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Rachel Reeves is set to make changes to the UK government’s crackdown on non-domiciled residents in a bid to ease concerns over tax reforms announced in October’s budget.
Speaking at a fringe event at the World Economic Forum in Davos on Thursday, the chancellor said the government would soon submit an amendment to its own financial law.
This will allow easier access to the temporary repatriation option, which allows non-state nationals to bring foreign income and profits earned before April 2025 into the UK and pay tax at a reduced rate of 12 per cent in 2025-26 tax. and 2026-27. year, increase to 15 percent in 2027-28. — compared to a maximum income tax rate of 45 percent.
The change planned by the Government would make it easier for certain funds to access the facility’s unique tax rates. But while the measure might be useful for some non-homesteaders, it’s unlikely to move the dial for many.
Reeves told The Wall Street Journal event in Davos on Thursday that the government was “listening to the concerns expressed by the expatriate community”, when asked about the increase in the net number of millionaires leaving the UK in recent months.
Jonathan Reynolds, the business secretary, later confirmed the planned change, which was first reported by The Times, telling reporters in a Swiss mountain resort: “There has been a change in the finance law . . . when you change the tax regime, people will want to know and there will be some uncertainty, so we have to convey that message.”
Reeves announced in the budget that she was ending the non-domiciled regime, which allows UK tax residents whose permanent home or “domicile” is abroad to avoid paying UK tax on their overseas income or capital gains for 15 years.
From April 6, 2025, it will be replaced by a four-year one scheme based on residence offer “internationally competitive arrangements for people coming to the UK on a temporary basis”.
Downing Street said the change would not lead to a fall in taxes taken from the replacement of the expatriate regime, and the Treasury still expects to raise £33.8bn over the next five years from the reforms.
Non-residents are most concerned about inheritance tax changes to existing trusts, with the issue often cited as a key factor that led them to leave the country.
Rachel de Souza, tax partner at RSM UK, said that while increasing the temporary repatriation facility was a “good move”, it was “woefully inadequate” to prevent wealthy non-nationals from leaving the UK.
“The way to stop this exodus would be to retain the IHT exemption for offshore trusts, but also reverse the proposed changes to agricultural and business property relief that affect farmers and entrepreneurs.”
Robert Brodrick, partner at law firm Payne Hicks Beach, said: “It’s encouraging to see that they’ve finally addressed the concerns of a lot of people who are affected by this, but I don’t think it’s going to be enough to stem the tide … It’s helpful, but the exposure to tax on inheritance is the biggest nail in the coffin.”
The chancellor also said on Thursday that she wanted to ease concerns from countries, including India, that the rule changes would not affect double taxation agreements: “That is not the case: we are not going to change those double taxation conventions.”
A Treasury official said: “We are always interested in hearing ideas on how to make our tax regime more attractive to talented entrepreneurs and business leaders from around the world to help create jobs and wealth in the UK.”
