Non-doms are individuals whose permanent home is outside of the UK but who chose to live in the UK for part of the year.
Presently, non-doms do not need to declare their worldwide income and gains to HMRC save for any they bring into the UK.
The Chancellor Jeremy Hunt intends to make changes to the taxation of non-doms. In the event of a labour government being elected such rules are likely to be strengthened.
What are the main changes?
The Government has announced that it intends to abolish the non-dom regime altogether and bring in a new residence-based tax regime.
With effect from 6 April 2025, people arriving in the UK (after at least 10 years of non-UK residence) will not have to pay UK tax on their worldwide income and gains for the first four years of UK tax residence. After the expiry of this four year period, such individuals will, subject to transitional reliefs, have to pay UK tax on their worldwide income and gains whether or not they are brought into the UK.
All owners of UK residential property, whether non-doms or otherwise, will continue to be exposed to UK inheritance tax.
What is the impact of the new rules for purchasers of UK property?
Purchasers of UK property who do not become resident in the UK will be unaffected by these changes. They will have to abide by any number of day restrictions to avoid inadvertently becoming UK tax residents.
Purchasers intending to move to the UK for the first time will be able to bring their worldwide income into the UK tax-free for their first four years of tax residence.
However, any purchasers intending to make a longer-term move to the UK should review the full implications of such a move on their worldwide assets. Staying in the UK for more than four years will subject their worldwide income and gains to UK tax, and staying more than ten years will bring their entire worldwide estate within the scope of UK inheritance tax.
Asset protection and tax mitigation strategies such as the use of trusts and incorporated entities will have to be considered especially where assets are being purchased for family members such as children. Such planning may require revision in the event of a labour government being elected.
The impact of the new rules based upon certain jurisdictions, such as the USA where citizens are taxed on all of their worldwide income regardless of residence, will have to be considered in specific circumstances.
Should you require any further information regarding the purchase of UK residential or commercial real estate as a non-UK resident, please do not hesitate to contact Mr Bill Dhariwal on DDI: 01489 864 117 or E: bill.dhariwal@lawcomm.co.uk
The contents of this article does not constitute legal advice.
