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How Are The Rules Changing For Non Dom Residents

31st October, 2024

The tax rule of non-dom status residents has recently undergone significant changes in the UK. It has been known for non-dom residents to receive favourable tax advantages, reducing the amount of tax they pay on income they have made overseas.

However, with growing pressure from the UK public, the government has been forced to make changes to its tax system. This has raised concerns for high-net-worth individuals who have benefited in recent times from the investments they’ve made overseas.

If you are a non-dom resident and considering relocating back to the UK, you must understand the changes being made and how they may impact you financially. Let’s explore the requirements for a non-dom status and the changes being made to the non-dom rules for UK residents.

 

What is Non-Dom Status?

A non-domiciled resident in the UK is someone who lives in the country but considers their permanent home to be out of the UK. This status is very important for tax purposes which is why it has been part of the UK’s tax system for over 200 years.

As a non-dom resident, you are only taxed on your income and gains whilst in the UK. For the income you make overseas, there is the option of being taxed on a remittance basis, meaning that you are only taxed on income or gains brought to the UK.

This type of tax system has made non-dom status highly beneficial – especially if you are a high-net-worth individual with significant investments outside the UK.

 

How do you Become a Non-Dom Resident?

To become a non-dom resident in the UK, there are specific criteria that need to be met to obtain your status. Here are three different criteria needed for you to become a non-dom resident in the UK:

 

  • Domicile of Origin – This is typically inherited from your father at birth. If your father was domiciled in another country, you would inherit that status.
  • Domicile of Choice – This can change if you take up permanent residence in another country intending to stay indefinitely.
  • Domicile of Dependency – For minors, domicile usually follows that of the parent on whom they are dependent.

What are the Current Rules for Non-Dom Status?

If you are a non-dom resident in the UK and you make the decision not to pay tax on the earnings made overseas, there are some implications. This is why the UK government has put rules in place for non-dom residents, to prevent them from avoiding paying tax.

One current rule in the UK is that if you don’t pay tax on your overseas earnings, you must pay:

 

However, in 2017, the UK government decided to make changes to the current non-dom rules. This meant that if you were a UK resident for 15 of the last 20 years you were no longer able to claim this status.

 

How are the Non-Dom Rules Changing?

The non-dom rules in the UK have progressively become stricter, with the most recent significant changes being made in 2017. However, in March 2024, an announcement was made on the new changes being made to the UK non-dom rules from April 2025 onwards.

Under the new rules, people who have moved to the UK from April 2025 won’t have to pay tax on foreign income for the first four years. However, if you decide to remain in the UK you will be made to pay the same amount of tax as other UK residents.

From 6 April 2025, the protection from income and gains will no longer be available to you as a non-dom resident in the UK. If you are someone who has made significant investments overseas this is a very important factor to consider as this may impact the financial gains you have made.

 

Planning for the Future as a Non-Dom Resident

With the new non-dom rule changes already being introduced, preparing for the future impact of the new rules is a must. To manage your taxes and protect your wealth, there are some key strategies for you to use:

 

  • Inheritance Tax Planning – Non-doms who hold UK residential property, either directly or through offshore structures, should explore inheritance tax planning options, which can be provided to you by the expert team we have at Haggards Crowther.
  • Alternative Domicile – Some non-dom residents may consider leaving the UK before becoming deemed domiciled, especially if their primary reason for being in the UK changes.
  • Reviewing Offshore Trusts and Structures – Given the changes in the rules around offshore trusts and companies, make sure you review these structures with the help of your number one tax adviser, Haggards Crowther.

 

Haggard’s Crowther is Here to Help!

The tax rules for non-doms in the UK have seen significant changes, and the abolishment of the non-dom status is set to start on 6 April 2025. While the non-dom regime remains in place, it has become less beneficial, particularly for long-term residents and those holding UK property through offshore structures.

If you’re a non-dom in the UK or considering moving to the UK, staying on top of these changes and planning is beneficial for protecting your assets and ensuring long-term tax efficiency. Look no further than Haggards Crowther for excellent tax advice and to help your fan with future non-dom rule changes.

If you are still unsure about the current changes being made to the non-dom rule changes and looking for useful advice, please contact us today.