Policy statement on changes to non-dom tax regime

On Monday the new Labour Government published a short policy statement on the changes to non-dom tax regime. It was not particularly detailed but it did clarify a few things following the Labour party’s informal comments on the Conservative Party’s proposed changes publish in March.

There will be a Budget on 30 October where we can expect much more detail. Draft Finance Bill legislation is usually published about 1 week after the Budget so we should expect to see the exact plans in early November.

The key points to note from the statement on Monday are as follows: 

• The use of domicile for UK taxation will cease from 5 April 2025, as per the Conservative party’s proposals.
  
  
• Those who have not lived in the UK in the past 10 years, will be able to elect into the “foreign income and gains” regime whereby foreign income and gains are not taxable for the first 4 years of UK residence. After 4 years, individuals will be taxable on their worldwide income. This remains unchanged from the Conservative Party proposals.
  
  
• There are a number of areas where the Government need to consider the detail of how their proposals will be implemented. There will be no formal policy consultations but they have said they will discuss the implementation of the new rules with the industry.
  
  
• As was expected, the 50% reduction of tax in 2025-26 for those moving to the worldwide taxation basis has been scrapped entirely. This was a Conservative Party proposal which Labour had already sad they would remove.
  
  
• The Temporary Repatriation Facility, whereby those who had previously sheltered foreign income and gains from UK by using the remittance basis, could bring those income and gains to the UK in 25/26 and 26/27 for a reduced rate of 12% is being kept but the Government will consider changes to it. This may mean a change in the tax rate. There is also an expectation that the facility may be available for more than two years.
  
  
• Likewise, the ability for individuals to “rebase” their foreign assets will be kept but the Government are considering changing the approach.
  
  
• As set out by the Conservative Party, inheritance tax will be payable after someone has been in the UK for 10 years and will remain applicable for 10 years after someone has left the UK. There is little detail on this and the exact rules are still being determined.
  
  
• It seems that “excluded property” inheritance tax protection for trusts will be abolished but we are still not yet sure how this might be applied, particularly whether there may be any grandfathering for pre-existing trusts.