Labor plans to tighten tax rules for non-UK domiciled individuals
Tax rules for non-UK domiciled individuals
Introduction
From next year, non-doms in the UK will face a tougher tax regime, as Labor aims to scrap what it sees as an outdated tax benefit and reform Inheritance tax (IHT) obligations.
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Labor plans to improve on the Conservative proposals in the March Budget by implementing tougher transition rules and introducing a new residence-based IHT system, starting from April 6, 2025. Full details of the dates of Basis change will be disclosed in the fall budget.
The new system
The new system will move from a domicile-based IHT approach to a residence-based approach, targeting those who have resided in the UK for the past 10 years. This change will affect the scope of assets subject to UK IHT for individuals and trusts, and will only apply to deaths occurring after the new rules come into force, thereby avoiding retrospective application.
Foreign income and gains regime (FIG) over four years
The Labor government will not maintain transitional measures announced by former Conservative chancellor Jeremy Hunt, such as the 50% tax cut on foreign income for people who lose access to remittances in the first year. Instead, they will implement a four-year Foreign Income and Gains (FIG) scheme, offering 100% relief on FIG to new arrivals to the UK during their first four years of tax residency , provided they have not been UK tax residents in any of the previous years. ten years.
UK residents not eligible for the four-year FIG scheme will be subject, as usual, to capital gains tax (CGT) on foreign gains. Remittance Basis users can rebase foreign capital assets to their value on a specified date for CGT purposes when they dispose of them. This rebasing date will be confirmed in the next budget.
April 2025
From April next year, income and gains within settler-interested trust structures will lose their tax protection. A new Temporary Repatriation Facility (TRF) will be introduced, allowing individuals who have previously used the transfer basis to remit FIG accumulated before 6 April 2025 at a reduced tax rate for a limited period. The details of this measure will be detailed in the fall budget.
Additionally, offshore anti-avoidance legislation will be revised, including offshore asset transfer and settlement rules, to clarify and simplify current laws. No changes resulting from this review are expected before April 2026.
The Overseas Workday Relief (OWR) program will continue, and more details will be announced in the fall budget.
Next steps
If you have any questions about how your tax obligations will be affected by the new Labor government, please contact us. Our team of experienced tax advisors will be able to guide you through the proposed changes.
The article Labor plans to tighten tax rules for non-UK domiciled people appeared first on Making the Complex Simple.
