The UK’s tax landscape is on the brink of a significant transformation, with sweeping reforms to the long-standing ‘non-dom’ regime set to take effect from 6 April 2025. The changes will dismantle the existing domicile-based tax system, replacing it with a new residence-based approach that will have profound implications for foreign individuals residing in the UK. For many, the countdown has begun to assess, adapt, and, in some cases, reconsider their financial positions.
An End To The Non-Dom Regime?
For decades, the UK has operated a remittance-based taxation system for individuals classified as ‘non-domiciled’—allowing them to avoid UK tax on foreign income and gains unless the funds were brought into the country. This system, long viewed as a key attraction for wealthy international residents, will soon be abolished in favour of a structure that taxes long-term UK residents on their worldwide income, regardless of domicile.
In its place, a new Foreign Income and Gains (FIG) regime will be introduced. Under this model, new arrivals to the UK who have not been tax residents in the past ten years will enjoy a four-year exemption from UK tax on foreign income and gains. This is intended to soften the transition and maintain the UK’s appeal as a destination for international talent. However, after this four-year window closes, all foreign earnings will be subject to full UK taxation.
Temporary Repatriation Facility (TRF): A Limited-Time Opportunity
One of the more complex elements of the reform is the introduction of the Temporary Repatriation Facility (TRF), designed to encourage non-doms to bring overseas wealth into the UK. For a limited period, individuals will have the opportunity to remit foreign income and gains at a reduced tax rate. While this may seem like an appealing offer, tax professionals caution that the fine print is critical—eligibility criteria, time constraints, and potential unintended consequences could complicate matters.
Inheritance Tax & Long-Term Implications
Another critical shift comes in the realm of Inheritance Tax (IHT). Under the current system, non-doms could avoid IHT on overseas assets, but from April 2025, individuals who have been UK residents for at least ten out of the last twenty years will be taxed on their global estate. This marks a major departure and could lead to significant restructuring efforts as individuals seek to manage their exposure.
What This Means for Non-Doms
These reforms have sent ripples through legal and financial circles, with tax advisors seeing a surge in enquiries from affected individuals. Many are exploring asset restructuring, while some are even contemplating relocation to more favourable tax jurisdictions. The UK’s attractiveness for high-net-worth individuals may be tested as the new rules take shape.
Need Guidance? Get In Touch!
The end of the non-dom regime signals a decisive shift in the UK’s tax philosophy, aligning it more closely with residence-based models seen in other major economies. While the government aims to create a fairer and more transparent tax system, the complexity of the transition means that individuals affected by the changes should seek professional guidance sooner rather than later. With just over a year before implementation, time is of the essence for those looking to mitigate the impact and plan accordingly.
At Nordens, we offer expert advice and assistance with all of your business needs: from your everyday accounting to Advisory, Tax, Audit and more. If you need support with any of the above or just want to speak to a member of the team, get in touch today.
