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News feed Date: 07 March, 2024

UK Chancellor Abolishes Non-Dom Status in 2024 Spring Budget

UK Chancellor Abolishes Non-Dom Status in 2024 Spring Budget

As we predicted in an earlier news story, Non-Dom Status in the UK Under Threat in 2024, non-doms have gone from an endangered species to facing actual extinction.

Chancellor Jeremy Hunt confirmed their fate in his presentation of the Spring Budget 2024 to the House of Commons on Wednesday, March 6, 2024. This article covers the main details.

Defining the Meaning of Non-Dom Status

What is a non-dom? According to the Financial Times, “A non-UK domiciled person (also known as a non-dom), in very simple terms, is someone who does not have the intention to reside permanently or indefinitely in the UK.”

Under the existing system, those with non-dom status don’t pay UK tax on foreign capital gains or income. They pay £30,000 annually for the privilege if they’ve resided in Britain for at least 7 of the last 9 tax years. This increases to £60,000 if they’ve lived in the UK for at least 12 of the past 14 tax years.

Establishing a Timeline for the Scrapping of Non-Dom Status in the UK

Non-doms do not cease to exist the moment Jeremy Hunt announces their dissolution. As His Majesty’s Treasury explains: “From April 2025, the Government will abolish the current tax regime for non-UK domiciled individuals, or non-doms…”

The intention is to “get rid of the outdated concept of domicile in the tax system, replacing this with a modern, simpler, fairer and competitive residence-based regime.”

Transitioning to a Residence-Based Regime

Domicile loses its significance in the new system. If you have been a tax resident in the UK for more than 4 years, you’re liable to pay UK tax on any new foreign income and gains (FIG).

Currently, the UK government misses out on revenue hidden offshore. This switch is set to raise €2.7 billion annually by 2028-2029

There’s plenty of carrot to accompany the stick, however. New arrivals in the UK will receive 100% UK tax relief on FIG for the initial 4 years they are tax resident.

If you’re a non-dom who’s been a tax resident for under 4 tax years, you also remain exempt from paying tax on your FIG until the end of your 4th year of tax residence.

To further smooth the switch from the old to new, the British government will implement:

  1. A temporary 50% cut in personal foreign income subject to tax in 2025-26 for non-doms losing access to the remittance basis on 6 April 2025 and who do not qualify for the new 4-year FIG exemption
  2. Re-basing of capital assets to 5 April 2019 levels for disposals occuring after 6 April 2025 for current non-doms who have claimed the remittance basis, so that non-doms can choose to be taxed only on capital gains from the date they dispose of foreign assets
  3. Non-doms can remit foreign income and gains from before 6 April 2025 to the UK at a rate of 12% under a Temporary Repatriation Facility in the 2025-26 and 2026-27 tax years.
  4. FIG realized in protected non-resident trusts prior to 6 April 2025 will not be taxed unless distributions or benefits are paid to UK residents who have lived here for 4+ years

The Latitude Take on the Spring Budget Ramifications

“Savvy investors will already have one foot out of the door of the UK,” says our UK Branch Manager, Dom Barnes. “They are already considering alternative Residency and Citizenship by Investment routes to preserve their tax strategy.”

“True, changes won’t be immediate. There is time to plan for the future. But too much deliberation could see you marooned in the UK with a less attractive tax structure. Fiduciary service providers situated in offshore jurisdictions like Jersey have an even busier year ahead now!”

The 2024 Spring Budget brought the abolition of non-dom status in the UK.

What Should You Do Next?

You now know that non-dom status in the UK will shortly enter the history books. Now’s the time to broaden your horizons and use investment migration to formulate a plan B. So, don’t delay and contact Latitude Group today.

UK Chancellor Abolishes Non-Dom Status in 2024 Spring Budget

Date: 07 March, 2024

Posted in: News feed