Are you a non-dom in the UK?
Like Lakshmi Mittal, are you planning to leave? Or are you planning to move to the UK in the near future?
Here’s what you need to know!
As of April 6th, the UK will put an end to the status ofnon-domiciled residents, otherwise known as RND(Resident non-domiciled), a regime that has existed for…200 years!
What is a “non-dom”?
- This includes UK residents whose permanent home is in another country.
- In 2023, over 74,000 people had this status.
This system was the subject of intense debate, particularly concerning its fairness and impact on public finances. The government therefore decided to abandon it, while creating a new system based on the criterion of tax residence rather than domicile.
This has consequences for income tax, inheritance tax and trusts.
- Income tax
Before the reform :
UK residents are subject to the “arising basis” tax regime. arising basis “This means that all their worldwide income is subject to UK tax.
Until now, tax residents who were not domiciled for tax purposes in the UK enjoyed “non-dom” status, enabling them to benefit from the advantageous tax regime known as the “remittance basis”. remittance basis “. This system exempted them from UK tax on their worldwide income and gains not repatriated to the UK, subjecting them only to tax on income and gains generated on UK soil. This status was applicable for their first 15 years of residence, after which they switched to the common law ” arising basis ” regime.
From now on :
From April 6, 2025, the remittance basis regime will be replaced by the new Foreign Income and Gain (FIG) regime. ” Foreign Income and Gain (FIG).
This system substantially refocuses the exemption on foreign income:
- It is intended to apply to people who have not been resident in the UK for tax purposes for the last 10 years.
- This regime will tax UK-sourced income and gains, while maintaining an exemption on foreign income and gains, as well as gains repatriated to the UK.
- Many RNDs benefiting from the remittance basis will not be eligible for the FIG scheme, and will therefore be subject to UK tax on a worldwide basis from April 6.
Unlike the previous system, which made a distinction between residence and domicile, the FIG scheme will now be based on the taxpayer’s length of residence in the UK:
- Taxpayers who have been resident in the UK for more than 4 years as of April 6, 2025, will have their worldwide income subject to UK tax.
- Taxpayers new to the UK from the new tax year will be subject to the FIG regime for 4 years.
- Taxpayers who have been resident in the UK for less than 4 years will be able to opt for the FIG regime until the end of their4th year of residence.
The government has already announced a number of transitional measures for people who were previously taxable under the remittance basis, such as :
- A 50% tax exemption on worldwide income for the 2025/2026 tax year. Foreign capital gains will not fall within the scope of this exemption.
- The application of a 12% rate to repatriations of foreign funds made during fiscal years 2025/2026 and 2026/2027, then 15% for fiscal year 2027/2028.
- For assets located outside the UK and disposed of after the reform, taxpayers would be offered the opportunity to opt for their April 5, 2019 value in calculating capital gains.
- Inheritance tax
Before the reform :
Until now, liability to inheritance tax depended on the taxpayer’s domicile and the location of his assets.
Non-doms were thus exempt from UK inheritance tax on assets located outside the UK, with non-UK assets only subject to taxation after 15 years of residence in the UK.
From now on :
An individual will now be subject to inheritance tax on all his or her assets – even foreign assets – as long as he or she has been resident in the UK for at least 10 years.
In addition, anyone wishing to leave the country will remain subject to UK inheritance tax for a period varying according to the number of years they have been tax resident in the UK :
- For 10 to 13 years’ residence in the UK: UK inheritance tax will no longer be payable after 3 consecutive tax years.
- For residency of more than 13 years but less than 20 years: one tax year is added for each year of residency.
- Finally, if you have been resident in the UK for 20 years or more, you will need to have lost this tax residence for 10 consecutive years to escape inheritance tax.
Continued UK inheritance tax after departure raises double taxation issues.
👉🏻 For example, if a person moves to France after more than 20 years in the UK, and dies there less than 10 years after leaving, inheritance tax will be payable in both countries: in France, where tax is payable if the deceased was domiciled there at the time of death, and in the UK.
- Major change for trusts
In the past, non-domiciled residents benefited from a highly attractive tax regime, under which their income from assets not repatriated to the UK was exempt under certain conditions and for a certain period of time. Insofar as the assets placed in a Trust were non-UK assets, they were exempt from taxation in the UK.
The reform abolishing the “non-dom” regime has changed this, making foreign income and capital gains realized within a Trust subject to taxation each year, which considerably reduces the attractiveness of setting up a Trust in the UK for the population concerned.
Remember that setting up a trust is treated as a donation in the UK, which is not the case in France: a detailed analysis will therefore be essential to avoid the risk of double taxation over time.
If you have a Trust, or if you want to move from the UK to France or vice versa, we are here to help.
