End of the Non-Dom Era: Labour’s Tax Reform Triggers Wealth Flight
April 15, 2025
What You Should Know About the End of the UK Non-Dom Regime 6 April 2025
April 6th, 2025 marks the beginning of a major shift in UK taxation. Labour’s new tax reforms have officially scrapped the long-standing non-domiciled (non-dom) tax status — a move that targets wealthy individuals who live in the UK but, under the new non dom regime, have been able to mitigate UK tax on their overseas income and gains.
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This change spells the end of a tax break that attracted many high-net-worth individuals (HNWIs) to the UK and is already causing ripples across the country’s elite financial circles.
The message is clear: if you live here, you pay here.
Let's break down what has changed.
What Was the Non-Dom Tax Regime?
The non-dom tax regime allowed individuals residing in the UK, who claimed their primary home (domicile) to be outside the UK, to avoid UK income and capital gains taxes by not bringing any foreign earnings or gains back into the UK.
This system made the UK an attractive location for individuals with international earnings.
We covered this in more detail here.
What Has Changed?
Since 2025-26 tax year, the government has implemented several significant reforms. These reforms include:
1. End of Non-Dom Status
All UK tax residents will now owe UK income tax on all global income and gains, regardless of whether these were brought into the country or not.
2. Inheritance Tax (IHT) on Foreign Assets
Non-doms could previously avoid UK Inheritance Tax on assets they held outside the UK; now individuals who have lived here for more than four years will be liable for IHT on all their global estate assets.
3. Temporary Reliefs
To assist the transition, temporary measures include the following:
- Tax Year 2025-26 will see a 50% reduction on foreign income tax.
- Capital Gains Tax (CGT) laws allow us to rebase overseas assets based on their value as of April 2019 for CGT purposes.
- Temporarily, bringing money from abroad may not incur full tax charges upon entering the UK.
Why Has the Government Made These Changes?
According to Labour, eliminating non-dom status will provide many advantages:
- Enhance tax fairness
- Raise extra funds to support public services
- Close longstanding loopholes used by the wealthy
Rising Tax Bills
HNWIs with overseas assets and income will now face significantly increased tax obligations that may have an effect on personal finances, family planning and wealth transference.
Making Decisions About Moving Abroad
Some individuals are already leaving the UK in order to settle in countries with more advantageous tax regimes. Some common destinations for relocation include:
- United Arab Emirates (UAE) does not levy income or capital gains tax
- Switzerland provides fixed annual tax arrangements for its most wealthy citizens
- Italy - flat tax of EUR100,000.000 on foreign income for new residents
- Monaco does not levy personal income tax for residents
Concerns Raised About Impact Within Industry Concerns are being expressed that this could lead to a decrease in:
- Investment into UK businesses
- Jobs funded by private wealth
- Donations to UK Charities
What About Entrepreneurs?
Many entrepreneurs utilise non-dom status to reduce tax on international business earnings, however, these changes could require:
- Establishing headquarters or structures outside the UK
- Reconsider ownership of intellectual property or company shares
- An investigation of how profits and dividends are managed is important to ensure long-term growth.
What Should Be Done Now?
If you or those you work with have been affected, taking immediate steps is key to their safety. Here are a few things you can do.
1. Consult With A Specialist Tax Advisor
Every situation varies. Seek tailored guidance from someone familiar with both UK and international tax regulations.
2. Evaluate Your Financial Structures
Evaluate how you hold assets - for instance through offshore companies or trusts. Any necessary changes must be implemented for optimal efficiency and compliance purposes.
3. Consider Relocating
If the UK's new tax rules no longer suit, you might wish to explore living elsewhere where tax liabilities would be lower. Be sure to carefully consider all legal, financial, and family aspects prior to making any decisions.
Summary
The changes to the non-dom tax regime mark a profound transformation for those who rely on global income and wealth for tax payments, especially those living abroad. Although intended to increase fairness, these reforms also pose challenges to those accustomed to using it.
Now is the time to review your plans, secure your assets, and seek professional guidance.
How Can We Assist?
At our offices in both the UK and UAE, we assist individuals, entrepreneurs and professional advisors in making well-informed decisions.
If you have any queries about this article or need advice then get in touch.
Are you living in Dubai and want to know what the new Spring Statement means for your financial future, then join us on 24th April 2025 at the Avani Palm Hotel Dubai, for an evening of expert analysis, practical advice, and strategic networking. Our Founder Andy Wood will discuss tax policies already outlined in this area – in relation to income and gains and, importantly IHT for Non-UK long-term residents – and any new nuggets unveiled by Mrs Reeves.
