The new non dom rules

As the landscape of tax regulations evolves, it's imperative for individuals and businesses to stay informed and adapt to changes effectively. One such significant change on the horizon is the overhaul of the Non-Dom rules, set to take effect from 5 April 2025. Here, we provide a comprehensive summary of the current position and implications of these forthcoming reforms.

Current Position

Non-Domiciled individuals currently have two primary taxation options: the Arising Basis and the Remittance Basis. Under the Remittance Basis, individuals can be taxed on income and gains only when they are remitted to the UK, albeit at the cost of forfeiting their Personal Allowance and Annual Exemption.

Changes Effective from 5 April 2025

The most notable change is the abolition of the Remittance Basis. Instead, a new framework known as the "10/4 Rules" will come into play. This rule stipulates that individuals who have been Non-UK Residents for 10 consecutive years prior to 6 April 2025 will enjoy an exemption on foreign income and gains for a period of 4 years. However, this exemption applies only to income and gains arising after 6 April 2025, and claiming it will result in the loss of Personal Allowance and Annual Exemption.

Transitional Rules

For individuals who have been Non-UK Residents for less than 10 years, they will lose the Remittance Basis on 6 April 2025. While they won't benefit from the 4-year FIG regime, transitional relief is available. They will only pay tax on 50% of their foreign income in the 2025/26 tax year. From 6 April 2026, they will be taxable on their worldwide income.

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Temporary Repatriation Facility (TRF)

For those who previously elected to use the Remittance Basis, a Temporary Repatriation Facility (TRF) allows the repatriation of foreign income and gains arising before 6 April 2025 during the tax years 2025/26 and 2026/24 at a flat rate of 12%.

Trusts

Changes to the trust regime are also imminent. From 6 April 2025, the protection from tax on income and gains within settlor-interested trust structures will no longer be available for non-domiciled individuals who do not qualify for the new 4-year FIG regime.

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In conclusion, while these changes may seem complex, proactive understanding and strategic planning can mitigate their impact. At Reckon, we're committed to guiding our clients through these transitions, ensuring compliance and optimising financial outcomes in the ever-evolving tax landscape.

If you have any questions or would like personalised guidance on how these changes may affect you, don't hesitate to reach out to Alfie Greenway.