Lakshmi Mittal and the Great British Non-Dom Tax Drama
April 2, 2025
Lakshmi Mittal and the Great British Non-Dom Tax Drama
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.
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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.
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.
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.
So you’ve left the UK for pastures new. The sun is shining. You're making more money. You’re enjoying a great quality of life in a new country. In fact, you’re totally de-mob happy. Even better, as a non-UK resident, UK taxes are a dim and distant unpleasant memory, right. Right? Wrong. I don’t necessarily see my role in life as chief balloon popper. However, there are some Uk tax things you should bear in mind before declaring yourself a tax exile. Am I really non-UK Resident (“NR”)? Up until 2013, the UK didn’t really have a statutory definition of residence for tax purposes. Yes, that’s as crazy as it sounds. Fortunately, the Statutory Residence Test (“SRT”) was introduced from 2013. The idea is that it provides a degree of objectivity through a series of tests. Although a statutory test, other than in straightforward cases, it can still remain complex.
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