The 2024 Spring Budget introduced significant changes to the non-dom tax regime, set to take effect next year. Starting April 2025, the UK government will abolish the remittance basis of taxation for non-UK domiciled individuals, replacing it with a streamlined residence-based system.

Key Changes:

• New Residence-Based Regime: From April 2025, non-UK domiciled individuals will no longer pay UK tax on foreign income and gains (FIG) for the first four years of their UK tax residence. They will continue to pay tax on UK income and gains, similar to the current rules.
• Post-Four-Year Taxation: After the initial four-year period, those who remain UK residents will be subject to the same tax rules as other UK residents.
• Transition Period for Current Residents: Individuals who have been UK tax residents for less than four years by April 2025 (following a ten-year period of non-UK tax residence) can utilise the new regime for any remaining years within the four-year window.
• Special Provisions for 2025-2026: Individuals moving from the remittance basis to the arising basis on April 2025, who do not qualify for the new four-year FIG regime, will pay tax on only 50% of their foreign income for the 2025-2026 tax year. This reduction applies solely to foreign income and does not extend to foreign chargeable gains. Starting from the 2026-2027 tax year, normal taxation on all worldwide income will apply.

Overseas Workday Relief (OWR):

OWR will also undergo reforms starting April 2025, aligning with the new regime. The relief will continue to offer Income Tax relief for earnings from overseas duties during the first three years of UK tax residence, with restrictions on remitting these earnings removed.

Inheritance Tax (IHT) Changes:

The government has also announced plans to shift to a residence-based regime for Inheritance Tax from April 2025, subject to consultation.

For more information on how these changes might affect your tax situation, feel free to contact our team of experts.