As new data comes out showing how much UK resident non-domiciled people pay in tax, a figure in the sector points out that recent changes in the numbers appear to be tempering.

Debate over whether the UK's resident non-domicile ("non-dom") system should be left mostly intact took a new turn with figures this week showing that their tax liabilities reached a record high of £12.4 billion ($15.8 billion) in the tax year ending 2022.

HM Revenue and Customs estimated that returns from non-domiciled and deemed domiciled taxpayers self-assessment tax rose in the tax year ending in 2022, compared with the previous 12 months. 

The tax authority said it estimated that a total of at least 78,700 non-domiciled and deemed domiciled taxpayers are indicated in self-assessment tax returns, covering income tax, capital gains tax and national insurance contributions. The £12.4 billion figure rose from £11.3 billion, covering 78,100 billion people.

In recent years, the total number of non-doms has declined as Labour and Conservative governments have restricted the ability of people to have permanent non-dom status and increased the amount they must pay to enjoy this status. Being a non-dom means not having to pay tax on worldwide income (that isn't brought into the UK) and only pay on UK-sourced income. The system, which dates back to the late 18th century, has been criticised as unfairly benefiting the rich. Defenders say it is fair not to tax people on worldwide income and gains because that money is taxed in the country where it is made. (See commentaries and comments here and here.) The Labour Party, which on current opinion polls would form the next UK government, has said it wants to scrap the entire system.

Richard Bull, private client partner at Crowe UK, an accountancy firm, said the pace of change in the data in recent years has started to settle down. 

“Today’s data shows the impact of tax rule changes in 2017 has seen the mass exodus of people begin to temper with around 78,000 people now living in the UK registered as non-domiciles in 2022. While an increase on 2021, the figure is significantly down from 120,000 people in 2016,” he said in a statement.

“While collecting more taxes overall from a smaller group of people will be hailed as a success for HMRC, beneath the headlines there is a more precarious position,” he added. 

“Despite an increase of nearly £3 billion to £12.4 billion in taxes paid by non-domiciles in 2022, the impact of annual inflation over the last seven years means the actual difference is much smaller and, more problematically for government coffers, there are continuing issues identifying the correct amount of tax to be collected as not every person is required to declare their status to HMRC,” he continued.

“Given the political attention this small group has received over recent months, and the fact that Labour are promising tax reforms to this area if elected, it remains to be seen if further changes would unlock more tax receipts or potentially trigger an exodus of this internationally mobile part of society with the resultant loss of tax revenue. However, as the saying goes: 50 per cent of something is better than 100 per cent of nothing,” he concluded.

The UK has a territorial tax code, as do most nations other than the US. Income and wealth sourced in the UK, for example, is taxed. Money that stays out of the UK and is not remitted to the country is not taxed (there are some caveats to this). (See this link for more commentary and analysis on the system.)