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OPINION OF THE WEEK: The End Of UK's Non-Dom System

James Quarmby

25 April 2024

The following commentary comes from James Quarmby, partner, private wealth and tax at . Quarmby, who is also a member of this news service's editorial board, has spoken to this publication before on the UK’s resident non-domicile system which is now slated for abolition by the UK government, with a temporary residency regime as a replacement. As readers may know, Quarmby is not afraid to be blunt, and his comments here are no exception. (The editor of this news service has defended the system.)

For years, the system has been attacked as unfair, archaic, or just odd, with the charge often made that non-doms are able to avoid paying their supposed fair share of tax. Defenders argue that these criticisms make no sense because the UK doesn’t adopt a worldwide system of tax (as the US does), and that non-doms bring in a net inflow of revenue to the country. But the “optics” 
 to use a fashionable word repel voters. This is particularly difficult when overall tax burdens are as high as they’ve been since the end of the Second World War. As a result, a Conservative-led government has abolished the system, and its Labour opponents are in agreement.  

With that out of the way, here is what Quarmby has to say. The usual editorial disclaimers apply to views of guest writers. To respond, email

I had just about calmed down my clients after Chancellor Jeremy Hunt's non-dom shock on 6 March when, on 9 April, Shadow Chancellor Rachel Reeves dropped her own bomb – that Labour's policy response was to drag all offshore trusts into the charge to IHT, even if created before April 2025.

This has resulted in something close to panic, with clients packing their bags and checking flight schedules. (OK, I'm exaggerating, but you get the point.) As most advisors will know, IHT is the real deal-breaker, especially if existing trusts are brought into play.

It is therefore important to know whether the government has the parliamentary time to enact the Chancellor's promise that pre-April 2025 trusts will be grandfathered for IHT purposes – if it doesn't, then we can be pretty sure that a Labour government will not respect that promise.

The rumours in parliament were that Prime Minister Rishi Sunak would shoot for an October election, not wanting to clash with the US election in November. In that scenario parliament wouldn't rise again until after the summer recess on 23 July, as there wouldn't be time, given the six-week purdah period required before any election. However, the recent press revelations that the Chancellor wants to deliver a pre-election Autumn Budget (apparently to raise the stamp duty threshold and give another NIC cut) suggests that parliament will need to be recalled after the summer recess in September, to allow time for both the Budget and the consequential Finance Bill. This means that we are back on track for a November election.

We are already expecting a draft Finance Bill this summer (probably June), designed to enact the measures set out in the 6 March Budget, but will it contain the legislation to grandfather pre-April 2025 trusts for IHT? If there isn't time for the IHT measures in that Bill, then at least we know that there may be a further opportunity in the autumn. Given that Labour has pledged to break the Chancellor's IHT promise if they are elected, one would think that Hunt would wish to enact it whilst he still has the power to do so – if only to irritate the opposition.

Whilst there is debate as to whether an IHT grandfathering provision enacted by the current government could be overturned by a new Labour government (the debate revolves around whether such a measure would be truly retrospective, which is not really allowed), the point is that it will make Labour think twice before charging ahead, which can only be a good thing. Finally, there is the fundamental (and ironic) point that if Labour did overturn the IHT grandfathering measure then it would blow a hole in their own non-dom policy.

This is because Labour's revenue raising projections for their policy were borrowed from the Warwick Report, which itself did not examine the exit projections for non-doms if the IHT protections were removed.

The Warwick Report acknowledges that if only 4.5 per cent of non-doms leave then the policy would be revenue negative – which means no more money for the NHS and other front-line services.

I think any tax advisor would acknowledge that dragging all trusts into the charge of IHT would push a substantial proportion of their client base out of the UK. I don’t have any numbers, but I'm guessing it will be closer to 30 per cent. It will certainly be way above the 4.5 per cent mark.