Important changes for non-domiciled private clients - Spring Budget 2024
The Chancellor announced the abolition of non-dom status in yesterday's Budget meaning big changes for foreign domiciliaries who live in or move to the UK.
The current regime allows non-doms to claim the remittance basis for the first 15 years of UK residence. The remittance basis means that for the first 15 years of UK residence an individual is only taxed on UK income and capital gains - foreign income and capital gains are not subject to UK tax, to the extent they are not remitted to the UK. There is no charge for opting for the remittance basis for the first seven years of residence, following which there is an annual charge of £30,000 increasing to £60,000 after 12 years of UK residence. From 6 April 2025, the concept of domicile will be scrapped, and a new residence-based system will be introduced so that anyone who has been tax resident in the UK for 4 years will pay tax on their worldwide income and gains in the UK
There is less detail on the effect on inheritance tax. The changes are subject to consultation (unlike the changes relating to income tax and CGT), and there will be no changes before 6 April 2025. The door has been left ajar for current non-doms to settle non-UK property into trust before the 2025 deadline, and UK practitioners can expect a deluge of queries from those who may fall foul of the new residence-based system 13 months from now.
All those who are currently non-domiciled clients and who have been carefully planning their stay in the UK with a keen eye on leaving before the 15 year deemed domicile deadline, may need to have a complete re-think, and until they know what the changes to the IHT regime are likely to be, it may be difficult to make a final decision.