6 March 2024
If you are covering the abolition of the non-dom rules, please see the following comment from Rachael Griffin, tax and financial planning expert at Quilter:
"In a bold move Chancellor Jeremy Hunt has announced the abolition of non-domiciled status. This decision diverges from Tory fiscal policies, and not only aligns closely with Labour's big-ticket proposals but also marks a big shift in the UK's approach to taxation and residency. Whether this is policy rooted in the Tory’s true desire to tackle this part of the tax system or is just an attempt to one up Labour ahead of the upcoming election is yet to be seen.
"Non-domiciled status, or 'non-dom' as it is known, has long been a subject of contention in the UK. It allows individuals residing in the UK but considering their permanent home to be abroad to enjoy substantial tax exemptions, particularly on foreign investments. This status, while beneficial to people like foreign students and workers, has predominantly served the wealthiest, providing them with a lucrative loophole to avoid paying UK tax on their global incomes.
"People who use the remittance basis of tax, i.e. only pay UK tax on the income or gains that are brought to the UK, typically are well advised and therefore with the help of their adviser will be able to find creative ways to mitigate their UK tax liabilities regardless of the change in rules.
"Economically, how significant this change is will depend on how it impacts the behaviour of its intended targets. While the immediate effect is expected to be a substantial increase in tax revenue—estimated at around £3.8 billion—there are concerns about the long-term impact on foreign investment and the attractiveness of the UK as a global financial hub. This figure is also only a best guess and could be much lower in reality. The change in rules could discourage high-net-worth individuals from living or investing in the UK, potentially leading to a drain of talent and capital. However, this perspective assumes a scenario where tax incentives are the sole reason for their residence in the UK, overlooking other factors such as political stability and legal system.
"However, similar reforms introduced in 2017 did lead to a modest number of people leaving the UK, but the aftermath was far from the mass departure predicted by some. This resilience suggests that while the reform may indeed prompt a percentage of non-doms to relocate, the overall impact on the UK's tax base may be less dramatic than feared."
For more information, please contact Alex Berry on + 44 (0)7741151931
