UK ex-pats: UK domiciles who live overseas may benefit from moving the IHT regime to a residence-based system as they will get certainty that after a certain period of time they will be treated as a non-UK individual when assessing their IHT exposure.
Potential users of the 12 per cent rate: Many non-doms will have overseas wealth that they would like to bring to the UK but are unable to do so without triggering significant tax charges under the remittance basis rules.
However, they will be given a window of opportunity to remit those funds at a temporary low rate.
UK domiciles returning to the UK after a 10-year absence: UK domiciles who have gone abroad for more than 10 years can benefit from the four-year exemption on returning to the UK.
At present, they would not receive any special tax treatment in these circumstances.
Losers
Non-doms living in the UK: These individuals stand to lose out on a number of fronts. For example, existing remittance basis users who do not qualify for the four-year exemption will become liable to UK tax on their worldwide income and gains.
Longer-term migrants: Non-doms who are planning on coming to the UK for more than four years will only be able to escape UK tax on their foreign income and gains in those first four years, rather than up to 15 years under the existing rules.
Furthermore, those coming to the UK for at least 10 tax years will face IHT on their worldwide assets after that 10-year period. For families hoping to put their children through school in the UK this could present a major issue.
Overseas trusts and their UK beneficiaries: Some overseas trusts and their beneficiaries will see their UK tax exposure increase on the withdrawal of various UK tax protections. Perhaps the most significant of these is the IHT trust protection that Labour intends to abolish if they get into power.
Crucially, the government’s proposals have not become law yet and are subject to change, particularly with a general election on the horizon.
It is also not clear if there is sufficient time for the new rules to be implemented on schedule to take effect from April 6 2025. Such uncertainties are unwelcome for anyone potentially impacted.
The key question for the government is whether these proposals will lead to individuals leaving the UK or being deterred from coming at all, particularly when other countries are offering tax breaks for wealthy new arrivals.
As a result, while the abolition of the non-dom regime may be viewed as a move towards a simpler and arguably fairer approach, it remains to be seen if the government will realise the tax receipts they have budgeted for.
