Living in the UK as a non-domiciled resident (non-dom) has historically offered some tax advantages. But changes are coming! The government is making it tougher for non-doms to avoid paying UK tax on their overseas income.
What’s changing?
Starting April 2025: Most non-doms will be taxed on their worldwide income, not just their income earned within the UK. This is a big shift from the current system where non-doms on the remittance basis only pay UK tax on overseas income brought into the UK.
Are there exceptions?
There might be some relief! If you’ve been a UK resident for less than 15 years, you could qualify for a new “foreign income and gains” (FIG) regime. This offers a 4-year grace period where you won’t pay UK tax on your overseas income.
There’s also a temporary measure for the 2025-26 tax year only. You might be able to claim a 50% reduction in tax on your overseas income during this period.
Thinking of leaving?
The new rules might make you consider moving to a country with lower taxes. However, there’s a lot to consider before you pack your bags:
- Family Needs: Does the new country offer good schools, healthcare, and a safe environment? Is the language a good fit? These factors can significantly impact your family’s happiness.
- Tax Landscape: Research the tax regime in your chosen country. Are there other taxes besides income tax?
- Visas and Permits: Can you easily obtain residency in the new country?
- Maintaining Non-Residence: How much time can you spend in the UK before being considered a resident again?
- Getting Help
These changes can be complex, so talking to a tax advisor is crucial. They can help you understand how the new rules impact you and explore your options, including:
- Taking advantage of the FIG regime (if eligible).
- Claiming the temporary tax reduction for overseas income (applicable for 2025-26 only).
- Understanding the implications of moving to another country.
- Remember, a tax advisor can also provide guidance on navigating potential changes to inheritance tax (IHT) that might be coming down the line.
The upcoming tax changes for non-doms in the UK will undoubtedly impact your financial situation. While the details are still being finalized, the revisions aim to create a fairer tax system.
The key takeaway is to act before April 2025. If you’re a non-dom resident, consulting with a tax advisor is essential. They can help you navigate the new rules, explore potential tax breaks like the FIG regime, and assess the implications of staying in the UK or relocating elsewhere. Remember, a well-informed decision can significantly impact your future tax burden.