As soon as billionaires start moving out, something strange is afoot. Lakshmi Mittal, the super-rich steel magnate behind ArcelorMittal--the world's largest steel company--is reported to be considering leaving Britain due to a potential end of non-domiciled (non-dom) tax status benefits in Britain. Who Is Lakshmi Mittal Anyway? Mittal stands out as being something special among his fellow billionaires; for years, he's lived comfortably in Britain while taking advantage of non-dom tax arrangements that enable individuals (like himself) to avoid UK taxes on foreign income as long as it was spent within British borders. But these cosy days are over! What Has Changed? Starting April 2025, the UK will transition away from its non-dom system and toward something much less generous. Key changes will include: End of Non-Dom Era: The remittance basis of taxation will be replaced by a new four-year exemption applicable to foreign income and gains from 6 April 2025. Global Assets Affected by UK Inheritance Tax: Transition to residence-based system for inheritance tax means that after being resident 10 out of 20 years, worldwide assets will be liable for IHT. Remittance Basis—Gone: Previously, non doms only paid tax on foreign earnings if remitted to the UK. Though there are transitionary rules to ease the impact, basically now, wherever you earn income, the UK taxman wants a share. Simply put, the party is officially over now folk like Mittal are wondering whether staying put makes any sense. Where Might the Wealthy Go? When your fortune is at stake, you don't make decisions at random; that is why HNWIs such as Mittal are keenly scrutinising places that might allow them to keep more of their cash safely: UAE: No income tax, inheritance tax or wealth tax applies in this region. Portugal: Thanks to its Non-Habitual Residency scheme, sunny Portugal has become an appealing location for individuals who seek tax benefits without compromising on lifestyle. Switzerland and Monaco: Monaco has long been considered a tax haven because of its favorable personal and corporate tax rules. The country does not tax individuals on their income, and corporations within the country have favourable tax treatment. Italy: allows for long-term residence and access to Schengen countries. Under certain circumstances, a flat rate of tax of 7% on all foreign-sourced income is available to new residents of Italy. Why Should the UK Worry? Britain's Reputation at Risk Packing their bags publicly doesn't exactly send out the message that Britain is ready for business; Mittal leaving could prompt other wealthy individuals to consider whether this country remains attractive. Money Matters Every time a billionaire leaves the UK economy, their absence leads to reduced investments, lower donations to charity and less lavish spending - not just with regards to taxes but also economically. Politics The government could run into trouble if new policies are seen to push away wealthy donors with money - not exactly an ideal recipe for voter appeal! What should HNW people be Doing Now? Verify Your Status: Evaluate whether your current tax status remains advantageous under these new circumstances. Clarifying Your Tax Exposure Globally: Fully understand the tax repercussions associated with maintaining or cutting ties to the UK. Consider Alternatives: Assess potential jurisdictions such as the UAE or certain European nations that offer clearer tax regimes without inheritance or wealth taxes. Final Thoughts Mittal's potential exit encapsulates more than simply his tax bill; it spotlights a wider anxiety amongst wealthy individuals Decisions like these require careful thought, proactive planning, and expert advice. Are You Worried About Tax Reform in the UK? Mosaic Chambers Group can provide independent, practical advice tailored to your circumstances.
For over two centuries, the UK’s non-domiciled tax regime and its remittance basis has been a cornerstone of tax planning for wealthy expats and international families. It was introduced, along with income tax, by Willian Pitt the Younger at the very end of the 18th century. It was part of the fiscal firepower necessary to battle Napoleon Bonaparte. And, like income tax, it had pretty much been a constant feature of the UK’s system ever since. But in March 2024, the then Chancellor, Jeremy Hunt, rang the death knell for the remittance basis, with Labour’s Rachel Reeves – who would succeed Hunt a few months later - declaring she would have abolished it anyway. The end is therefore very much nigh for the UK’s non-dom tax regime. More specifically, the end is 6 April 2025. However, out with the old and in with the new’ goes the saying. As such, the ‘what comes next’ will reshape the tax landscape for non-doms, expats, and international investors with a UK footprint (or those considering creating one). What is Domicile (and Non-Domicile)? Domicile is not a straightforward concept like tax residence. The latter is largely about physical presence (or otherwise) in a particular. Instead, as well as physical presence, it also requires an understanding of your future intentions. Is a place somewhere that you intend to live permanently or indefinitely. There are two main types of domicile that I will discuss here: • Domicile of origin: This is inherited at birth, usually from your father (if you think that is misogynistic then I don’t make the rules, OK?). You do not lose your domicile of origin. However, think of it as the foundations of a building. You can a domicile of choice on top it. • Domicile of choice: You build a new domicile of choice by achieving two things. Firstly, by physically residing in place and, secondly, by forming the intention to stay in that same place permanently or indefinitely. Both must be present.