Autumn Budget 2024 - Non-Dom Regime

Very broadly, the non-dom regime is aimed at UK resident individuals whose 'permanent residence' (which is a complicated term) is overseas. Non-doms are currently able to elect to be taxed on the remittance basis, which means that they pay tax on their income and gains only if it is either UK source or is "remitted" to the UK – they do not pay tax on their unremitted foreign income and gains. There are also inheritance tax benefits to non-doms, as they do not generally pay inheritance tax on worldwide assets.

This status can be claimed for up to 14 years in 20 (though charges can apply after 7 years). This is generally viewed, by international standards, as quite a generous regime.

From 6 April 2025, the non-dom regime will be abolished and replaced with a new tax regime based on residence.

The new regime will provide 100% tax relief on foreign income and gains ("FIG") for non-doms in their first 4 years of tax residence (the "4 Year Period"), provided that such persons have not been UK tax resident in any of the 10 consecutive years prior to their arrival.

This relief ("FIG Relief") must be claimed by the individual in their Self-Assessment in each year (within the 4 Year Period) that they want FIG Relief to apply. Individuals will need to make separate FIG Relief claims in respect of their foreign income and gains.

FIG Relief only applies to FIG that arises during the 4 Year Period. Most types of FIG are eligible for FIG Relief (including FIG arising to eligible individuals from a non-UK tax resident trust). However, notably, foreign earnings and foreign employment income are not eligible for FIG Relief, although they may be eligible for overseas workday relief, as discussed below.

Broadly, OWR is an income tax relief available to non-doms on earnings that they receive that (a) are paid and kept offshore, and (b) relate to days spent working abroad and (c) form part of a non-dom's employment.

Currently, OWR is available for three years. From 6 April 2025 eligibility for OWR will be based on an employee’s residence and not their domicile. OWR will be available for up to four years to align with the new FIG Relief regime. The amount of OWR that can be claimed will be limited to the lower of £300,000 or 30% of an individual’s total employment income.

Individuals that are eligible for the FIG Regime will also be eligible for the four-year OWR regime. However, individuals that are ineligible for the FIG Regime are still expected to be eligible for OWR for the first three years that they have been UK tax resident.

Eligible individuals should be able to continue to claim OWR by way of election in their Self-Assessment. From the employer's perspective, UK employers and their agents will no longer be required to wait for HMRC's approval to exclude a portion of an OWR-qualifying employee's pay from PAYE and will only need to operate PAYE on earnings related to work done by that employee in the UK.

Rebasing for Capital Gains Tax

As a transitional measure, current and past remittance basis users, who do not benefit from the FIG Relief, will be able to rebase foreign assets they held on 5 April 2017 to their value at that date when they dispose of them from 6 April 2025. This is subject to various conditions. One important condition is that the individual must not have been UK domiciled or deemed UK domiciled at any time before the tax year 2025/26. Note that this rebasing date has been pushed back by two years from what had previously been proposed by the previous Conservative government.

Temporary Repatriation Facility

Individuals who have previously claimed the remittance basis will be able to access a new Temporary Repatriation Facility ("TRF") enabling them to designate and remit at a reduced rate foreign income and gains that arose prior to 6 April 2025. This includes unattributed foreign income and gains held within trust structures.

The TRF will only be available for a limited period of three tax years, from 6 April 2025.

The TRF rate will be 12% for tax years 2025/26 and 2026/27, and 15% for tax year 2027/28.

No transitional measures for non-doms who will be ineligible for FIG Relief 

Current remittance basis users who will be ineligible for the new FIG Relief (e.g. because they may have been UK tax resident in any of the previous 10 years) will be disappointed to see that the transitional measure announced by the previous Conservative government (providing a 50% reduction in foreign income subject to tax for individuals who lose access to the remittance basis in the first year of the new regime) will not be introduced.

As expected, it has been confirmed that the current domicile-based system of IHT will be replaced with a new residence-based system with effect from 6 April 2025. Click here for an overview of these changes.