Technical notes were initially issued by the Conservative Government on 23 April 2024 setting out proposed changes to the tax rules in the UK relating to individuals who are non-UK domiciled. These technical notes were reviewed and reissued on 29 July 2024, then updated on 8 August 2024. Unsurprisingly, the new Labour administration announced that their policies would be more draconian as it states that it is committed to addressing unfairness in the tax system.
Recently, Rachel Reeves has announced that there may be a re-think to some of the policy changes as the Government will take a “pragmatic, not ideological” approach to taxation.
While there remains no certainty as to any changes that may be made, it seems positive that there is an acknowledgement that UK tax policy should aim to keep the UK an attractive jurisdiction for high net worth, internationally mobile individuals to call home. It is understood that Rachel Reeves has been advised that there might be an overall tax loss if the proposed changes to UK taxation were implemented, as reports show an exodus of high net worth individuals from the UK.
Please see our September 2024 Update for the original proposals made by the Labour Government. One key proposal was to abolish the “remittance basis” of taxation, which allows qualifying non-domiciled individuals to pay tax only on their UK income and gains while shielding foreign income and gains from UK taxation if the funds are not brought into the UK. The proposal would have introduced a much more limited window for individuals to bring foreign income and gains to the UK.
The Labour Government had further proposed to extend the scope of Inheritance Tax. It is understood that the extension of the Inheritance Tax rules was extremely unpopular with many high net worth individuals in particular, the provision to keep persons in scope of UK Inheritance Tax for 10 years after leaving the UK, (known as a 10-year tax tail). Not only was this unpopular it also seemed administratively difficult to enforce. Proposed changes announced to the taxation of trusts settled by non-domiciled individuals which suggested that they could be brought into scope of Inheritance Tax had also caused concern for many settlors who had created trusts perhaps many years before moving to the UK.
It is hoped that that any changes to the proposals to be announced in the budget on 30 October 2024 will achieve a balance between a fair tax system and encouraging individuals to remain in or move to the UK.
Should you have any questions about the forthcoming changes to the non-UK domicile tax legislation or the effect of the existing succession tax treaties please do not hesitate to call Catherine Pugsley or Anna Gaston or any other member of the Private Client team on 0207 222 5381.