The UK’s non-domiciled (non-dom) tax regime has officially ended, ushering in major financial changes for global investors, high-net-worth individuals, and expats. Effective April 6, 2025, these reforms reshape wealth management, property investment, and tax planning. In a recent London Property Podcast episode, Matt Bird, tax partner at Sayers Butterworth LLP, unpacked the implications of this tax shake-up, from worldwide taxation to new inheritance tax rules. With many non-doms relocating to tax-friendly destinations like Dubai and Singapore, those staying must adapt swiftly. Here’s a detailed guide to the key changes, their impact on UK investors and expats, and expert strategies to stay ahead in 2025.
Worldwide Taxation: Non-Doms Face Full UK Tax Exposure
The abolition of non-dom status marks a shift to a residence-based tax system, with significant consequences for UK residents.
• What’s Changed: As of April 6, 2025, UK residents are taxed on their global income and capital gains, eliminating the non-dom ability to shield foreign earnings from UK tax unless remitted.
• 4-Year Relief Window: New arrivals, not UK tax residents in the prior 10 years, qualify for a 4-year foreign income and gains (FIG) regime, offering 100% tax relief on foreign earnings during this period.
• Financial Impact: Long-term non-doms now face UK income tax rates up to 45% and capital gains tax up to 24% (e.g., on property sales), requiring a complete overhaul of financial strategies.
Action Step: Map out your global income sources and consult a tax advisor to leverage the 4-year FIG relief or optimise your residency status before the deadline.
Remittance Basis Charge Eliminated, New Flat Tax Introduced
The remittance basis charge, a key feature of the non-dom system, is gone, replaced by a new tax structure for remitted income.
• Old System: Non-doms paid £30,000–£90,000 annually (based on years of residency) to avoid tax on foreign income kept offshore.
• 2025 Reform: The charge is scrapped, but all foreign income is now taxable. A Temporary Repatriation Facility (TRF) allows pre-April 2025 foreign income and gains to be remitted at a 12% flat rate from 2025–2027, increasing to 15% in 2027–2028.
• Strategic Opportunity: The TRF provides a cost-effective way to bring offshore funds into the UK for investments, such as London property or business ventures.
Investor Tip: Act early to remit funds at the 12% TRF rate, prioritising high-value assets like prime real estate to maximise returns.
Offshore Trusts Lose Tax Protection
The removal of protected trust status exposes offshore structures to UK taxation, impacting non-doms’ wealth planning.
• Previous Advantage: Non-doms used settlor-interested trusts to defer tax on foreign income and gains held offshore, often through underlying companies.
• New Rules: From April 2025, trusts lose their tax shield for non-doms ineligible for the 4-year FIG regime. Trust income and gains are now taxed directly on the UK-resident settlor.
• TRF for Trusts: Trust distributions can use the 12% TRF rate, but complex rules around matching benefits to pre-2025 FIG require expert navigation.
Strategy: Review trust structures with a tax specialist to assess exposure, restructure assets, or repatriate funds before the new rules take effect.
Inheritance Tax (IHT) Expansion: Global Assets in Scope
The shift to a residence-based inheritance tax (IHT) system significantly broadens the tax net for non-doms.
• IHT Overhaul: From April 2025, individuals resident in the UK for 10 out of the last 20 tax years face IHT on worldwide assets at up to 40%. This liability persists for 3–10 years after leaving the UK, depending on residency duration.
• Trust Implications: Non-UK assets in trusts established before April 2025 remain IHT-exempt, but new trusts are taxable, complicating estate planning.
• Relocation Trends: The IHT changes are driving non-doms to jurisdictions like Dubai, Italy, or Singapore, where inheritance taxes are minimal or nonexistent.
Planning Tip: Consider gifting assets, setting up pre-2025 trusts, or relocating before the 10-year residency threshold to minimise IHT exposure.
What’s Next: Strategies for Investors and Expats
With the non-dom regime ending, Matt Bird emphasises proactive planning to mitigate tax burdens and maintain wealth. Key strategies include:
• Pre-Arrival Planning: New UK residents should structure finances before arrival to maximise the 4-year FIG relief and explore double tax agreements to reduce UK tax residency exposure.
• Update Tax Strategies: Pre-2025 approaches, like offshore trusts or remittance planning, are largely obsolete. Reassess with a specialist to align with the new regime.
• Leverage the TRF: Remit pre-2025 foreign income at the 12% rate to fund UK investments, such as prime London properties in Mayfair or Knightsbridge, which remain attractive despite tax changes.
• Real Estate Outlook: London’s property market may face short-term pressure from non-dom exits, but its global appeal and limited supply ensure long-term resilience. Diversify into tax-efficient vehicles like Reserved Investor Funds (RIFs) for stable returns.
Expert Advice: Partner with a tax and property specialist to craft a compliant, efficient strategy that preserves wealth and capitalises on London’s real estate opportunities.
Navigate the Tax Shake-Up
The end of non-dom tax status in 2025 is reshaping London’s wealth and property markets, challenging investors and expats to act decisively. Our network of tax and real estate experts, inspired by insights like those from Matt Bird, helps you turn these changes into opportunities. Whether you’re restructuring assets, investing in London property, or planning your residency, we provide tailored guidance to thrive.
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