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More on non-doms - The UK Spring Budget 2024
By D P Sengupta
Mar 29, 2024

THE non-dom regime and the remittance basis of income taxation has been a controversial topic in the UK almost since the beginning of Income taxation in 1799. Many attempts at reforming the system did not fructify although some tweaks were indeed made. Recently, the system became the focus of much discussion when Rishi Sunak became the first person of Indian origin to become the Prime Minister of the UK and it was revealed that his wife Akshata Murty had claimed the benefit of this quaint system that still prevails in the UK. The opposition labour party that is gaining ground in the UK has promised to abolish the non-dom system if it comes to power. Perhaps to blunt the criticism somewhat, Jeremy Hunt, the UK Chancellor of the Exchequer in his spring budget 2024 presented on the 6th of March, 2024 has also promised to do away with the same prompting news outlets to proclaim the demise of a 200-year-old system of income taxation in the UK.

Very broadly speaking, ordinarily residents are taxed in the UK on their worldwide income while those who, despite being residents in the UK are non-domiciled in the UK, pay their income tax only on income arising in the UK and pay UK tax on their foreign income only when they actually remit the same to the UK. There is thus a perverse loophole for this group of people in keeping their income accumulated abroad for as long as they wish. Besides. as we have seen in my last article, the non-dom status also has favourable treatment for the purpose of inheritance tax.

The first Income Tax was introduced in the UK in the year 1799 to help fight the Napoleonic Wars. King Charles III was the Monarch and William Pitt the younger was the Prime Minister. By that time, England already had extensive colonies and much of the Royal wealth was dependent on the profits and monopolies that were granted to the East India company and to the South Sea companies. The non-dom regime that is in the eye of the storm is a direct remnant of the colonial system where influential people running these colonies had connections with the ruling elite and could influence the tax policy of the day. Many of them used to spend considerable time in the colonies tending to their interests there and if they had to pay tax on their worldwide income in the UK, it would have hurt their interests. Therefore, it was decided that their income would be included for the purpose of taxation in the UK only when they repatriated the income to the UK. Initially, the repatriation basis was applicable to all UK taxpayers. Subsequently, in 1914, such remittance basis was restricted to people who were not domiciled in the UK or not ordinarily resident in the UK. The non-doms therefore got advantageous tax treatment as compared to the ordinarily resident taxpayers only from 1914 onwards.

More recently, in 2008, after many studies and reports, the then government decided to charge a fee for those willing to avail of the non-dom system. Initially, this was fixed at a flat charge of GBP 30,000. Then in 2012, non-domiciled individuals were allowed to remit foreign income and gains to the UK tax free provided they were used to invest in qualifying UK businesses.

Further changes were brought in 2017 whereunder if a UK tax resident is not domiciled in the UK, he/she has to make a choice for each year either to be taxed on arising basis or on remittance basis in respect of the foreign income. For the first seven years of residence in the UK, there are no charges. But, for long-time residents i.e., those residents in the UK for more than 7 years, a charge known as remittance basis charge (RBC) becomes payable. From 6th April 2017, there are 2 levels of charge: GBP 30,000 if one has been UK resident in at least 7 out of the preceding 9 UK tax years and GBP 60,000 if one has been UK resident in at least 12 out of the preceding 14 UK tax years

It is reported that the total number of persons still claiming the non-dom status has come down from 33,600 in 2015/16 to 14,300 in 2016/17. A recent paper has analysed the composition of the non-doms and has concluded that 'most non-doms are from India, the US, Western Europe (especially France) and other English-speaking countries such as Australia, Canada, Ireland, New Zealand, and South Africa. There are very few non-doms from Africa or South America. "This is evidence of a twin dominance of the 'Anglosphere' and the EU, reflecting the UK's colonial connections and modern economic ties." (The UK's 'non-doms': Who are they, what do they do, and where do they live?) (

Despite the Labour Party's current rhetoric about abolishing the system, it is easily discernible that successive governments have found it difficult to close the loophole. This is also apparent from the speech of Mr. Jeremy Hunt in what he stated while presenting the Spring Budget:

"Next, I turn to the taxes paid by those who are resident in the UK but not domiciled here for tax purposes - a category of people known as "non-doms."

I have always believed that provided we protect the UK's attractiveness to international investors, those with the broadest shoulders should pay their fair share.

After looking at the issue over many months, I have concluded that we can indeed introduce a system which is both fairer and remains competitive with other countries.

So the Government will abolish the current tax system for non-doms, get rid of the outdated concept of domicile and the remittance basis in the tax system, and replace it with a modern, simpler and fairer residency-based system.

From April 2025, new arrivals to the UK will not be required to pay any tax on foreign income and gains for their first four years of UK residency, a more generous regime than at present and one of the most attractive offers in Europe.

But after four years, those who continue to live in the UK will pay the same tax as other UK residents.

Recognising the contribution many of these individuals to our economy, we will put in place transitional arrangements for those benefitting from the current regime.

That will include a two-year period in which individuals will be encouraged to bring wealth earned overseas to the UK where it can be spent and invested here - a measure that will attract onshore an additional £15 billion of foreign income and generate more than £1 bn of extra tax.

Overall abolishing non-dom status will raise £2.7 billion a year by the end of the forecast period.

