The UK Government has introduced reforms to the tax treatment of non-domiciled individuals in the recent Autumn Budget.
Set to take effect on 6 April 2025, these changes will impact both long-term residents and international businesses.
What is changing?
The biggest change involves moving from the existing domicile-based tax system to a new, residence-based regime.
Under the current system, individuals who are ‘non-doms’ could benefit from remittance-based taxation, meaning they only paid UK tax on foreign income brought into the UK.
From April 2025, this will be replaced with a globally competitive, residence-based model, aiming to simplify rules and address perceived unfairness.
Here’s a summary of the primary changes.
New residence-based taxation
The concept of domicile as a tax factor will be replaced by a system based purely on tax residence.
Anyone who has made the UK their long-term home will be taxed on worldwide income, regardless of where that income originates.
End of offshore trust exemptions
Offshore trusts will no longer be used as a shelter for foreign assets from Inheritance Tax (IHT).
This means assets in these trusts will be subject to UK IHT if the settlor or beneficiary is a UK-resident.
Foreign income and gains (FIG) relief
A new ‘4-year FIG regime’ will offer some tax relief on foreign income for new arrivals to the UK who haven’t been UK tax residents in the previous decade.
For four years, eligible individuals will receive 100 per cent tax relief on foreign income and gains.
Overseas Workday Relief (OWR)
The Budget has introduced reforms to the OWR, expanding eligibility to a four-year period and introducing an annual financial cap.
This could simplify tax reporting for employees spending part of their work year abroad.
Capital Gains and Temporary Repatriation Facility (TRF)
Current and past remittance basis users will be allowed to rebase foreign assets to their 2017 value to simplify capital gains calculations.
The TRF will also allow individuals to remit certain pre-2025 FIG to the UK at a reduced tax rate for a limited period.
What does this mean for international businesses?
Employees currently claiming non-dom status may face higher tax liabilities in the UK, especially those with offshore trusts or income.
Employers may need to adjust tax equalisation policies and inform employees of these changes.
Businesses may also face additional tax liabilities for relocating executives to the UK. The revised four-year OWR could make temporary relocations easier but requires planning to optimise tax relief.
With offshore trust protections removed, companies with trust-based investment structures or family-owned businesses may need to restructure to soften IHT exposure.
If your business is affected by the non-dom tax changes, our team of tax experts is here to help you. Contact us now to prepare for the April 2025 transition and make the most of the new tax regime.
Reanda UK is a subsidiary of leading independent accountancy firm Grunberg & Co Limited. Our aim is to help businesses and individuals to navigate the UK’s world-renowned business and tax infrastructure, and to support them with their international ambitions. To find out how we can help you, please contact us.