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Non-domicile changes – Transitional provisions

Navigating personal and business tax complexities for non-domiciled individuals

The abolition of the non-dom tax regime

In the Spring Budget 2024 Jeremy Hunt announced the abolition of the non-dom tax regime and a new modernised ‘tax holiday’ for individuals moving to the UK.

It is one of the most significant reforms to the non-dom tax regime in our generation. Many affected individuals will now face a dilemma due to the proposed rules, in terms of both their existing structures and ongoing exposure to UK Tax.

Transitional provisions

The three main transitional concessions the Chancellor proposed in the Spring Budget for certain individuals are:

  • Only 50% of foreign income will be subject to UK tax in 2025/26
  • Individuals who have previously claimed the remittance basis at some point will be able to make a remittance of previously untaxed income and gains in either the 2025/26 or 2026/27 tax year at a flat rate of 12%
  • Individuals will be able to rebase their non-UK assets to the market value as at April 2019
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The incoming changes to the tax regime for non-domiciled individuals are broad and will have a significant impact.

There are three primary transitional rules designed to mitigate their immediate impact:

  • For the 2025/26 tax year only, certain individuals will be subject to tax on only 50% of their non-UK income. However, Labour have signalled their intention to remove this benefit should they win the next general election.
  • For the 2025/26 and 2026/27 tax years, individuals will be able to remit foreign income and gains previously protected by the remittance basis to the UK at a special tax rate of 12%.
  • From 6 April 2025, certain individuals will be able to elect to rebase the base cost of their assets to their fair market value as of 5 April 2019.

There are still several questions that need to be answered in respect of how these will work in practice.

  1. Will the remittance basis charge need to have been paid in order to benefit as has been the case in previous transitional provisions?
  2. Will an individual be able to remit all foreign income realised in 2025/26 to the UK without a tax charge, even though tax has been paid on 50% of that income?
  3.  What is the significance of the 5 April 2019 date, and how and when will the election need to be made?

We won’t be able to answer these questions until draft legislation is published, but there are some clear planning opportunities that arise regardless. In particular, where an individual is able to take advantage of the remittance basis currently, deferring UK remittances to either 2025/26 or 2026/27, this could mean paying tax at 12% rather than (potentially) 45%.

How we can help

If you would like to discuss how you might be able to take advantage of these transitional rules, please get in touch with your usual Blick Rothenberg contact, or one of the team using the below form.

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