ABOLITION OF THE RES NON DOM REGIME IN THE UNITED KINGDOM

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On March 6, 2024, with the Spring Budget 2024, the project to abolish the Res Non Dom tax regime was published. This project, effective from April 6, 2025, will end the Res Non Dom regime in the United Kingdom, along with the concept of domicile and the complex remittance-based rules. Instead, a new favorable tax regime will be introduced for a maximum of four years of tax residence in the United Kingdom for individuals who have not been tax residents in the country in the previous ten years. Under this new regime, non-British source income and gains will be exempt from taxation for up to four fiscal years, with the possibility of “repatriating” them without any further tax implications. Once the “favorable” residence period ends, taxpayers will pay taxes on income and gains earned in the United Kingdom, Europe, or anywhere in the world (as is the case for all other ordinary tax residents).

Below are the main changes introduced:

  • Abolition of the non-dom regime: From April 6, 2025, the current system will be replaced by a residence-based regime.
  • Transitional regime for current non-doms: For current Resident Non Domiciled individuals, a special rule for the first year will allow them to be taxed only on 50% of foreign-source income for the fiscal year 2025/2026. From April 6, 2026, the entire worldwide income will be subject to ordinary taxation in the United Kingdom. Individuals who already benefit from the regime will be able to revalue assets held before April 5, 2017, at their value on that date. This will allow them to be taxed only on capital gains accrued from April 5, 2017.
  • Temporary Repatriation Facility: It will be possible to repatriate foreign income and capital gains generated before April 6, 2025, benefiting from reduced rates:
    • 12% for the fiscal years 2025/26 and 2026/27;
    • 15% for the fiscal year 2027/28.
  • Inheritance Tax Reform: The current system, based on domicile, will be replaced by a regime based on the residence of the deceased (“long-term resident”).
  • Impact on offshore trusts: Trusts associated with non-domiciled individuals will lose the previously guaranteed tax protections. Consequently, income and capital gains generated by such trusts will be subject to taxation in the United Kingdom, in addition to potentially being included in inheritance tax.

With the abolition of the Res Non Dom regime in the United Kingdom, many wealthy citizens will face a new tax reality without the advantages they previously enjoyed. It is highly likely that a significant number of UK Non Doms will decide to relocate to countries that offer attractive tax regimes, such as Switzerland, Italy, the United Arab Emirates, and Monaco.

Our firm remains available to provide you with more information on this matter.