The new rules for non-doms have a surprisingly advantageous effect for some people.
There are a significant number of people who were born in the UK with a UK domicile of origin and who later acquired a foreign domicile of choice. Under the old rules, if they become UK resident they were immediately deemed domiciled in the UK – although there was a one-year period of grace for IHT. This made them subject to the full set of UK taxes on their worldwide income and assets, despite their long period abroad and their non-dom status. No surprise that they all stayed away.
The new rules for non-doms which came into force on 6 April 2025 virtually abolished the concept of domicile as a determinant for UK tax purposes and was replaced by a residence test. In broad terms, IHT will not apply to the foreign assets of individuals unless and until they have been resident in the UK for 10 out of the last 20 years.
So the very class of people who were so aggressively targeted before 6 April 2025 are surprising beneficiaries of these new rules because they will not now be subject to IHT on foreign assets unless and until they have been resident in the UK for 10 out of the last 20 years. So they can resume UK residence for nine years without any IHT disadvantage.
It gets better. If they were to become resident, they would of course become liable to income tax and CGT going forward – but they would be entitled to a special exemption from tax on their foreign income and gains (whether remitted or not) for the first four years of residence. That would be extremely helpful if they were inadvertently to become resident – possibly if they were to spend more than the relevant number of days by reason of some personal issue.
It is hard to imagine that these consequences were intended – but who knows? However, they are very welcome.
The new rules for non-doms have a surprisingly advantageous effect for some people.
There are a significant number of people who were born in the UK with a UK domicile of origin and who later acquired a foreign domicile of choice. Under the old rules, if they become UK resident they were immediately deemed domiciled in the UK – although there was a one-year period of grace for IHT. This made them subject to the full set of UK taxes on their worldwide income and assets, despite their long period abroad and their non-dom status. No surprise that they all stayed away.
The new rules for non-doms which came into force on 6 April 2025 virtually abolished the concept of domicile as a determinant for UK tax purposes and was replaced by a residence test. In broad terms, IHT will not apply to the foreign assets of individuals unless and until they have been resident in the UK for 10 out of the last 20 years.
So the very class of people who were so aggressively targeted before 6 April 2025 are surprising beneficiaries of these new rules because they will not now be subject to IHT on foreign assets unless and until they have been resident in the UK for 10 out of the last 20 years. So they can resume UK residence for nine years without any IHT disadvantage.
It gets better. If they were to become resident, they would of course become liable to income tax and CGT going forward – but they would be entitled to a special exemption from tax on their foreign income and gains (whether remitted or not) for the first four years of residence. That would be extremely helpful if they were inadvertently to become resident – possibly if they were to spend more than the relevant number of days by reason of some personal issue.
It is hard to imagine that these consequences were intended – but who knows? However, they are very welcome.
