Reporting has become muddled in recent times because the media confuse the term ‘non-dom’ with ‘the income tax remittance basis’. It’s not lost on me that the media phrase has greater appeal, but as a tax professional, I still get more excited by the technical substance of my trade!
To cover the point correctly, only a ‘non-dom’ can claim ‘the remittance basis of taxation’ i.e. the ability to pay UK Income Tax / Capital Gains Tax (CGT) on profits brought to the UK. By removing the remittance basis (from 6 April 2025) all UK tax residents will suffer income tax and CGT on worldwide income and gains as they arise. The result being foreign profits will automatically be caught for UK tax.
The remittance basis will still be available to a ‘non-dom’ for the first four years of being UK tax resident assuming they haven’t been UK tax resident in the previous 10 years. If the conditions are not met, the ability to elect for such status will be lost.
The implications of the remittance basis are complicated and outside this brief commentary. However, the changes announced in the Budget may not be as impactful as some may fear because tax treaty relief will become available to manage tax exposure and foreign income will no longer lose its source classification, resulting in greater flexibility with planning UK tax affairs.
I’m not suggesting the removal is great news for those ‘non-doms’ who utilise the remittance basis, but I would say it may not be the game-changer some may fear. There are also transitional rules to soften the impact, and on the face of it, they look quite attractive for the long term ‘non-dom’. It may also be possible to restructure offshore assets ahead of April 2025 to reduce the UK impact of the change.
In summary, media headlines will offer plenty of rhetoric on this topic, but I recommend seeking advice if affected by the change. You may find the outcome more manageable than expected – some might even see an upside – so get good advice ahead of April 2025 to make the most of what is available.
If you have questions around this topic