Last week the Government announced that the Non-Dom rules would be scrapped and replaced with a new simpler system from 6 April 2025.
Based on what we understand (and the final legislation has not yet been published), there will be 5 groups of people this affects:
- Those who have been in the UK for less than 4 years following a period of at least 10 years of not being tax resident in the UK
- Those who have been here for more than 4 years but less than 15 years
- Those who have already been here for more than 15 years but who have used the remittance basis in the past
- Those who have been away for at least the last 10 tax years
- Those who have Settlor Interested, Overseas Trusts (Protected Trusts)
The first thing to remember is that nothing is changing until 6 April 2025. Until then, the current non-dom rules will continue, but for those who need to, it gives us time to plan.
Each group will be affected in a different way:
If you have been in the UK for less than 4 tax years by 2025/26:
- This is a great opportunity to realise income and gains (post 6 April 2025) and to remit it before the new rules kick in
Talk to us about making the most of the opportunity.
If you will have been here for more than 4 years but less than 15 years by 2025/26:
- During 2025/26 you will benefit from a reduced rate of income tax for one year only – consider deferring/ accelerating income into that year
- During 2025/26 and 2026/27 you will be able to remit historic income and gains at a reduced tax rate of 12% – make the most of it
- Going forward, if you are going to stay here, you will need to report everything. Over the next couple of years, you may want to consider tidying up/restructuring your overseas affairs to simplify the future
Talk to us about what you need to do now and during the transitional period to maximise the benefits and simplify the future.
If you have been here for more than 15 years and has used the Remittance Basis:
- You too should benefit from the 12% rate of tax in 2025/26 – 2026/27 – make the most of it where you can
- Nothing else will really change, you will still pay normal income tax and CGT rates when you remit historic income and gains
Talk to us about how to use the transitional rules to minimise the tax on future remittances.
If you have been away from the UK for at least 10 years or never lived here before:
- The new rules will give you a unique opportunity to live in the UK and not pay tax on your overseas income for a period of 4 years, during which time you can remit whatever you wish
Talk to us about coming the UK and the other tax implications that you need to understand.
If you have a Protected Trust
- Overseas income and gains arising post April 2025 will be taxable in the hands of a UK Settlor/Beneficiary, unless they are within the 4 year exempt period
- Historic accumulated income and gains will remain protected, unless distributed (or benefits are provided) to a UK beneficiary outside the 4 year exempt period
- The new rules will significantly reduce the administrative burden of record keeping and the transitional rules could provide a one off opportunity to bring accumulated overseas income and gains to the UK at an exceptionally low tax rate
Talk to us about your options going forward and whether any steps may be taken to protect future income and gains.
What next?
The important thing is not to panic. There is time to take steps and to plan the best way to maximise the benefits and less beneficial consequences, and we should be very happy to work with you to do that. Please do not hesitate to get in touch with us at hello@gravita.com.
For more information on Inheritance Tax changes for Non-Doms, click here.
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