Autumn Budget 2024: what are the changes for non-doms?

In the Budget, the Chancellor announced that the Government will scrap the non-domiciled (non-dom) tax regime. In this article, our private client partner Alex Boothman explains the existing rules and how non-doms can prepare.

What are the existing rules?

• Individuals who are “non-dom” can claim the remittance basis for up to 15 years after becoming UK resident.
• Foreign income and gains in non-UK trusts can be “rolled up” tax-free.
• Only non-UK income and gains “remitted” to the UK are subject to UK Income Tax and Capital Gains Tax. Unremitted non-UK income and gains are protected.
• The remittance basis is free for the first 7 years, then subject to charges of £30,000 per year from year 8 and £60,000 per year from year 13.

What are changes for individuals?

• “Domicile” will be removed and replaced with a residence regime bringing “long-stayers” within the scope of UK tax.
• Individuals will not pay UK tax on any foreign income and gains arising in their first 4 years of tax residence (if non-UK resident for all of the last 10 years).
• After this, the remittance basis will be lost entirely, and all personal non-UK income and gains will be subject to UK Income Tax and Capital Gains Tax.
• Individuals will be within the scope of UK Inheritance Tax (IHT) on their worldwide estates once they have been resident in the UK for 10 or more of the past 20 years. IHT will continue to apply for between 3 and 10 years after leaving (depending on how many years they have been resident in the UK).

What about trusts and offshore companies?

• Settlors of non-UK trusts will be taxed on all income and capital gains arising in the trust after 4 years of UK residence.
• Settlor-interested trusts will protect their assets from a 40% IHT charge on the death of a “long-stayer” settlor where the trust was settled pre-30 October 2024. Post-30 October 2024 trusts are not protected.
• Trusts will not protect their assets from an IHT charge at up to 6% on 10-year anniversaries of the trust for long-stayer settlors (even if set up before 30 October 2024).
• The anti-avoidance provisions relating to trusts and offshore companies will be reviewed with a view to “simplifying” them.

Other key changes which could impact non-doms too

• Business property relief and agricultural property relief have been halved and will not only relieve up to 50% over £1 million of assets from 6 April 2026.
• Pensions and death benefits will fall within the scope of IHT on death from 2027/28.
• Overseas workday relief will only be available for individuals who have not been UK resident for 4 years and will be limited to the lower of £300,000 or 30% of the individual’s income.
• Business investment relief will cease from 2028/29.

Will there be any transitional provisions?

• There will be an option to rebase assets to 5 April 2017 (changed from 5 April 2019 from the Spring Budget) subject to certain conditions, but only for individuals.
• A 3-year “Temporary Repatriation Facility” (up from 2 years as announced in the Spring Budget) will be introduced to allow previously accrued foreign income and gains under the remittance basis into the UK at a flat rate of 12% for 2025/26 and 2026/27 and 15% for 2027/28.
• The temporary 50% exemption for foreign income in 2025/26 announced in the Spring 2024 Budget will not be introduced.
• Previously unremitted foreign income and gains will remain subject to the existing rules.

How can you prepare?

If you already live in the UK:

• Consider taking advantage of the 2017 rebasing and Temporary Repatriation Schemes.
• Review your years of residence to establish whether you are a long-stayer for IHT purposes and consider options to mitigate your IHT exposure (such as life insurance or leaving the UK).

If you are thinking about moving to the UK:

• Take advice before your move to understand your potential exposure and to plan effectively.

If you have questions or concerns about the changes to the non-dom tax regime, please contact Alex Boothman.