From 6 April 2025, non-doms in the UK will experience a tougher tax environment under new rules proposed by the Government. The current domicile-based inheritance tax (IHT) system will be replaced with a residence-based system. This change means that individuals who have been UK residents for the past 10 years will be subject to UK IHT. These rules will apply to both individuals and trusts, with no retrospective effect. Only deaths occurring after the implementation date will be impacted.
The Government plans to strengthen previous Conservative proposals by introducing more stringent transition rules and a new regime for inheritance tax. Unlike the Conservative’s initial plans, which included a 50% reduction in foreign income tax for those losing access to the remittance basis, the new regime will provide 100% relief on foreign income and gains (FIG) for new UK arrivals during their first four years of tax residence, provided they haven’t been UK tax residents in the prior 10 consecutive years.
UK residents ineligible for this relief will be subject to capital gains tax (CGT) on foreign gains as usual. The Government is also considering the appropriate rebasing date for foreign capital assets held by current and past remittance basis users, with details to be announced in the Autumn Budget. Additionally, income and gains within settlor-interested trust structures will no longer be protected from tax from April next year.
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