Chancellor Rachel Reeves has announced plans to amend the abolition of non-dom tax status, offering a more generous transition phase. The move follows concerns that the original proposals could prompt wealthy individuals to leave the UK.
Under the changes confirmed in the October 2024 Budget, non-dom status will be scrapped from April 2025 and replaced with a residence-based regime. Foreign earnings will also be brought into the UK inheritance tax system. Labour had already extended the transition period for bringing money onshore from two to three years, but Reeves indicated further tweaks are coming.
Speaking at the World Economic Forum in Davos in January, Reeves said: 'We have been listening to the concerns that have been raised by the non-dom community.' The government still expects the package of measures to raise £12.7bn over the next five years.
Non-dom status currently allows UK residents whose permanent home is abroad to pay tax only on UK earnings, unless foreign income is brought into the country. Recent data from HMRC showed 74,000 people claimed non-dom status in 2022-23, up from 68,900 the previous year.
The changes aim to replace the centuries-old system with a simpler residence-based regime, ending the preferential treatment of foreign wealth. Critics had warned that the original transition period was too short, potentially driving millionaires away. A report from New World Wealth and Henley & Partners found that over 10,000 millionaires left the UK in 2024, partly due to the rule changes.
