Everything we know from Labour about the 2025/26 non-dom changes

Spring Budget 2024 proposals

Labour Government July 2024 updates

Impact of non-dom changes

Removal of the remittance basis of taxation and a new temporary regime 4-year foreign income and gains (FIG) regime.

Proposal to be adopted.

100% relief for foreign income and gains for new arrivals in the UK, or their first 4 tax years where they have not been UK tax resident in any of the 10 consecutive years prior to their arrival.

Transitional provision: 50% reduction in foreign income subject to UK tax for the first tax year (2025/26) of the new regime when an individual loses access to the remittance basis of taxation.

Transitional provision will not be adopted.

Non-domiciled individuals who claim the remittance basis in 2024/25, will be subject to the new regime from 6 April 2025. Those who are not within the 4-year FIG regime will pay UK tax on their worldwide sources of income and gains without a reduction in the applicable tax rates.

Transitional provision: A Temporary Remittance Facility (TRF) to be introduced for remittances in 2025/26 and 2026/27 of income / gains previously sheltered by the remittance basis at a rate of 12%.

A new TRF will be introduced for a limited time at a reduced tax rate. The length of time and rate is to be confirmed.

It appears then that there will still be an incentive to remit previously sheltered income and gains to the UK for former remittance basis users.

Transitional provision: Remittance basis users will be able to ‘rebase’ their foreign assets for Capital Gains Tax (CGT) purposes to 5 April 2019 values.

Rebasing is to be adopted, but the date of rebasing is to be confirmed.

There will be some CGT benefit to past or current remittance basis users who are outside of the 4-year FIG regime and dispose of assets post 6 April 2025.

Trust protections for tax on income and gains (for settlors of offshore trust with protected trust status) to be removed.

Proposal to be adopted.

From 6 April 2025, settlors of offshore trusts will be subject to UK tax on income and gains arising within the structure, unless the settlor is within the 4-year FIG regime.

Intention to move from a domicile regime for Inheritance Tax (IHT) purposes to a residency-based regime. Ten-year tail to be introduced for individuals who depart the UK ensuring that their assets remain within the scope of IHT.

The IHT regime is to be subject to a consultation paper.

Committed to replace the current regime with a residence-based regime.

IHT changes are not to be subject to a formal consultation, but the government will consider existing stakeholder feedback and carry out further external engagement over the summer of 2024.

From 6 April 2025 the basic test for the application of IHT at present is expected to be whether an individual has been tax resident in the UK for 10 years prior to death, with a provision to keep a person within the scope of IHT for 10 years after leaving the UK.

This change would bring long term UK resident non-doms into the scope of UK IHT.

Excluded property status for IHT purposes for assets contained in an existing Trust to be retained.

New regime for IHT purposes is to be introduced as above, but excluded property status for trusts is to be ended. There is an acknowledgement that current excluded property trusts have been established based on current rules, and as such, they are considering how these changes can be introduced in respect of these Trusts.

Non-UK domiciled individuals who are settlors of settlor interested Trusts will need to consider whether under the new proposed rules, the value of the Trust is brought within the scope of IHT.

Overseas Workday Relief (OWR) to be reformed based on the new residence-based regime. To continue to be available to provide income tax relief for the first three years of UK residence for individuals who work both in the UK and overseas.

A form of OWR will be retained. There will be engagement with stakeholders on the design of this relief.

To be monitored by those who are currently claiming OWR or those considering relocating to the UK but who work internationally.

The Transfer of Assets Abroad and Settlements anti-avoidance legislation will be reviewed in an attempt to modernise the rules, make them simpler to follow and ensure that they are effective.

These rules are not likely to be subject to change until 6 April 2026.

Individuals impacted by the anti-avoidance rules will need to ensure that they understand the way in which any proposed changes will impact the way they are subject to UK tax.