living and investing in effective jurisdictions. Contact us now!
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