We use that revenue to help cut taxes on working families." (Emphasis added)

The labour party now accuses the Conservatives of stealing their idea. However, even when the labour party was in power, they had enough opportunity to abolish the system but did not do so. Of course, in 2008, the labour did introduce the charge that certain non-doms with long stay would pay. The charge has been increased by the Conservative government in 2017. In fact, it has always been a dilemma for the British politicians to balance the consideration of fairness of the tax system with the need for maintaining the country as an important investment hub so much so that advocacy groups like the TJN, Oxfam etc have long considered the UK as a tax haven. And the taxation system in force for non-doms has been considered as one of the important elements of the tax system that allows wealthy expats to live for a long time in the UK enjoying the benefits of the public service and protection of the State in enforcing their legal rights and yet not paying the UK taxes on their offshore income.

But what exactly are the reforms proposed by the Chancellor? According to the HM Treasury, the government wants the UK to have a fair and internationally competitive tax system, focused on attracting talented individuals and investment that contribute to the growth of the economy at the same time adhering to the ability to pay principle which is phrased as 'those with the broadest shoulders should contribute a bit more'.

It is admitted that the concept of domicile is outdated and incentivises individuals to keep income and gains offshore. The government therefore proposes to modernise the tax system by ending the current rules for non-doms, from April 2025. Instead, the government now proposes to introduce a new residence-based regime taking effect from April 2025.

According to this document, the new approach will ensure that the UK remains internationally competitive and attract the best international talent. To ensure that above objective, new arrivals to the UK will benefit from 100 per cent UK tax relief on foreign income and gains for the first four years that they are tax resident in the UK, and there will be transitional arrangement in place for current non-doms.

It is stated that those who have established ties with the UK and benefit from the public services should contribute accordingly. Therefore, under the new system anyone who has been tax resident in the UK for more than four years will pay UK tax on any foreign income and gains, as is the case for other UK residents.

It is stated that this reform will raise GBP 2.7 billion per year by 2028-29, which is in addition to the current GBP 8.5 billion which non-doms pay in UK tax each year.

Changes to the 'non dom' regime

According to this Treasury policy paper, this reform removes preferential tax treatment based on domicile status for all new foreign income and gains (FIG) which arise from April 2025. This reform will abolish the remittance basis of taxation for non-doms and replace it with a modernised regime that is simpler and fairer.

For new arrivals, who have a period of 10 years consecutive non-residence, there will be full tax relief for a 4-year period of subsequent UK tax residence on FIG arising during this 4-year period, during which time this money can be brought to the UK without an additional tax charge.

Existing tax residents, who have been tax resident for fewer than 4 tax years and are eligible for the scheme, will also benefit from the relief until the end of their 4th year of their tax residence.

It is claimed that this is much simpler and more attractive than the current regime, since individuals will be able to bring their foreign income into the UK without attracting any tax charge, encouraging them to spend and invest these funds in the UK.

Non-doms taxed on the remittance basis are eligible for Overseas Workday Relief (OWR) during their first 3 years of UK tax residence. OWR will be retained and simplified under the new system.

"Overseas workday relief (OWR) may be available to non-UK domiciled employees who work wholly or partly overseas, if they have been non-UK resident for at least three consecutive tax years and apply to be taxed on the remittance basis. If these conditions are met, earnings from duties performed overseas are only taxed if they are remitted to the UK. If the earnings are not remitted, they are not taxable in the UK." (

Under the new system, regardless of where an individual is domiciled, and after transitional arrangements, anyone who has been tax resident in the UK for more than 4 years will pay UK tax on any newly arising foreign income and gains, as is the case for all other UK residents.

It is claimed that this new regime is more generous than countries which have no equivalent scheme, and will be competitive against countries who operate similar systems for new residents.

And what about the liability to inheritance tax that, as we have seen in the last article also depends on domicile status and location of assets? Under the current regime, no inheritance tax is due on non-UK assets of non-doms until they have been UK resident for 15 out of the past 20 tax years. No final decision has been taken but it is stated that the government will consult on the best way to move IHT to a residence-based regime. However, to provide certainty to affected taxpayers, it is stated that the treatment of non-UK assets settled into a trust by a non-UK domiciled settlor prior to April 2025 will not change, so these will not be within the scope of the UK IHT regime.


We may also note that there is a trust regime whereunder distributions by a foreign trust established by a non-dom enjoyed protection so long as the distribution was not to a British resident. Non-doms could settle their overseas assets in a trust before becoming deemed domiciled and the income /estate was protected from being covered by the anti-abuse rules. The proposal is to end this protection from 2025.

Since there will be a transition from a long-standing system to a new system for the existing non-doms, the government has proposed to put an attractive transitional regime as follows:

- A temporary 50% reduction in the personal foreign income subject to tax in 2025-26 for non-doms who will lose access to the remittance basis on 6 April 2025 and are not eligible for the new 4-year foreign Income and Gain (FIG) exemption regime.

- Re-basing of capital assets to 5 April 2019 levels for disposals that take place after 6 April 2025 for current non-doms who have claimed the remittance basis. This means that when foreign assets are disposed of, affected individuals can elect to be taxed only on capital gains since that date.

- Non-doms will be able to remit foreign income and gains that arose before 6 April 2025 to the UK at a rate of 12% under a new Temporary Repatriation Facility in the tax years 2025-26 and 2026-27.

- While the government is removing protections on non-resident trusts for all new FIG that arises within them after 6 April 2025, FIG that arose in protected non-resident trusts before 6 April 2025 will not be taxed unless distributions or benefits are paid to UK residents who have been here for more than 4 years.


While these are the proposals for reforming the non-dom and remittance basis of the current government, it is not sure whether these will be implemented if the next government is formed by the Labour party, which then may have its own idea of reform. Going by the statements from both the parties, it is however most likely that the extant system will be changed one way or the other.

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