UK Treasury Proposes to Introduce Residence-Based Regime for Taxation of Non-Domiciled Individuals
The UK Treasury has published a policy paper, "2024: Non-UK domiciled individuals – Policy Summary", which sets out the changes to be made to the taxation of non-UK domiciled individuals. From the start of the next tax year, i.e. from 6 April 2025, the concept of "domicile" will be removed as the basis for taxing non-domiciled individuals on their income and gains from non-UK sources and assets. Instead, a new residence-based regime will be introduced.
The previous Conservative government had announced that an individual who has not been resident in the UK for tax purposes for the past 10 years will be eligible for tax relief on foreign income and gains (FIG) for 4 years. However, the Labour government believes that several advantages for existing non-domiciled individuals remain and the government is committed to ending these.
From 6 April 2025, the protection from tax on income and gains arising within settlor-interested trust structures will no longer be available for non-domiciled and deemed domiciled individuals who do not qualify for the 4-year FIG regime.
There will also be a review of offshore anti-avoidance legislation, including the transfer of assets abroad and settlements legislation to remove ambiguity and uncertainty and make the rules simpler to apply. A form of overseas workday relief will be retained. Further details on the review will be provided in due course, but any changes are not expected to apply before the start of the 2026/27 tax year.
Further information on transitional arrangements for affected non-UK domiciled individuals and a new residence-based regime for inheritance tax are contained in the policy document, dated 29 July 2024, which can be found here.
Source: IBFD Tax Research Platform News