In the wake of the Budget 2024 announcements, significant changes to the UK's non-domiciled individual (non-dom) regime are on the horizon, with scheduled implementation for 6 April 2025. However, uncertainties loom, especially considering the potential shift in political power after the next General Election. While the outlined reforms align closely with Labour policy, the final enactment and potential adjustments remain uncertain.
At present, the non-dom changes are not included in the Spring Finance Bill. Draft legislation is anticipated later in the year for technical review, raising the possibility that these changes may not be enacted before the Election. However, clients are advised to consider their options prudently, though substantive actions may be deferred until greater clarity is attained.
Key highlights of the proposed changes, as outlined by the government documents, include:
Abolition of the Remittance Basis
The existing income tax and capital gains tax regime for non-doms, known as the remittance basis, will be abolished. In its place, a new special status, referred to as the "4-year FIG regime," will be introduced for the first four years of tax residency in the UK.
Transitional Rules and Relief
Various transitional rules will be implemented, including reduced income tax rates for foreign income, rebasing relief for capital gains, and a Temporary Repatriation Facility (TRF) for pre-6 April 2025 foreign income and gains. These measures aim to ease the transition for affected individuals.
Changes to Trust Taxation
The protected trust regime will effectively cease from April 6, 2025, potentially subjecting income and gains in trust structures to taxation on the settlor(s). Trusts established post this date may face inheritance tax exposure based on the settlor's residency status.
Inheritance Tax Reforms
Proposed changes in inheritance tax aim to shift from a domicile-based to a residence-based regime. Consultations are underway to determine the specifics, including a potential 10-year tail period post-residency.
Existing non-doms are urged to assess their estate planning and trust structures promptly. Strategies such as advancing foreign income and gains, deferring remittances or amending trust terms may help mitigate potential tax liabilities. Similarly, those contemplating relocation to the UK should consider the timing and implications under the new regime.
While the 4-year FIG regime offers certain advantages, its limitations and complexities warrant careful consideration. Professional advice is essential to navigate these changes effectively and optimize tax planning strategies in alignment with individual circumstances.
In conclusion, while the Budget 2024 proposes substantial alterations to the non-dom regime, uncertainties persist regarding their final enactment and implications. Clients are advised to stay informed, assess their options and seek expert guidance to navigate these changes and safeguard their financial interests effectively. Our tax team are happy to help in this area – please get in touch by emailing info@streets.uk
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