Danny Clifford, partner at Ensors, discusses the changes to non-domicile tax status in the Spring Budget.

From time to time, the ‘masses’ seem to become exceedingly angry about some injustice in the tax system, real or perceived. The most recent has been in relation to non-domicile tax status; the ‘tax loophole’ that enables wealthy foreign people to not pay any tax. 

Except, of course, it wasn’t. 

The legislation was put in place with specific intent to benefit the UK by attracting wealthy individuals to the country. 

So what has changed? 

Bringing wealthy people into the UK does benefit the economy, and neither party wants to curtail that. So what has happened is something that satisfies those who are up in arms about non-dom status but, as far as possible, does not cut-off the benefits arising. 

The result is a proposed new set of rules that mean that domicile status will no longer enable someone to claim any special treatment; and there will not be a remittance basis of taxation that allows tax on overseas income and gains to be avoided. 

Eastern Daily Press: Danny Clifford, partner at EnsorsDanny Clifford, partner at Ensors (Image: Ensors)
However, there are a series of other measures, that in some cases will be even more beneficial, such as: 

  • A person first becoming resident in the UK after April 2025 will have to pay no UK tax on their foreign income or gains for the first four years even if brought into the UK.
  • A person who has used the remittance basis previously will have a window during which they will be able to bring the relevant income and gains in at a tax rate of only 12%. 

Currently rates of up to 45% might apply in those situations. 

It could certainly be said that there are still tax incentives for wealthy foreigners to come into the UK. The big change is the timescale. 

Previously, the beneficial treatment might last for 15 years – that is down to four, and arguably less in some scenarios. 

In reality, the length of this period was always the main issue – and that remains the case. 

Some may wonder why, when non-domicile status impacts directly on a relatively small number of individuals, I have covered it here when there were other measures announced of more relevance to more people – the reductions of National Insurance, or the changes to the High Income Child Benefit Charge, for example. 

The reason is that it just may be that there will be a considerable number of people who will dislike the new rules more than they disliked the old ones, but for a very different reason!

For those who revel in watching Premier League football and seeing the best players and managers in the world plying their trade in “our” league, it could be that situation will now start to change. 

The chances of bringing in another Guardiola, Klopp or Haaland (or of them extending their contracts) may well have just considerably reduced.