Changes to UK taxation – non-UK domiciles

6 August 2024

In tax sometimes all we crave is a bit of clarity.  This certainly is the case with changes to the UK taxation of non-UK domiciles first proposed by the Conservatives.  When the proposed changes were announced little detail was given, rather that this would follow in draft legislation.  There has, though, been much speculation.

At Everfair our aim is always to consider the facts and give short shrift to speculation but in such an important area it is sometimes necessary to sort the facts from the fiction.  This post will seek to look at where we are after the General Election and the new Chancellor’s first public spending statement which was accompanied by a policy paper for the changes.  It will aim to sort the facts (or what little facts we do have) from the speculation (most commentary since the announcement of the proposals has been speculation).

While we still do not have any concrete details to be able to discuss the changes with any reliability or clarity, the confirmed change in government has meant a delay in when any detail might surface.  We are now expecting the detail in Labour’s first budget which has been confirmed for the Autumn, due to take place on Wednesday 30 October.  So, it is worthwhile considering where things stand with regard to what Labour have said, particularly in their policy paper.

The policy paper confirms that the non-domicile changes will be introduced by Labour following their confirmation as the new Government but the exact form (and to a lesser extent timing of their introduction) are two very significant unknowns.  So, rather than having the clarity we crave, really the only clarity we have is that there really is no clarity.

The lack of clarity in this important area of UK tax presents tax advisers with an unwelcome dilemma.  We would like to be able to advise our clients to allow them to plan with certainty but this is currently not possible.  Sometimes, though, it might be worth considering different options, including perhaps identifying a worst-case scenario, to formulate a potential plan which will at least allow speedy action once more details are known.

What we do know are that the changes are two-fold, impacting:

• income tax and capital gains tax, principally the removal of the remittance basis; and

• inheritance tax on non-UK assets, especially the use of excluded property trusts (broadly trusts set up by non-domiciles to hold non-UK assets which keep the assets outside the scope of inheritance tax).

Our next post will focus on the impact for income tax and capital gains tax while a subsequent post will focus inheritance tax.

Key takeaways:

• There is no clarity on the tax landscape for non-UK domiciles – changes have been announced but as yet little specific detail has been given.

• The change in Government has delayed when any detail will be given, with this not now expected until the first Labour budget on 30 October.

• As with the Conservatives before them, Labour will introduce changes impacting income tax, capital gains tax and inheritance tax.