GPSJ Autumn 2024 ONLINE - Flipbook - Page 35
TAXES
GPSJ
Feature Synopsis: The Abolition of the UK
Non-Dom Regime – What It Means and How to Prepare
By Steph Gemson, Director, TaxGem
In a landmark policy shift, the UK government has announced the complete abolition of the non-dom
tax regime, effective April 2025. The reform will replace the current non-domiciled status with a
residence-based tax scheme, fundamentally altering the tax obligations for thousands of non-dom
individuals residing in the UK. With this announcement, many non-dom residents are considering
their financial future and residency status to align with the new rules.
Steph Gemson, founder of
accountancy company TaxGem,
discusses the implications
of this change in the UK tax
landscape and offers guidance
on what people should do next if
it impacts them.
What does the New ResidenceBased Scheme mean?
From April 6, 2025, all UK residents,
regardless of domicile status, will be
taxed on their worldwide income and
gains after four years of residence,
removing the previous remittance
basis option.
This means people who don’t
class the UK as their permanent,
main country of residence can no
longer pay an annual remittance basis
charge to exclude foreign income
and gains from UK tax if they are not
brought into the UK; all global income
and gains will be taxed on an arising
basis.
Individuals new to UK tax residence
(defined as those in their first four
years, after at least a decade abroad)
will still have a four-year period during
which foreign income and gains
will be exempt from UK tax, with no
restrictions on remittance.
How will the new regulations
impact current non-doms?
The existing option for non-doms to
pay a remittance basis charge to limit
UK tax to UK-sourced income will be
abolished, meaning all residents will
now be taxed on worldwide income
after four years of UK residence.
Previously, non-doms could maintain
their status and the remittance basis
for many years, but under the new
regime, non-dom distinctions are
effectively eliminated for tax purposes,
creating a uniform tax treatment for all
residents.
Unlike the previous indefinite
remittance basis option, the new
regime will offer new UK residents
a limited four-year exemption from
foreign income and gains taxation,
after which full UK taxation applies
Non-doms accustomed to
sheltering foreign assets, income
and gains may face increased
administrative and financial
complexities under full worldwide
taxation, which can impact wealth
management, trusts, and crossborder income tax planning.
What should current non-dom
UK residents do to manage their
tax liabilities and finances?
Global financial planning is essential
for non-dom UK residents who
have previously relied on remittancebased rules. Careful global assets
and income management under
a worldwide tax scope, potentially
impacting wealth management
strategies and investments abroad,
must be undertaken by a qualified,
experienced accountant or tax
adviser who understands global tax
liabilities.
Non-doms new to the UK may
benefit from the four-year exemption
on foreign income and gains.
Planning around this window can
help maximise tax efficiency during
the initial years of UK residency. For
individuals with significant foreign
income or assets, relocating outside
the UK may be more attractive to
preserve tax advantages.
Non-doms with foreign trusts or
complex asset holdings should
reassess these structures under the
new rules, potentially restructuring to
mitigate global taxation impacts. Nondoms can also utilise the Temporary
Repatriation Facility (TRF) to remit
overseas funds at a reduced tax rate.
Also, they could qualify to rebase
certain foreign assets, providing
short-term opportunities to manage
tax exposure effectively.
How can non dom UK residents
still optimise their financial
portfolios in the UK?
Despite removing the non-dom
status there will still be tax-efficient
investment options and methods
for non dom UK residents to
optimise their financial portfolios.
With worldwide income becoming
taxable, investing in UK-based
assets can simplify tax obligations
and reduce exposure to additional
foreign tax complications, especially
for income-generating assets. Taxefficient investment wrappers like
ISAs (Individual Savings Accounts)
and pension contributions remain
exempt from UK income and capital
gains taxes – making this an attractive
option for individuals looking to shelter
investments from tax.
Eligible non-doms can elect to
rebase certain foreign assets to their
value as of April 5, 2017, ensuring
only gains arising after this date are
subject to UK Capital Gains Tax. This
can significantly reduce tax liabilities
on existing assets.
Reviewing offshore trusts under the
new rules is essential for those with
substantial assets. Due to new UKwide tax obligations, trusts may need
to be adjusted or, in some cases,
liquidated if they no longer provide the
intended tax benefits.
The Temporary Repatriation Facility
(TRF) offers a window to bring pre-6
April 2025 foreign income and gains
into the UK at a reduced tax rate.
This can be advantageous for nondoms needing liquidity or wishing to
reinvest in the UK while managing tax
exposure.
Non-doms can also explore UKcompliant offshore investment funds
structured to defer tax on growth until
assets are realised or repatriated,
aligning with global investment
strategies while managing immediate
tax impacts. Consideration must also
be given to restructuring investments
to prioritise assets generating capital
gains over those producing dividends
or interest, as capital gains may
allow for more flexibility with lower
rates of tax and available reliefs and
exemptions, optimising the overall tax
efficiency of the portfolio.
To ensure you navigate the new
rules, seek a tax expert to help you
make the correct financial decisions
and understand your obligations
and potential reliefs. Missteps in
reporting foreign income or structuring
international assets under the new
rules could lead to hefty tax penalties.
Professional advisors will ensure
compliance with the updated HMRC
requirements and minimise any risk.
Experienced tax advisors can also
guide non-doms in assessing options
like relocating assets, adjusting
investment portfolios, or considering
alternative residency plans to optimise
tax exposure and align with personal
financial goals. With transitional reliefs,
such as rebasing and the Temporary
Repatriation Facility, professional
advice is also key to strategically
timing and structuring asset transfers,
allowing non-doms to maximise these
benefits while available.
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