“Non-dom” describes the tax status of a UK resident whose permanent home – for tax purposes – is outside the UK.
Currently, a non-dom only pays UK tax on the money they earn in the UK. They do not have to pay tax to the UK government on money made elsewhere in the world (unless they pay that money into a UK bank account). For some people, this status offers tax-saving opportunities as they may choose a lower-tax country as their main residence (domicile). In April 2023, there were 68,800 non-doms in the UK, mostly living in and around London.
The Spring Budget 2024 included plans to change the rules for non-doms’ tax status. This new treatment of non-dom individuals’ foreign income and gains (FIG) starts on 6 April 2025, with three key points to note:
A new four-year FIG regime will be available to individuals who become UK tax residents after a period of ten tax years of non-UK residence. Those people will not pay tax on FIG arising in the first four tax years after becoming UK tax resident. After the first four years, each non-dom will be liable to pay tax on income and gains achieved worldwide.- During the first three years of being a UK tax resident, each person may also qualify for overseas workday relief, available to non-British employees who come to work in the UK. If eligible, employees are only subject to UK income tax on their employment income related to their UK workdays.
- Potential changes to how inheritance tax and trusts are treated within the new non-dom scheme are under discussion with changes introduced from 6 April 2025, if agreed.
Transitioning to the new non-dom tax regime
Arrangements are in place to help existing non-doms to move to the new scheme. These include:
- an option to rebase the value of capital assets to 5 April 2019,
- a temporary reduction in taxation on foreign income for the 2025/26 tax year, with only 50% of FIG taxed.
- a two-year temporary repatriation facility to allow previously accrued FIG to be brought into the UK at a tax rate of 12%.
What happens to non-doms’ tax affairs now?
‘The new non-dom tax regime offers an interesting mix of challenges and opportunities,’ says Emily Bridges international tax expert and founder of re:accounts Chartered Accountants in Stevenage. ‘The four-year window of tax-free FIG is still attractive to some people, especially if they are keen to shelter asset sales from inheritance tax, sell a business or increase dividend payments. As with all tax planning and advice, the best way forward must involve a bespoke solution reflecting each individual’s circumstances and goals.’
Are you living in the UK as a non-dom resident?
Find out how these changes affect you and the options available. Our advice blends Emily’s expert international tax knowledge with our superpower of saving money for our clients. We’d love to talk with you. Contact us for an initial discussion without obligation or jargon.
