The UK tax system is entering one of its most significant reforms in decades. HM Treasury and HM Revenue & Customs have confirmed the abolition of the non-dom regime, effective from 6 April 2025, and a new residence-based taxation system will replace it. This marks the end of a decades-long model that differentiated between residence and domicile, which had offered high-net-worth individuals flexible tax treatment. The reform, as outlined in the official UK Government announcement, aims to align the UK tax system with international standards and will directly affect wealthy residents and international investors planning to live or invest in the UK.

Key Changes in the UK Tax System

• Four-Year Temporary Tax Exemption: Starting on 6 April 2025, new residents who have not been UK tax residents in the past 10 years will enjoy a full exemption on foreign income and gains during their first four years of residence.

• Abolition of Offshore Trust Protections: From 6 April 2025, income and gains generated within offshore trusts that benefit the settlor will become taxable, ending previous exemptions.

• Temporary Repatriation Relief: From 2025 to 2028, individuals can bring pre-6 April 2025 foreign income and gains into the UK at a reduced tax rate, expected to be between 12% and 15%.

Investor Impact

The revised UK tax system will impact individuals who previously benefited from non-dom exemptions. Every taxpayer will need to reassess their status annually under the statutory residence test, potentially increasing administrative burdens. The statutory residence test details can be reviewed through the UK Government guidance. Investment strategies, particularly those involving offshore structures, must be carefully re-evaluated.

Countries Still Offering Similar Non-Dom Regimes

• Thailand: Does not tax foreign income unless remitted into the country.

• Malaysia: Applies territorial taxation, exempting unremitted foreign income.

• Malta: Applies the remittance basis, taxing only income brought into the country.

• Cyprus: Offers an attractive non-dom regime with up to 17 years of exemptions.

• Ireland: The closest legacy model to the UK, without time limits or fees.

• Singapore and Hong Kong: Apply strict territorial taxation, exempting all foreign income.

• Mauritius, Panama, and several Caribbean nations: Provide territorial tax regimes, often linked with citizenship by investment programs.

Note: Portugal officially ended its NHR regime for new residents in 2024.

Remittance Basis vs. Territorial Tax System

• A territorial tax system (e.g., Thailand, Singapore, Panama) exempts all foreign income regardless of whether it is remitted.

• A remittance basis (e.g., Malta, Ireland) taxes foreign income only when it is brought into the country.

Countries with Hybrid or Flat Tax Options

• Italy: Offers a €200,000 flat tax regime for qualifying individuals.

• Greece: Offers a €100,000 annual flat tax option.

• Portugal: Its NHR regime has ended for new residents as of 2024.

FAQs

Will current non-doms be affected?
Yes. From April 2025, the old non-dom status will no longer apply. All individuals must declare and pay taxes on their worldwide income unless eligible for the four-year exemption.

What about previous investments?
Assets held under the old regime, especially through offshore trusts or entities, may face reassessment. Professional tax advice is strongly recommended.

Does the new system affect family members?
Yes. A taxpayer’s residence status could affect the tax liability of their dependents. Each case should be reviewed individually.

Is there a legal deadline for compliance?
Yes. All adjustments must be completed before 6 April 2025, when the new regime begins.

Can documentation be submitted electronically?
Yes. HMRC offers a digital platform for tax submissions, although requirements may vary depending on individual circumstances.

When should individuals restructure their assets?
Restructuring should be finalized before 6 April 2025 to benefit from available relief measures.

What happens if I move to the UK after 2025?
The new residence-based rules will apply immediately, with eligibility for the four-year exemption if conditions are met.

Practical Solutions

• Review offshore trusts and structures before April 2025.

• Consider repatriating income under the reduced tax relief window from 2025 to 2028.

• Explore alternative jurisdictions such as Cyprus or Italy’s flat tax regime for tax-neutral planning.

• Consult a professional advisor to assess personal exposure and opportunities under the new rules.

NTL International Recommendation

We recommend all international investors and high-net-worth individuals review their tax structures promptly. The upcoming changes to the UK tax system could significantly affect relocation plans and asset protection strategies. Careful restructuring and early compliance will be essential to minimize risks and maintain eligibility. Contact our team today to secure your future under the new residence-based taxation regime.

Also Read:
Changes to the UK Inheritance Tax Regime and Their Impact on Wealth Planning.