Non-dom status applied to individuals who resided in the UK but considered their permanent home (or domicile) to be elsewhere. This allowed them to avoid paying UK tax on foreign income and gains, as long as those funds weren't brought into the UK. This status was designed to attract wealthy individuals, investors, and business leaders to the UK, boosting the economy and fostering innovation.
To claim non-dom status, you had to demonstrate a strong connection to a country outside the UK. This could be through birth origin or significant ties to another nation. Non-doms still paid tax on UK-earned income, but their overseas income, such as earnings from company stocks or property sales, remained untaxed if kept outside the UK.
In a significant policy shift, the UK government announced in the October 30th budget that non-dom status will be abolished in April 2025. The goal is to increase tax revenue and address concerns about tax fairness.
A new residence-based scheme will replace the non-dom system. This means that everyone residing in the UK will be taxed on their worldwide income and gains, regardless of where their domicile is.
If you currently have non-dom status, you'll need to prepare for these changes. Starting in April 2025, you'll be required to report and pay tax on all your global income and gains.
To ease the transition, the government will offer a temporary reprieve for the first three years. The Temporary Repatriation Relief will allow individuals to bring their capital and gains into the UK at a reduced tax rate.
Navigating the Transition
It's crucial to stay informed about the details of these changes as they emerge. Seek guidance from your accountants and financial advisors to develop a tax-efficient strategy for managing your assets and income in this new landscape.
Key Takeaways:
At Breaking the Mould Accounting Limited, we support you with personal tax planning. As well as advising you on how to best navigate the changes to non-dom tax status. Contact us now and get professional guidance.