Chancellor Rachel Reeves unveiled Labour’s first budget since being elected to government – with a focus on slashing national debt, boosting the UK economy and protections for working Brits. Among the announcements was the removal of the non-dom tax scheme, with Reeves calling it ‘outdated’.
Plans to remove the non-dom tax scheme, which will see a reversal of Britain’s tax rules for non residents, are set to start in April of next year.
Despite efforts of the Conservative government to tighten rules on non-doms in their March budget, Reeves said in her speech:
“I have always said that if you make Britain your home, you should pay your tax here. So today, I can confirm, we will abolish the non-dom tax regime and remove the outdated concept of domicile from the tax system from April 2025.”
In its place, the Chancellor will introduce a residence-based scheme, which could potentially provide incentives to investors and wealthy foreigners to come to the UK temporarily.
Reeves added: “We will introduce a new, residence based scheme with internationally competitive arrangements for those coming to the UK on a temporary basis while closing the loopholes in the scheme designed by the party opposite. To further encourage investment into the UK, we will also extend the Temporary Repatriation Relief to three years and expand its scope bringing billions of pounds of new funds into Britain. The independent Office for Budget Responsibility say that this package of measures will raise £12.7bn over the next five years.”
The Chancellor said she would close exemptions that let wealthy, often foreign residents avoid tax on overseas income, helping to raise 12.7 billion pounds over the next five years.
Britain’s ‘non-dom’ tax rules, which enable non-domiciled residents to pay little or no UK tax on money earned overseas, have been criticised and debated. Reportedly advisors warned Reeves against reversing the 200-year-old scheme.
It has been reported that private banks and advisers to the super-rich have said claimed clients with non-dom status will leave the UK if the government increases taxes on them – suggesting a shrewd move on Reeves’ part after the pandemic saw Britain’s home grown millionaire’s jetting off to countries with laxer tax systems.
