Chancellor Rachel Reeves has revealed plans to revise the UK's approach to non-dom tax status. The adjustments aim to phase out tax benefits more gradually, encouraging wealthy individuals to bring their funds back to the UK while supporting economic growth.

What Is Non-Dom Status?

Non-domiciled (non-dom) tax status allows UK residents to avoid paying taxes on foreign income if their permanent home is outside the UK. Labour had pledged to abolish this status, arguing it creates unfairness in the tax system and deprives public services of much-needed funds.

However, critics warn that abolishing non-dom status could backfire, driving wealthy individuals and investors out of the country.

Wealthy Individuals Are Leaving the UK

Recent data from New World Wealth and Henley & Partners shows a sharp increase in the number of millionaires leaving the UK. In 2024, over 10,000 millionaires emigrated—a staggering 157% rise compared to 2023. Analysts cite rising taxes on non-doms, the global dominance of US and Asian tech industries, and the decreasing importance of the London Stock Exchange as key reasons for this exodus.

The New Temporary Repatriation Facility

To address concerns, Reeves announced a change to the "Temporary Repatriation Facility." This program offers a three-year window for former non-doms to return their wealth to the UK with a discounted tax rate. While the changes are described as a "tweak," they aim to attract investment without significantly altering the government’s revenue projections.

The Treasury expects the updated non-dom tax reforms to raise £33.8 billion over the next five years.

Balancing Tax Fairness and Economic Growth

Reeves emphasized the importance of addressing tax system unfairness while ensuring the UK remains attractive to investors. She stated: "We’ve been listening to the concerns raised by the non-dom community."

However, critics remain skeptical. Nigel Green, CEO of deVere Group, criticized the lack of clarity in the proposed changes, saying they fail to undo the damage caused by earlier tax reforms.

Mixed Reactions to Non-Dom Tax Reform

• Conservatives: Shadow Chancellor Mel Stride claimed Labour’s plans are “falling apart” and accused the party of making the UK less appealing to investors.
• Scottish National Party (SNP): The SNP criticized the adjustments as a "Davos deal for millionaires," accusing the government of ignoring the cost-of-living crisis faced by ordinary citizens.

Additional Announcements: Attracting Top Talent

During her Davos speech, Reeves also outlined new visa policies to attract talent in Artificial Intelligence (AI) and medical research. These changes aim to position the UK as a global leader in innovation, potentially poaching top talent from the US and the European Union.

Source: bbc.co.uk