The U.K. government has announced plans to ease some of its proposed changes to the controversial non-dom tax rules, following concerns over a significant exodus of millionaires. Chancellor Rachel Reeves confirmed the decision, stating that the government has listened to feedback from the non-dom community and will introduce amendments to address their concerns.
The non-dom regime, which has been in place for over 200 years, allows individuals living in the U.K. but domiciled elsewhere to avoid paying taxes on overseas income and capital gains for up to 15 years. However, the system has faced criticism, prompting Reeves to announce its abolition starting April 2025. Under the new rules, long-term residents would be subject to inheritance tax (IHT) on their global assets, including those held in trusts.
Speaking at a side event during the World Economic Forum in Davos, Reeves revealed that the government would propose an amendment to the Finance Bill to make the temporary repatriation facility (TRF) more generous. This facility allows non-doms to bring money into the U.K. without incurring significant taxes.
“We have been listening to the concerns raised by the non-dom community,” Reeves told The Wall Street Journal. “In the Finance Bill, we will table an amendment to make the temporary repatriation facility more generous, enabling non-doms to bring money into the U.K. without paying significant taxes.”
Reeves also sought to reassure wealthy international investors that the changes would not affect double-taxation agreements between the U.K. and other countries, such as India. “We are not changing those double-taxation conventions,” she emphasized.
A Treasury spokesperson confirmed the adjustments, stating that the goal is to encourage non-doms to bring their funds to the U.K., where they can spend and invest. The spokesperson added that the changes are not expected to impact the £33.8 billion in tax revenue forecasted over five years but are intended to ensure the reforms operate as planned.
The government’s October budget included measures targeting the ultra-wealthy, such as new levies on private equity executives, private schools, second homes, and private jets. Critics warned that these moves could drive wealthy individuals out of the country, undermining the government’s pro-investment agenda.
Recent data from New World Wealth and Henley & Partners estimates that 10,800 millionaires left the U.K. in 2023, a 157% increase from the previous year. While the proposed amendment has been welcomed by some, experts question whether it will be enough to reverse the trend.
James Austen, a tax partner at Collyer Bristow, noted that while the amendment is positive news for high-net-worth taxpayers, it does not address broader concerns about the new regime, particularly regarding trusts and inheritance tax. Similarly, Matthew Braitwaite of Wedlake Bell’s private client offshore team suggested that the changes might delay but not prevent the departure of non-doms.
Source: CNBC
