Non-Dom Changes to Taxation

March 28, 2024

Under pressure from publicity concerning his wife, Akshata Murty’s, 'non-dom’ tax status and exacerbated by comment’s and protestations from opposition leader Sir Keir Starmer, Rishi Sunak's government has announced a change to the ’non-dom' rules occurring on 6th April 2025. The announcement was made by Chancellor Jeremy Hunt and in response, as a point of interest, Sir Keir has accused the government of ‘lifting’ the policy from Labour, who had been espousing and proposing the policy for circa 6 years.

What is ’Non-Dom’

’Non-Dom’ (short for ‘not domiciled') applies to any UK resident who’s domicile is not in the UK. It is important to note that ‘non-dom’ is purely a tax status, not to be confused with ‘non-resident’ and the term, other than having the potential to be influenced by them, does not directly refer to Citizenship, Nationality or resident status.

Currently ‘non-doms’ only pay UK tax on UK earnings and don’t have to pay tax on their worldwide income, other than if it is ‘brought in’ to the UK. This is know as the ‘remittance’ basis of taxation, which is distinct from the UK domiciled (and resident) who are assessed on their worldwide income for UK tax and, broadly, taxed regardless of where the income lands, less any foreign tax that they may have paid, subject to Treaties in place.

What is ‘Domicile’

The definition of ‘domicile’, unlike residence, is not easily ascertained by way of time-scales, tables, etc. and can be open to many interpretations. Generally, domicile is the place where a person considers their permanent home to be, although this has further connections to family history, in particular where the individual's father was born.

There are two principal means by which a person can be actively classified as ‘non-dom’:

Domicile of origin - if you were born in a different country from the UK, or if your father came from a different Country
Domicile of choice - if you are over 16 and choose to leave the UK and live indefinitely in another Country

Changes to the 'non-dom' rules occurred in 2017 whereby individuals can no longer claim this status if they have been a UK resident for fifteen out of the previous twenty tax years. Also, if all of the following circumstances apply:

Their domicile of origin was in the UK.
They were born in the UK.
They were resident in the UK for at least one tax year since 2017.

The Existing Rules for Taxation

The ‘remittance’ basis of taxation, as aforementioned, is applied for foreign income amounts over £2,000 per tax year and, if the individual chooses not to pay UK tax, they must pay to HMRC:

£30,000 if they have been UK resident for at least seven of the previous nine tax years.
£60,000 if they have been UK resident for at least twelve of the previous fourteen tax years.

How will the Existing Rules Change?

Chancellor Jeremy Hunt’s choice of words included that there would be a ‘phasing out’ of the current rules, leading to an assessment of UK tax on worldwide income, as exactly occurs for the UK domiciled (and resident). Accordingly, for the first four tax years for any ‘non-dom’ arriving in the UK to take up residence after 5th April 2025 the individual will be exempt from paying UK tax on foreign income and capital gains and thereafter will be taxed as per other UK resident individuals. This development is widely known as the 'new four-year foreign income and gains (FIG) regime’.

Existing resident ’non-doms’ will be allowed a two year transition period during which they will be ‘encouraged’ to bring foreign income into coverage by UK taxation. Thereafter, they will taxed as per other UK resident individuals.

The Solution

As long term professionals in the tax return industry, Taxeezy staff keep bang up-to-date with all developments in the UK taxation system. These developments are passed on to the client alongside other advice when preparing an individual’s tax return. Taxeezy do this at a very reasonable price and are, accordingly, the ultimate solution to any issues of uncertainty that may arise in the course of an individual’s UK tax affairs.

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