Changes to the taxation of non-UK domiciled individuals

The Policy paper on changes to the taxation of non-UK domiciled individuals has been published on gov.uk on 29^th July 2024.

The changes are now definitely on the way! Are you/your family prepared?

Key updates include:

• From 6 April 2025, the domicile status will be replaced with a new residence-based tax regime.
• New Foreign Income and Gains (FIG) Regime for new arrivals – 100% tax relief on foreign income and gains will be provided for the first four years, if they haven’t been UK tax residents in the last 10 years. This replaces the current remittance basis.
• The protection for income and gains within settlor-interested trust structures for non-domiciled individuals will end for those not eligible for the FIG regime.
• Offshore anti-avoidance laws will be updated to be clearer and more effective, with no changes expected before the 2026/27 tax year.
• A form of Overseas Workday Relief will remain, with details to be announced in the Budget.

Transitional Arrangements:

• The previously proposed 50% tax reduction on foreign income will not be introduced.
• CGT will apply normally to those ineligible for the FIG regime.
• Pre-6 April 2025 FIG will be taxed when remitted to the UK.
• A Temporary Repatriation Facility (TRF) will allow reduced tax rates on remitted FIG for a limited period after the remittance basis ends. Expansion of the TRF’s scope is being considered.

Inheritance Tax (IHT) Changes:

• From 6 April 2025, IHT will be residence-based, affecting property scope for individuals and trusts.
• Non-UK assets will be in scope for IHT if a person has been UK resident for 10 years before the tax year of the event, and for 10 years after leaving the UK.
• Excluded Property Trusts will no longer keep assets out of IHT. Existing trusts will have transitional arrangements for adjustment.

Further details will be provided at the Budget and the government will review stakeholder feedback.

For an initial discussion on how this may impact your affairs, please contact us.

Because tax efficiency is complicated enough!…