The UK chancellor Jeremy Hunt announced yesterday that he plans to abolish the non-dom regime from 2025, replacing it with a residency based system.
The government is scrapping the existing outdated tax regime for non-UK domiciled individuals and replacing it with a modernised residence-based regime that it says is fairer and more competitive.
From 6 April 2025, there will be a new residence-based regime where individuals will not pay UK tax on any foreign income and gains arising in their first four years of tax residence, provided they have been non-tax resident for the last 10 years.
Hunt told MPs: “This is a category of people known as non-doms – Nigel Lawson wanted to end it in 1988 but did not, and I have always believe that we need to maintain the attractiveness of investing in the UK. So following Treasury and OBR analysis we have concluded it that we can indeed introduce a system which is fairer.
“We will abolish the current tax system for non-doms, get rid of the dated concept of non-doms and we will replace the non-dom regime with a modern simpler system from April 2025 based on residency. Under the new regime, they will not have to pay taxes on non-UK assets for the first four years.“There will be transitional arrangements for those benefiting from the current regime with a two-year transition period when they will be encouraged to bring assets onshore.
“The changes will raise £2.7bn by the end of the forecast period.”
So what impact will the non-domicile tax reform on have on the UK property market and will deter overseas purchasers?
Parminder Sidhu, partner and head of residential property at UK-based Wedlake Bell, shared his thoughts.
He said: “We do not expect the announcement to significantly deter foreign buyers. The market for foreign investors in London property is strong with lots of interest especially from the US and the Middle East.
“The adjustments to the non-dom tax regime may have a dampening effect on foreign investment in the London property market, as existing and potential non-domiciled individuals consider their options, but the fact is that past changes – such as ATED, or the UK’s exit from the EU – did not cause a mass exodus of these individuals from the UK.
“Foreign investors and non-domiciles are attracted to London as one of the world’s most vibrant, multicultural cities with excellent jobs, schools, and culture, and are undeterred by the UKs political scene.
“If the attitude towards non-domiciles continues to harden over the next few years, then we may see a growing reluctance from overseas buyers to invest in London, likely at a detriment to the city’s reputation as an international capital.”
With the UK and Gibraltar market so closely linked and many non-doms sharing their time between Gibraltar and the UK, time will tell how this could effect the property market here and whether or not HMGoG will look to implement anything similar.
