Non Dom Tax changes effective April 6, 2025
The UK government has announced that from April 6, 2025 the current tax regime for non-UK domiciled ("non-dom") individuals will be replaced by residents based regime.
Simply put, non-domicile residents are individuals who live in UK and have their residence in UK, but do not pay UK tax on foreign income - although they are liable to pay a fixed charge of £30,000 or £60,000 per annum to maintain their tax status depending on their period of residence in the UK.
The UK government has been under pressure for a number of years to limit access to the non-domiciled status regime, and there were previous reforms in 2017 which restricted access to the regime and made a couple of important changes - particularly impacting individuals who had been UK tax residents for more than 15 of the last 20 UK tax years.
The changes which specifically take effect on April 6, 2025 are as follows:
- Anyone who has been tax-resident in the UK for more than 4 years will pay UK tax on their worldwide income and gains
- New arrivals will receive a 4-year relief before UK tax applies to their worldwide income and gains, providing they have been non-resident in the UK in the previous 10 years – know as the "FIG regime".
- Transitional arrangements will be put in place for existing non-UK domiciles, currently claiming the remittance basis including:
- An option to re-base the value of Capital Assets to 5 April 2019.
- A temporary 50% exemption for the taxation of foreign income for 2025-26 for individuals moving from remittance to arising basis on 6 April 25 (note that capital gains are excluded).
- A Temporary Repatriation Facility for individuals who paid tax on the remittance basis prior to 6 April 2025 to bring accrued foreign income and gains into the UK at a 12% tax rate for 2025-26 and 2026-27.
- Overseas Workday Relief will be available for eligible employees to exempt employment income relating to overseas duties that is not remitted to the UK from UK tax for the first three years of UK residence.
Much will depend upon your particular circumstances, but in general terms the new regime will be more generous to expats during the first four years in the UK and considerably less attractive to long-term expats. In terms of the latter, apart from concerns about the treatment of negative gearing losses on Australian properties and franking credits, the major concern revolves around the application of UK inheritance tax.
Under current rules an Australian expatriates would need to live in the UK for 15 years or more before becoming subject to UK inheritance tax and this would only apply for the first five years after moving back to Australia, or elsewhere. In contrast, in a government consultation paper released alongside the budget, it was proposed that once an expat had lived in the UK for more than four years they would enter the inheritance tax net and remain there for a further 10 years after leaving the UK.
UK inheritance tax is a substantial consideration - it is a tax on the estate of someone who has died, including all their assets of any description, levied at a rate of 40% on that part of their estate valued at over £325,000 (currently).
The changes may also impact how economic it will be for many long-term Australian expatriates in the UK to retire into the country.
We will continue to update this page as more details become available regarding the changes, and the application of those changes.
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