Spring Budget 2024 – What should I expect as a non-domicile in the UK?

Please note – This article is intended for informational purposes only. It is a summary of the details currently available. The full legislation and guidance have yet to be issued and may be subject to change. This area is highly complex, and you should seek professional assistance if you wish to explore in more detail. Please get in touch if you require further assistance. We have not provided any information and/or advice specific to Trusts and IHT. If you require more detail in these areas, please consult an expert (contacts available on request).

The ‘Non-Dom’ regime has formed part of the UK’s tax system for over 200 years, generally relating to individuals whose permanent home is considered to be outside the UK. Currently, these individuals can benefit from the remittance basis of taxation – whereby they are only required to report and pay tax on foreign income and gains that is remitted (transferred) to the UK. This basis of taxation is available for the first 7 years of UK residency; at the loss of one’s capital gains exemption and personal allowance (which is phased out once you hit an Income Threshold) after which there are charges for accessing the remittance basis. See here for more information on Residence & Domicile and the existing rules on the Remittance Basis.

There have been many modifications to the rules around the ‘Non-Dom’ regime with the last major update in 2017, where a 15 year limit was introduced on the number of years a ‘Non-Dom’ could benefit from the remittance basis of taxation. The proposal on 6th March marks another big change…

From 6th April 2025, the remittance basis will be replaced with a residence-based tax system – where individuals can elect NOT to be taxed on foreign income and gains for the first 4 years of UK residency. During which time, this money can be brought to the UK, without an additional tax charge (new Foreign Income and Gains regime – FIG)

This is available for new arrivals and individuals who have returned to the UK after a period of 10 consecutive years of non-UK residence. It’s also available for existing individuals in the UK who are still within their first four tax years on 6th April 2025.

Overseas Workday Relief (OWR) will be retained and simplified. More details to follow, though it is expected that the format will remain the same i.e. individuals can claim in their first three years of UK residence but new arrivals not eligible for the new FIG regime, will in turn not be eligible for OWR. See here for the current OWR Rules.

NOTE: very much like the current Remittance Basis claim, making this election will result in the loss of personal allowance and the capital gains annual exemption.

A big concern for the ‘Non-Doms’ who have already been resident in the UK for 4 years; they will not be able to claim the remittance basis from 2025/26, and therefore will be subject to tax under the Arising Basis  whereby they will report and pay UK tax on their worldwide income and gains as it arises from 6th April 2025. There are some transitional arrangements which are set to soften the impact for those individuals who go from the remittance to arising basis due to the new FIG regime:

  • For 2025/26, individuals will be subject to UK tax on only 50% of their non-UK sourced income and gains.
  • They have the option to rebase personally held foreign assets to its value at 5th April 2019; provided the asset was held on that date (on the basis that remittance basis has been claimed previously).
  • Temporary Repatriation Facility (TRF), available for 2025/26 and 2026/27 – allowing individuals to remit unreported foreign income and gains from remittance basis tax years to the UK at a reduced tax rate of 12%. We do expect there to be complications around identifying income from prior years when transferring money to the UK but there has been mention of relaxation around mixed fund ordering rules to assist with the transition. More information on making transfers to the UK here.

To conclude; from 6th April 2025 individuals will no longer have the option to claim the remittance basis. Instead, this is replaced with a new elective FIG regime that will apply to the first 4 years of UK tax residence; with transitional arrangements for those within their first 4 tax years.

It’s certainly worth bearing in mind there is a General Election due before the Conservative Government propose these changes will come into effect; and therefore, if there is a change of Government – it remains uncertain what response they would have to these proposals and whether they will fully adopt the changes, look to amend, or even completely scrap it.

Here is a link to HMRC’s latest technical note on the changes – https://www.gov.uk/government/publications/changes-to-the-taxation-of-non-uk-domiciled-individuals/technical-note-changes-to-the-taxation-of-non-uk-domiciled-individuals

We will provide further details as more unfolds…