The Chancellor, Rachel Reeves, has revealed that the Labour government will be abolishing the non-dom regime from April 2025 in her Budget speech.

The concept of domicile status from the tax system will be removed and replaced with a ‘residence-based regime’.

This includes ending the use of offshore trusts to shelter assets from inheritance tax (IHT) and scrapping the planned 50 per cent tax reduction for foreign income in the first year of the new regime.

Individuals who opt-in to the residence-based regime will not pay UK tax on foreign income and gains (FIG) for the first four years of tax residence.

Meanwhile, for capital gains tax (CGT) purposes, current and past remittance basis users will be able to rebase personally held foreign assets to 5 April 2017 on a disposal “where certain conditions are met”.

“The announcement was as expected,” commented Spencer West LLP private wealth partner, Sangeeta Rabadia.

“Ms Reeves announced that she will be abolishing the non-dom tax regime. Unfortunately, she did not go much further that what she has before.

“Those affected will unfortunately, be faced with further waiting to see what this means for them. What is this new residence-based scheme that will replace the current regime? How will this be implemented, will it be all in April, will there be a tiered approach? How will that impact those paying tax under the current regime?

“Whilst the budget was much awaited, there is still a longer wait for those affected. As practitioners we are no more in a position to advice our clients as we were yesterday.”

Utmost International head of HNW technical services, Brendan Harper, added: “The changes confirmed by the Chancellor to the Resident Non-Domicile Regime brings months of uncertainty for UK resident non-domiciled individuals to an end.

“With the scrapping of the regime, if non-domiciled individuals decide they want to live in the UK past four years they will need a long-term solution and alternative strategies to manage and protect their wealth effectively. For many, they may need to think beyond establishing trusts in order to shelter offshore income and gains for the long-term and to protect their estates from inheritance tax.

“We suspect that after this announcement we will continue to hear clients talk about making plans to move to other jurisdictions such as Portugal, the UAE and Monaco where we have seen the highest levels of interest this year.

“High-net worth individuals and their intermediaries now have certainty to take stock of the reforms and begin adjusting their financial plans accordingly.”

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