Non-Doms and Non-Residents: What will the April 2025 changes bring?

David Collins, explores the practical considerations of Non-Dom tax changes following the announcements in the Autumn 2024 Budget, and what this means for you:

You’ll recall it was the Conservatives who, somewhat surprisingly at the time, decided in the Spring 2024 Budget that they wanted to bring in rules to abolish the Non-Domiciled (“Non-Doms”) status with effect from 6 April 2025.

Labour’s first Budget in October 2024 stuck with this plan and confirmed the finer details (you can see more information on this in the detailed post-Budget Report on our website Autumn Budget Report 2024 – Scrutton Bland)

While the headlines have been widely discussed, it’s worth taking a step back to consider the practical steps you might need to take to safeguard your financial position. And how you can take advantage of any planning opportunities that are available to you.

Key updates from the Budget to consider:

• Temporary Repatriation of Funds: The new regime allows temporary repatriation of overseas funds to the UK under specified conditions with a low and fixed-rate tax charge. This presents a valuable opportunity for Non-Doms, but requires careful planning to meet the conditions and avoid unanticipated liabilities.
• The Foreign Income and Gains (FIG) Regime: The introduction of the FIG regime provides a welcome relief from UK taxes for some. But those unable to benefit from it will now face having to disclose all offshore income and gains, even if not remitted to the UK.
• Reforms to Overseas Workday Relief (OWR): The eligibility criteria for claiming OWR have been tightened, with a cap on the amount of earnings that qualify. Non-Doms working overseas should ensure that their documentation clearly supports the split between UK and overseas duties to aid in calculating the relief available.
• Inheritance Tax (IHT) Regime now based on residency rather than Domicile: The new rules further reduce UK resident Non-Doms’ ability to avoid UK IHT in their worldwide assets, with those resident in the UK for 10 of the last 20 years now being brought into charge. Furthermore, those leaving the UK may be liable to UK IHT for a longer period than was the case previously and assets held in offshore Trusts have lost their protections from UK IHT.

What action can you take now?

• Plan Temporary Repatriations Carefully: The new rules on temporary repatriation of funds provide a useful planning tool but require adherence to the conditions. This includes ensuring funds are returned from overseas within the specified timeframe and, crucially, not before the rules are introduced in April 2025!
• Update Workday Relief Documentation: With the tightened rules for Overseas Workday Relief, maintaining detailed and accurate records of workdays spent in and out of the UK is crucial. Employers and individuals should review payroll and expense records to ensure compliance. It’s also wise to segregate overseas bank accounts to ensure that eligible funds can be remitted without being tainted by other funds that can’t benefit from these particular rules.
• Review Offshore Structures: If you’ve set up trusts, companies, or other vehicles to hold assets, these may need revisiting to ensure what your exposure to taxes may now be.

The Bottom Line

The changes coming into effect on 6^th April 2025 reflect the Government’s ongoing focus to ensure fairness in the tax system, while encouraging compliance and urging investment in the UK. For many Non-Doms and Non-residents, the immediate task will be reviewing their current arrangements and seeking professional advice to mitigate risks and identify opportunities.

For any questions on this topic or to discuss your personal situation in more detail, please contact David or one of the tax team on 0330 058 6559 or by emailing hello@scruttonbland.co.uk