In March 2024's Budget the UK Chancellor Jeremy Hunt announced widespread changes to the UK taxation of individuals classed as non-UK domiciled – so called “non-doms”.

From 6 April 2025 the non-dom rules as we know them today will be abolished, as will the concept of domicile as a relevant connecting factor in the UK tax system to be replaced with tax residence.

The remittance basis of taxation will be abolished and be replaced with a new “4-year foreign income and gains tax regime” (FIG). The FIG regime will broadly apply to individuals during the first four tax years of UK residence that fall after 5 April 2025, provided that they were previously non-UK resident for a period of 10 consecutive tax years, and where in point, individuals will not incur any liability to UK tax – regardless if the FIGs are brought into the UK.

Similar tax relief will apply in respect of trust distributions received by individuals who are UK resident and meet the 4-year FIG criteria.

Personal allowances and capital gains annual exempt amounts will not be granted to any individual who is assessed under the FIG regime.

Once the 4-year period has expired, individuals will be taxed on worldwide income and gains. It is expected there will be a rebasing of capital asset values, as at April 2019, for qualifying individuals.  UK tax resident settlors of non-resident trusts who fall outside of FIG, will be subject to tax on income and gains within the trust on an arising basis. FIG arising in trusts before 6 April 2025 will continue to be matched to distributions.

For remittance basis users who fall outside of the FIG regime in 2025/26, there is a one-year transitional provision, which on application results in only 50% of an individual’s foreign income arising being within the scope of UK tax.

The transitional provisions do not, however, apply in relation to gains arising in the year 2025/26.  There will also be a “temporary repatriation facility” (TRF) whereby qualifying individuals can elect to pay tax at 12% on remittances of pre-6 April 2025 FIG.

From April 2025 UK inheritance tax (IHT) will be no longer based on domicile but UK tax residence under the Statutory Residence Test. IHT will be chargeable on worldwide assets owned outright once an individual has been UK tax resident for 10 years. There will also be a 10-year tail for individuals leaving the UK. UK situs assets will remain in charge as they are currently.

For assets held in trust the exposure to IHT will be determined by the settlors UK tax residence and whether they qualify for FIG. This is also the case for the 10-year anniversary charge.

However, the treatment of non-UK assets that became comprised in a settlement by a non-domiciled settlor prior to 6 April 2025 (i.e. existing excluded property trusts) will not change.

The details of this new regime will be released over the course of the coming months and much of it including the IHT measures will be subject to consultation. Should you have concerns as to how these measures may affect you please contact your usual adviser at LTS.

Please note this article is not advice and should not be relied upon. It is a summary of the budget proposals announced on 6 March 2024.