What can you expect this year from the Budget’s non-dom tax overhaul?

Chancellor Rachel Reeves announced substantial changes to the taxation rules surrounding non-UK domiciled individuals (non-doms) in October’s Budget.

These changes will have a big impact on how foreign income, gains, and assets are treated.

With the abolition of the remittance basis and new rules for Inheritance Tax (IHT), offshore trusts, and Capital Gains Tax (CGT), non-doms must reassess their tax planning strategies.

At MGI Midgley Snelling LLP, we have years of experience helping internationally active clients, including non-doms, manage the complexities of cross-border taxation.

With changes to the tax regime on the horizon, we are here to provide clarity, practical advice, and tailored solutions to ensure you stay ahead.

Income Tax and Capital Gains Tax

The remittance basis will be abolished and replaced with a residence-based system from 6 April 2025.

Under this system, individuals who opt-in will not pay UK tax on foreign income and gains (FIG) for their first four years of tax residence.

Additionally, for CGT purposes, current and past remittance basis users can rebase foreign assets to their value on 5 April 2017 when selling them under certain conditions.

With these changes, planning ahead will help minimise tax liabilities. We can:

  • Review your foreign income and gains to ensure optimal tax treatment
  • Help you take advantage of the 2017 rebasing provision to minimise CGT on foreign asset disposals.
  • Advise on double taxation agreements to avoid paying tax on the same income in multiple jurisdictions.

Inheritance Tax planning

From April 2025, offshore trusts will no longer shield assets from IHT under the new residence-based system.

Therefore, alternative strategies for protecting your estate are required.

Our team can:

  • Develop tax-efficient strategies to mitigate IHT, even without the use of offshore trusts.
  • Assist with estate planning, ensuring your assets are structured to protect wealth for future generations.
  • Provide full executorship administration services, including liaising with HM Revenue & Customs (HMRC) on IHT issues.

We also offer resources like our estate planning booklet to make the process as straightforward as possible for your executors and loved ones.

Onshore and offshore trusts

The Budget eliminates the use of offshore trusts for IHT protection, but they can still be used for other purposes.

It is now more important than ever to maintain accurate records and ensure compliance with evolving tax rules.

We have decades of experience in setting up and managing trusts. We can:

  • Review and restructure existing trusts to align with the new rules.
  • Ensure trustees and beneficiaries comply with record-keeping requirements.
  • Advise on the tax implications of distributions and help calculate liabilities for beneficiaries.

National Insurance

The Overseas Workday Relief will be extended to four years, with the requirement to keep income offshore removed.

The amount that can be claimed annually will be limited to the lower of £300,000 or 30 per cent of net employment income.

We can help by:

  • Advising on the National Insurance implications of overseas work arrangements.
  • Helping foreign nationals working in the UK explore contribution holidays or exemptions.
  • Assisting UK residents on overseas assignments with certificates of continuing liability and other compliance needs.

Temporary Repatriation Facility (TRF)

The Temporary Repatriation Facility (TRF) will apply from 6 April 2025, providing a limited opportunity for individuals to remit previously unremitted foreign income and gains (FIG) under favourable terms.

This scheme is designed to encourage non-domiciled individuals who previously used the remittance basis to bring funds to the UK.

The key aspects of the TRF are:

  • It applies to FIGs arising pre-6 April 2025 that were subject to a remittance basis claim and have not yet been remitted to the UK.
  • It is available to UK residents for three tax years from April 2025.
  • Settlor-beneficiaries of offshore trusts can also benefit if the distributions or benefits received between April 2025 and April 2028 can be matched to FIGs within the trust that arose before 6 April 2025.
  • The tax charge on designated amounts will be set at 12 per cent for the 2025-26 and 2026-27 tax years, rising to 15% in 2027-28.

Once the TRF charge is paid, no further UK tax will be due, regardless of when or if the funds are remitted to the UK.

This presents a valuable opportunity for non-domiciled individuals to bring funds to the UK at a lower tax rate. However, certain limitations apply:

  • Foreign tax cannot be offset against the TRF charge, as designated amounts are treated as net of tax.
  • If the TRF charge is paid from undesignated FIGs, those amounts will be taxed as a remittance under normal rules.
  • Any unremitted FIGs that are not brought to the UK under the TRF will continue to be taxed under the remittance basis if remitted later, following the current rules for UK domiciled individuals.

With the introduction of the TRF, non-doms should consider their repatriation strategy carefully to make the most of this opportunity. Our team can help you:

  • Assess your eligibility for the TRF and how it fits into your overall tax strategy.
  • Calculate potential tax liabilities and the best approach to designating funds.
  • Ensure compliance with all reporting requirements and avoid unexpected tax consequences.

Your next steps

The changes to the non-dom tax regime require careful planning to protect your wealth and ensure compliance.

Our international experience and understanding of cross-border tax rules allow us to provide practical advice to help you with these changes and secure your financial future.

Contact us today for further advice.

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