Overview of the changes to the non-dom regime – Spring Budget 2024

Today the government announced wholesale changes to what is termed as the ‘non-dom’ regime.

On review of the detail, these changes affect relevant taxpayers more than just the taxation of their foreign income and gain under the current remittance basis regime. 

The new rules will be introduced with effect from 6 April 2025, which does allow taxpayers time to plan for the changes and ascertain what the right course of action is for them. As ever, everyone’s circumstances will be different and liaising with your trusted adviser will be imperative to take the right course over the next 13 months. 

Abolition of the Remittance Basis Regime

The Chancellor announced that the current remittance basis regime will be abolished and replaced by the new Foreign Income & Gains (FIG) regime. This will apply to individuals in their first 4 years of UK tax residency, which the Statutory Residence Test (SRT) continues to govern. 

It will be important for individuals to have a sound understanding of the SRT and its application to their circumstances. In some instances, taxpayers could be considered to be non-UK tax residents by adjusting the amount of time spent in the UK.  

Given the FIG regime offers maximum tax benefits for a short period, not utilising the regime correctly could be costly. 

For the 4-year period individuals will be able to use income and gains realised in that time in the UK without any tax charges. For qualifying inbound taxpayers this will be a good opportunity to realise offshore income and gains tax-free, however for current UK tax residents using the remittance basis it will mean a drastic change in their UK tax affairs. 

Further details of the FIG can be found here 

Consultation of the Inheritance Tax (IHT) regime 

As it stands, IHT is a taxation that is based on the principles of domicile. A non-UK domiciled individual’s non-UK situs assets are outside the scope of UK IHT. The current proposal, which is subject to consultation, is to change this to a residence-based system, meaning that an individual who has been resident in the UK for 10 years will be subject to UK IHT on their worldwide assets, again from 6 April 2025. 

Changes in trust taxation 

From 6 April 2025, the protection from tax on income and gains arising within a trust where the settlor is also a beneficiary will not be available for individuals outside of the 4-year FIG regime. 

However, it is envisaged that the IHT protections for assets within a non-UK settlement, that was settled prior to 6 April 2025 will continue to apply. As such taxpayers may no longer benefit from income tax and capital gains tax benefits, but they could still benefit from IHT protections. 

There have been drastic rule changes for the taxation of non-UK domiciled individuals in 2008, 2017 and now 2024, with the goal posts continually moving. This will be another unwelcome change but as advisers we are available to help you not only understand the rules but apply them as efficiently as possible. 

For further details of the changes to trusts, click here.

Watch our Spring Budget question time webinar

Following the Spring Budget, our panel of specialists examined the announcements made by The Chancellor, discussing what these changes mean for you. They also answered questions from our live audience. This webinar is now available to watch on demand here.

Alternatively, if you would like any further information or guidance on this topic, get in touch with your usual Kreston Reeves contact or contact us here.