Chancellor Jeremy Hunt has abolished non-dom tax as part of his Budget.
From April 2025 new arrivals into the UK will not be required to pay any tax on foreign income and gains in the first four years of their UK residency.
After four years those who continue to live in the UK will pay the same tax as other UK residents.
Hunt said: “We [the government] will put in place transitional arrangements for those benefiting from the current regime. That will include a two year period in which individuals will be encouraged to bring wealth earned overseas so that it can be spent and invested here in the UK.
"A measure that will attract onshore an additional £15bn on foreign income and will generate more than £1bn in tax."
According to Hunt, abolishing non-dom status will raise £2.7bn a year by the end of the forecast period and said this new regime will be a much more “generous” one.
Claire Trott, divisional director for retirement and holistic planning at St. James’s Place said the new regime seems like a “complex transition”.
She added: “The scrapping of the non-dom status is estimated to bring over £2.7bn of extra tax revenue which will be used to fund the other tax cuts announced in the Budget.
“Moreover, this was one of Labour’s proposed changes so the Conservatives taking this 'tax windfall' from Labour’s calculations will certainly hamper their proposed spending.
“If Labour do win the next election, they will have to consider what to do about this budget hole the Conservatives will have left them. They will have to choose whether to change where the savings are spent, or to just try and fulfil their spending plans in other ways.”
Current non-dom tax regime
According to HMRC, there were 68,000 non-doms in the UK in the tax year ending 2022.
While a study by academics at Warwick university and the London School of Economics in June 2023, found abolishing the non-dom tax regime would raise approximately £3.6bn a year.
Under the current regime, non-dom individuals do not pay UK tax on their foreign income or gains if they are less than £2,000 in the tax year or if the individual does not bring them into the UK.
If an individual’s income is £2,000 or more, or it is brought into the UK, they must report it to HMRC and either pay UK tax on it which may be claimed back or claim the ‘remittance basis’.
Labour had previously said in its mission documents it plans to get the NHS ‘back on its feet’ by abolishing non-dom tax for the very wealthy to fund the public service.
alina.khan@ft.com
