The UK government recently announced that it will abolish the controversial non-domiciled status, or non-dom, as of the new tax year, April 2025.
While there has been growing concern from tax advisors and wealth planners in the lead-up to the Labour Party’s budget that the change may lead to an exodus of ultra-wealthy individuals from the UK, others point out that it is unlikely too, despite efforts by leading tax havens and other wealth-based destinations attempting to lure the super-rich to their shores.
What is the non-dom tax status UK?
The UK’s non-dom tax status harks back to a 200-year-old tax rule that enables individuals living in the UK to be domiciled in another country, allowing them to avoid paying tax on income or capital gains generated outside of the UK for up to 15 years. However, non-doms must still pay tax on income generated within the UK.
UK residents are taxed on their global income, making non-dom status a highly favourable tax arrangement that leads to substantial savings, especially for ultra-wealthy individuals who generate significant income from overseas assets.
The main route to becoming a non-dom is domicile of origin, whereby an individual must prove that they, or their father, was born in another country and that they plan to eventually return to that country.
Domicile is not the same as residency, which is determined by the amount of time an individual spends in a country each year, and, in many respects, is largely fluid. Instead, domicile is a complex legal concept, one that is typically inherited from a person’s father at birth and reflects a long-term relationship with a country.
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