The UK government has announced plans to abolish the long-standing ‘non-doms’ tax regime, effective from April 2025.
- Chancellor Rachel Reeves labels the concept of domicile as outdated, aiming to replace it with a residence-based tax framework.
- Key modifications include the removal of a 50% foreign income discount and adjustments to inheritance and capital gains taxes.
- The Temporary Repatriation Facility will be extended from two to three years, providing more flexibility for temporary UK residents.
- This significant shift reflects a focus on competitiveness and modernisation within the UK tax system.
The UK government has declared its intention to eliminate the ‘non-doms’ tax regime, with the cessation set to begin in April 2025. This longstanding arrangement, which allowed for preferential tax treatment based on domicile status, is now considered obsolete by the current administration. Chancellor Rachel Reeves has voiced the need for an updated system, describing the domicile concept as outdated and in need of replacement to better fit a modernised tax environment. In its place, a new residence-based tax scheme will be introduced, designed to offer competitive terms for international individuals temporarily residing in the UK.
This transition involves significant changes to key components of the tax structure. Importantly, the current 50% discount on foreign income will be abolished with the new system. This measure is anticipated to align the UK more closely with international tax standards, reducing incentives for shifting income overseas to gain tax advantages. Additionally, the inheritance tax and capital gains tax frameworks will undergo adjustments, notably setting the capital gains tax rebasing date at 5 April 2017.
Further to these changes, the government will extend the Temporary Repatriation Facility from two to three years. This extension aims to offer greater flexibility for those residing temporarily in the UK and aligns with the broader goal of making the tax system more adaptable to the needs of international arrivals.
The Office for Budget Responsibility has expressed its role in monitoring the impacts of these tax reforms. This ongoing scrutiny underscores the administration’s commitment to ensuring that the new tax system is not only competitive but also equitable. Such a shift highlights the government’s forward-thinking approach to tax reforms, seeking to position the UK as a leader in modern taxation practices while addressing historical tax privileges.
The abolition of the non-doms regime marks a pivotal transformation in the UK’s approach to international taxation, aiming for fairness and competitiveness.
