Chancellor Rachel Reeves has revealed changes to the rules replacing the non-domiciled (non-dom) tax regime, set to take effect in April 2025, as reported by STEP.
The revisions will amend the temporary repatriation concession to address concerns raised about the policy.
Speaking at the World Economic Forum in Davos, Switzerland, Reeves addressed reports of a rise in non-dom taxpayers leaving the UK due to the new system. The reform introduces a four-year foreign income and gains (FIG) regime for new arrivals who have not been UK tax-resident in the previous decade. It also transitions from a domicile-based system for inheritance tax (IHT) to a residence-based system.
Reeves confirmed that an amendment to the Finance Bill 2024-25 will refine the temporary repatriation facility (TRF). While specific details remain unclear, the changes aim to make the TRF more accessible.
The current TRF draft allows non-doms to pay a ‘TRF charge’ to remit FIG accrued before April 2025 without further tax. Designations can be made in the three tax years from 2025/26 to 2027/28. The TRF charge starts at 12% for the first two years, rising to 15% in 2027/28. These rates are significantly lower than the top income tax rate of 45% and the top capital gains tax rate of 24%.
The TRF also simplifies mixed-fund rules and introduces ‘TRF capital accounts’ to encourage spending and investment of FIG in the UK. Additionally, certain trust distributions will be taxed at lower rates during the three-year window.
Reeves assured that tax treaties preventing double IHT charges on non-domiciled individuals will remain in place, easing concerns about potential double taxation. Edward Hayes TEP, a member of the STEP UK Advisory Committee and Director at Burges Salmon, said:
“Anything that makes the temporary repatriation facility easier and more attractive to use should be welcome news. It is an eminently sensible policy and the only part of the non-dom reforms expected to raise serious tax revenues, according to the government’s estimates. Strong take-up of the facility is therefore a win for both the country and the individuals impacted by it.”
