UK Treasury Softens Stance on Non-Dom Tax Rule Amid Concerns of Millionaire Exodus
The UK government has announced plans to revise its controversial non-domiciled (non-dom) tax rule, following concerns that the initial changes could lead to a mass exodus of wealthy individuals. The non-dom regime, which has been in place for over 200 years, allows individuals living in the UK but domiciled elsewhere for tax purposes to avoid paying taxes on overseas income and capital gains for up to 15 years.
Reforms Aim to Encourage Investment and Spending
In October, UK Finance Minister Rachel Reeves announced plans to abolish the non-dom regime from April 2025, subjecting long-term residents to inheritance tax on their worldwide assets. However, following concerns from the non-dom community, the government has decided to introduce an amendment to the Finance Bill, making it more generous for non-doms to bring money into the UK without paying significant taxes.
Temporary Repatriation Facility to be Expanded
The temporary repatriation facility, which enables non-doms to bring money into the UK without paying significant taxes, will be expanded to encourage investment and spending in the country. This move is designed to motivate non-doms to bring their funds to the UK, rather than taking them elsewhere.
Reassurance for Wealthy Overseas Investors
Reeves has also sought to reassure wealthy overseas investors that the changes will not affect double-taxation agreements held between the UK and other countries. This means that countries with double taxation conventions with the UK, such as India, will not be drawn into paying inheritance tax.
Government Seeks to Balance Revenue with Investment
The government’s decision to revise the non-dom tax rule is part of a broader effort to balance revenue generation with investment and growth. While the changes are not expected to impact the £33.8 billion of tax revenue forecast over five years, they reflect the government’s continued engagement with stakeholders to ensure that the reforms operate as intended.
Concerns Over Millionaire Exodus
The initial plans to abolish the non-dom regime sparked concerns that wealthy individuals would leave the UK, taking their investments and tax contributions with them. According to recent figures, an estimated 10,800 millionaires left the UK last year, a 157% increase on 2023. The government’s revised approach aims to address these concerns and encourage non-doms to invest and spend in the UK.
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