On March 6, 2025, the UK Parliament enacted the Finance Bill 2024-25, officially abolishing the non-domiciled (non-dom) tax regime effective from April 6, 2025. This significant shift replaces the remittance basis of taxation with a residence-based system, wherein individuals residing in the UK for more than four years will be taxed on their worldwide income and gains. New residents will benefit from a four-year exemption on foreign income and gains, regardless of domicile status.

The reform introduces a Temporary Repatriation Facility (TRF), allowing individuals to remit previously untaxed foreign income and gains to the UK at reduced tax rates – 12% for the 2025/26 and 2026/27 tax years and 15% for 2027/28. Additionally, the inheritance tax (IHT) system will transition to a residence-based model, subjecting individuals who have been UK residents for at least 10 of the previous 20 years to IHT on their worldwide assets.

Implications for high-net-worth individuals

These changes have prompted concerns among high-net-worth individuals, leading to a notable exodus. Prominent figures such as Goldman Sachs executive Richard Gnodde and steel magnate Lakshmi Mittal have relocated, citing the loss of favorable tax treatment. The UK’s capital gains tax receipts have also declined by 10% to £13 billion in the year to March 2025, reflecting the impact of these departures.

Prospective and current UK residents should consult with tax professionals to navigate the complexities of the new regime and assess the implications for their financial planning.

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