Chancellor Rachel Reeves has announced adjustments to the proposed abolition of non-domiciled (non-dom) tax status, offering a more generous phased approach to winding down the associated tax benefits.
Speaking at the World Economic Forum in Davos, Reeves confirmed that amendments to upcoming legislation would enhance the Temporary Repatriation Facility, aimed at encouraging former non-doms to repatriate their wealth to the UK.
Non-dom status currently allows UK residents to avoid taxation on overseas income if their permanent domicile is outside the UK.
Labour’s election manifesto pledged to eliminate this status, highlighting concerns over fairness in the tax system and the potential for additional revenue to fund public services.
LISTENING TO CONCERNS
At an event hosted by the Wall Street Journal yesterday, Reeves said: “We have been listening to the concerns that have been raised by the non-dom community.”
The enhancements to the Temporary Repatriation Facility – a three-year scheme offering discounted tax rates for assets repatriated to the UK – were described as minor adjustments unlikely to significantly alter the overall fiscal impact of scrapping non-dom status.
Downing Street reinforced the government’s commitment to replacing the “outdated” non-dom tax regime, with the Prime Minister’s official spokesperson stating: “The new system addresses unfairness in our tax system, attracts the best talent and investment to the UK, and ensures that everyone who is a long-term resident of the UK pays their tax here.”
UNCERTAINTY
But Sean Cockburn, Partner at Forvis Mazars, is worried about the uncertainty caused by the upcoming changes.
“The Chancellor’s comments at Davos suggest updates to the 2024–25 Finance Bill may respond to reports of an exodus of wealthy individuals from the UK,” he says.
“While revisions might be welcomed by non-doms, the new rules, set to take effect from April 2025, leave little time for affected individuals to adapt. Stability is crucial for efficient financial planning.”
LESS APPEALING
And Charlie Sosna, Head of Private Wealth and Tax at Mishcon de Reya, says: “Many clients feel the proposed rules make the UK less appealing. We’ve seen significant clients exploring relocations to countries like Italy, Switzerland and Monaco. These clients are often willing to contribute and pay their way, but the UK must offer an attractive regime to retain their wealth and investment.”
Sosna also expressed concerns about the short-term nature of the proposed incentives. He adds: “The new rules may attract individuals for a brief period but could discourage longer-term commitments to the UK.
“This risks creating a transient population that contributes little to the tax base. The government’s decision to revisit these policies is a step in the right direction, but it must balance fairness with incentives that encourage long-term investment.”
TIME RUNNING OUT
And Carol Katz, Partner in the Private Wealth and Tax group at Mishcon de Reya, says: “The departure lounge is currently fuller than arrivals.
“Expanding the Temporary Repatriation Facility with reduced tax rates of 12–15% could encourage individuals to stay in the UK. However, time is running out to finalise these changes, and clients will want to see the detail before altering their plans.”
She adds: “While the regime may appeal to those seeking short-term tax relief on foreign income and gains, four years is often too short to justify relocating families.
“Many are considering alternatives such as Italy, Switzerland or Dubai, which offer more stable and appealing tax regimes for internationally mobile individuals.”
