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| 1 minute read

The Labour Party announces further reforms to the non-dom regime

This week's announcements that the Labour Party plans on strengthening the current Government’s proposed reforms to the non-dom regime tell us four things.

  1. The Labour Party broadly accepts the current Government’s proposed reforms.
  2. Some of the transitional provisions proposed by the current Government (such as the 50% relief on income tax in 2025/26) may well not materialise and should not be relied upon.
  3. Other favourable provisions, for example a UK investment incentive for individuals within their first four years of UK residence and concessions to encourage former remittance basis users to remit their foreign income and gains, may well materialise.
  4. Trusts may not provide inheritance tax protection for long-term UK resident settlors from 6 April 2025.

This final point is likely to focus the minds of clients who are potentially affected as exposure to inheritance tax on trusts created by long-term UK resident (but non-UK domiciled) individuals is a very significant factor. Some may well decide to leave the UK before 6 April 2025, perhaps even before a general election.

One important point to note is that the interaction of inheritance tax and trusts is an extremely complex area. These announcements are often far easier to make in overview than they are to implement practically. We still expect there to be technical consultation on this area of the reforms, irrespective of the outcome of the next general election. Given the complexity it would seem to be premature to plan on the basis that the outcome of any legislative process is known. These reforms remain something which much be kept under close review. 

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private client, tax, tax policy, pc and family offices, blog, the budget