Giving a range of opinions about the end of the UK's non-dom system and its replacement, wealth managers and private client lawyers examine the details a day after yesterday's Budget.

After Wednesday’s UK Autumn Budget statement of Chancellor of the Exchequer, Rachel Reeves, in the House of Commons, we carry more analysis of what the measures mean and, in particular, their implications for affluent, high net worth and ultra-HNW individuals and their advisors. As is usually the way with these packages, more fine details will come out in the days after a minister finishes a speech. Given the big majority of MPs that the ruling Labour Party enjoys in the House of Commons, there is very little chance, one thinks, that any of the changes will be struck down or significantly amended. The editor of this news service considers the broader implications here.)

The following reactions to the end of the UK non-domicile regime, focus in particular on inheritance tax and trusts. (We are also running this article on our Asia news service because we know that readers in the region, who have clients enjoying non-dom status at present, will value the information.)

If you wish to respond and comment, email the editors at tom.burroughes@wealthbriefing.com and amanda.cheesley@clearviewpublishing.com.

Aidan Grant, partner at Collyer Bristow
“Under pressure, the government has kept its manifesto commitment of abolishing domicile from the UK tax code, replacing it with a pure, residency-based regime. The fact that taxpayers have effectively known about these changes since March may have allowed the water to reach its boiling point gradually before many of the people formerly known as ‘non-doms’ hopped out of the UK.

“Controversially, perhaps, the new rules appear to introduce a concept of 'qualifying foreign income,’ which must be identified (i.e. disclosed to HMRC) for the regime to apply to it. If so, this will vastly increase HMRC’s awareness of the non-UK income/gains of all UK residents. Currently, remittance basis users must only disclose foreign income and gains that they remit to the UK, with no obligation to disclose non-remitted funds. Moving forwards this appears to be inverted, with taxpayers having to disclose that which they are seeking to shield from tax. This is a significant increase in the level of disclosure required for taxpayers.

“Whilst the four-year period is significantly shorter than the current 15-year window for the remittance basis, the breadth of the four-year is, at least, more generous to those with overseas wealth.

“It is welcome that the government plans to extend the Temporary Repatriation Facility (TPF) to three tax years from 6 April 2025, allowing non-domiciliaries to remit foreign income and gains previously shielded by the remittance basis to the UK at a rate of only 12 per cent (15 per cent in 2027/28). This facility will be used by wealthy taxpayers who might accept that paying only 12 per cent to bring overseas wealth in the UK is better than not remitting it at all.

“Inheritance tax will be levied on foreign individuals on the expiry of the new 10-year residency period. During the initial 10 years, the individual’s non-UK assets will remain outside the scope of IHT. However, after 10 years his/her worldwide wealth will fall within the scope of charge.

“Crucially, this will include 'excluded property trusts.’ This includes those trusts previously settled by non-domiciled settlors well before today’s changes. From 6 April 2025, trusts with a long-term resident settlor (i.e. a person who has been resident in the UK for 10 years or more) will no longer benefit from excluded property status for IHT purposes. This is proving to be amongst the most controversial changes. Anecdotally, many of our clients accept that UK taxation of worldwide income and capital gains becomes reasonable after an initial tax-efficient period. However, IHT on worldwide wealth, including wealth placed in structures currently qualifying as excluded property trusts, is definitely the straw that will break the back of many non-dom camels.

“For foreign trusts where the settlor is either (a) not resident in the UK or (b) dead (provided that, if dead, he/she was not a long-term UK resident), it will come as a relief that exposure to UK taxation remains substantially unchanged. Such trusts will remain an effective way of deferring UK tax until the point of receipt by a UK-resident beneficiary, whilst also shielding trust capital from IHT.

“Whilst the focus for many affected non-doms and their advisors will inevitably – and understandably – be the higher tax costs that will come with long-term residence in the UK, there are some beneficiaries of the Budget changes. These will include individuals returning to the UK after more than 10 years abroad. Currently, those individuals will be be brought back within the scope of all UK taxes within two tax years of their return. However, in keeping with Labour’s promise to remove domicile as a relevant tax concept, there appears to be no distinction in the new rules for those ‘returning domiciliarie;' in future they will be treated in the same way as anyone coming to live in the UK.  

“In other words, this essentially opens up the replacement for the non-dom regime even to those who are domiciled in the UK. It is a rare and welcome example of the Treasury taking the rough with the smooth, and applying the logic of its changes fairly, even where it is disadvantaged by doing so.”

Matthew Braithwaite, Wedlake Bell partner and head of its offshore private client arm
"The government has resolved to press ahead with its full strength non-dom reforms, ignoring calls from industry bodies, think tanks, lobby groups and the UHNW community to re-think its proposals.

"The result is a new UK non-dom regime that simply cannot hope to be 'internationally competitive,’ as the Chancellor hopes, and although may offer short-term attractions, will not entice any non-doms to remain in the UK. We fully expect to see a continuation of non-doms exiting the UK and reduced in-bound activity in respect of those non-doms looking to enter the country.

"Of particular note is the government's intention to extend inheritance tax from 6 April 2025 to property trusts created by 'long-term residents,' a move which is highly likely to drive a further swathe of UHNWs to choose to exit the UK. 

“Many non-dom individuals had decided to stay in the UK following the 2017 changes to the regime on the basis that their wealth-holding structures were, to a large extent, protected from UK tax. That these structures now come fully within the scope of UK tax will likely be the final straw for many making a decision about their future in the UK. We expect that this will be, in the long term, a blow to the UK, as these individuals will take with them valuable sources of investment, spending, and the often significant amount of tax they had been paying."

Dominic Lawrance, partner at Charles Russell Speechlys
"The UK’s non-dom community, which contributes significantly to the UK economy, has been on tenterhooks awaiting the Budget. The central question was whether the government would proceed with the previously-announced reforms or would heed the many voices cautioning against these changes.

“It is now clear that the government is pushing ahead with the reforms, making only a modest concession in the form of improved IHT treatment for trusts settled before Budget Day. While welcome, this measure alone will not be enough to preserve the UK’s competitiveness compared to other jurisdictions.

“While the IHT concession may bring some relief, this Budget is unlikely to ease concerns among internationally mobile individuals who have chosen to make the UK their home. It would not be surprising if some now reconsider their residency plans, given these changes. This Halloween Budget is likely to spook many individuals into getting out of the UK. If so, this will be terrible news for the UK, as the forecast fiscal gains from the reforms are predicated on there not being an exodus, and on the UK continuing to be an attractive country for internationally mobile individuals to move to.”