What now for non-doms in the UK?

Despite lobbying by and on behalf of non-doms, the changes proposed to the taxation of non-domiciled individuals and offshore trusts came into effect on 6 April 2025. We summarised the key changes in our last edition. It was widely reported in the press that a number of non-doms had left the UK in advance of the changes coming into force. So, what now for those who remain or those considering a move to the UK?

Despite the introduction of this generally more onerous tax regime, in the context of global turbulence, there are some positives and opportunities worth noting:

• The Financial Times has reported that some Americans are considering temporarily moving their assets to the UK for fear of asset seizures. Some, of course, may also move. People wanting to move away from their home country on a temporary basis, perhaps due to instability or concerns about the rule of law in their home country, can take advantage of the four-year foreign income and gains (FIG) regime in the UK, assuming they have not been resident in the UK for 10 consecutive tax years. This would allow a breathing space for them where they could, if they made the relevant claims, not be liable to UK tax on overseas income and capital gains for a four-year period. They would also be free to bring such income and gains into the UK without a UK tax levy and would not be liable to UK Inheritance Tax (IHT) on their assets outside the UK for 10 years.
• Non-doms already living in the UK, who have decided to remain despite the rule changes, should consider taking advantage of the temporary repatriation facility (if they qualify, having previously been remittance basis users) to bring foreign income and gains into the UK at reduced tax rates to fund their life in the UK for however long they plan to remain.
• In some cases, double tax treaties may mitigate or negate the impact of the changes.
• Individuals who, under the old regime, could not shift their UK IHT domicile despite having been non-resident for many years e.g. because they were originally UK domiciled and had not settled in any other jurisdiction permanently, will now only be within the UK IHT net if they are resident for 10 out of 20 tax years. This provides an opportunity for those individuals to return to the UK for a significant period, whilst ensuring their non-UK assets remain outside of the UK IHT net.

Of course, people’s circumstances vary, but the message for non-doms in the UK, and those planning a move to the UK, is to take advice on arranging your affairs so that you are best placed in this new tax landscape.

Non-dom case study: The Atlantis family moved to the UK 10 years ago as their twins started attending English schools. The twins are now 17, in their last year of further education and are applying to UK universities. Their parents are enjoying life in England and will remain if the children go to UK universities, but will ultimately leave, most likely when the children are 21. Under the old rules which applied before 6 April 2025, they made use of the remittance basis of taxation (so only paid UK tax on offshore income and gains if they were remitted to the UK) and were not deemed domiciled in the UK for IHT as they had not been resident for more than 15 out of 20 tax years. They had always planned to leave before they reached that threshold.

Given the changes and their plans, they take advice and decide to:

• Take advantage of the temporary repatriation facility over the next three years to bring gains and income into the UK at a reduced tax rate of 12% then 15% to fund their living for the next 4 years.
• Take out fixed-term life insurance for IHT, to cover a potential UK IHT liability if they were both to die whilst in the UK and before their IHT tail (i.e. the period they will be deemed within the scope of UK IHT after leaving) ends. On their current plans, this will be for a period of eight years to cover their next four years in the country and an IHT tail of four years (as they will have been resident for 14 years when they leave).
• Review and update their wills in relation to both their UK and overseas assets (as the law of their domicile will still apply for succession purposes generally) and put in place Lasting Powers of Attorney.

The most significant potential additional cost to the Atlantis family, resulting from the tax changes, is IHT. However, by putting insurance arrangements in place to cover this, they can manage the situation.