Experts react as UK Prime Minister signals 'revision' to non-dom rules

UK Prime Minister Rachel Reeves has confirmed she will make some changes to the non-government reforms announced in the autumn Budget.

She has pledged to table amendments to the finance bill at the World Economic Forum in Davos that could remove some of the controversial elements of non-state taxation changes, although there are few details.

Reeves was widely quoted as saying that we have been listening to the concerns raised by the non-dom community.

Stephen Kenny, head of private clients at audit and accounting firm PKF Littlejohn, said in an initial reaction, short on details about what adjustments she would make: Changes to non-dom rules were first announced by the previous government in March 2024. Many in the industry have since raised the impact of these changes, and the new government has taken the opportunity to reassure the international mobile community that: The UK is open for business. But they did not heed the warning until it was too late.

“Having worked with non-resident high net worth individuals for most of my career, one of the key advantages the UK offered was certainty and a stable tax system. This has been eroded by successive changes to the non-dom regime, which in most cases has not been managed as effectively as possible. The feedback I get from people who want to leave the UK is that not only are they unhappy with the changes to the tax system, but they are also unsure that it will no longer change in the future.

“I doubt whether this announcement will do much to change people’s opinions. If the Government is serious about opening up the UK for business, it must take the opportunity to work with advisers to create a fair system that works for the UK and allows people to plan for their future effectively.

Anthony Whatling, managing director at Alvarez & Marsal Tax, said: Rachael Reeves' announcement that the Government will introduce amendments to the proposed non-dom changes is very welcome. It is reassuring to hear that the government is listening to the concerns raised by non-government and industry experts about the potential flight of wealthy individuals from the country.

“However, the only proposed amendment appears to be to expand the temporary repatriation facility, allowing taxpayers to bring historic income and profits to the UK at a reduced rate. While we await the specifics of these changes, it is questionable whether this measure alone will significantly stem the outflow of wealthy nondomes.

“There remain major concerns that limiting tax benefits for the first four years in the UK will make the UK relatively less attractive. “Extending this four-year limit on new immigrants, along with an annual tax similar to the successful Italian regime, will allow us to better attract and retain internationally mobile ultra-high-net-worth individuals who contribute significantly to the local economy.”

Charlie Sosna, head of private wealth and tax at Mishcon de Reya, said: The Prime Minister's statement will be welcomed by clients both within and outside the UK. There was clearly a feeling among many customers that the proposed rules would not make the UK an attractive place for them to stay.

“Many of our major clients were looking to relocate to their home countries or to other countries where they wanted to attract talent and wealth (Italy, Switzerland, Monaco, etc.). We have many client families and family offices looking for help in reviewing their position in the UK and relocating to another jurisdiction in response to the abolition of the ‘non-dom’ regime.

“It is important to remember that these customers are very happy to contribute to society, to contribute to society, and to pay for it. However, the government must strike a balance with providing schemes that encourage people to move to or stay in the UK rather than simply staying in their home country.

Separately, the new regulations have not been enough to induce many entrepreneurs and wealth creators to relocate themselves, their businesses and their families from their home countries or elsewhere to the UK. Instead, they created a system where they could bring people into the UK for a short period of time, contribute little to nothing in their taxes to the UK, and then leave the UK when their favorable tax situation ended. As a result, we've seen a slowdown in people wanting to move to the UK, with many people looking at the country with some skepticism and questioning whether they and their businesses are really welcome there.

Given the government's desire to attract these people, it is understandable that they have reviewed their response and decided to act to minimize the loss of these individuals and convince people abroad that the UK is a place they want to live and invest. . We welcome any changes the Government can introduce to address these issues and ensure a system where everyone contributes to society and 'pays their way', but which encourages them and their families, businesses and investments. We encourage you to make huge profits in this way. Come and stay in England.”

Carol Katz, partner in Mishcon de Reya’s Private Wealth and Tax group, added: We have seen an increase in the number of inquiries from existing and new customers regarding the impact of the proposed rules on international mobile. I'm looking to move out of the UK. The departure lounge is currently much fuller than the arrivals lounge!

“Expanding temporary repatriation facilities will encourage more people to remain in the UK. That's because a reduced tax rate (12% or 15% depending on the year in question) is an important carrot to encourage people to bring in their money. We are here to settle down for the long term. Our clients will want to confirm the details before changing their plans and running out of time.

The new scheme will appeal to people who only want to stay in the UK for a short period of time to benefit from 100% tax relief for four years on their overseas income and gains. However, four years is a short time to make a decision to move a family, and many are looking at Italy, Switzerland and Dubai as alternatives to the UK.

Marc Acheson, global wealth expert at Utmost Wealth Solutions, said: “The measures announced in the Budget have created a perfect storm that has made the UK far less attractive to non-locals, with many leaving and fewer coming. Replaces current remittance standards. The new four-year overseas earnings regime encourages bad behavior and provides little incentive for people to come to the UK and establish long-term roots.

“Many of our clients have been exploring other jurisdictions in the EU and UAE. “These communities will contribute significantly to the Exchequer without ever leaving the UK, so a review of changes, particularly those relating to the erosion of IHT protection for existing settlements, would be welcome.”

Rachel De Souza, tax partner at audit, tax and consulting firm RSM UK, said: “We welcome Rachel Reeves’ acknowledgment that concerns have been raised by the non-dom community about the changes that will take effect on April 6. Increasing temporary repatriation facilities would certainly be a good move, but preventing wealthy non-state and British entrepreneurs from leaving the UK is woefully inadequate.

“The way to stop this exodus is to maintain the IHT exemption for offshore trusts, while also canceling proposed changes to agricultural and business property relief that affect farmers and entrepreneurs.

Asked whether it could change wealthy people's attitudes to staying in the UK, Withers partner Philip Munro said:

“The tax rate will be 12% for the first two years and 15% for the last tax year of operation. While this may help some individuals who have previously insisted on remittance criteria, it is unlikely that revisions to the terms will have any impact on the decision-making of individuals considering leaving the UK.

“The decision to leave the UK and become a non-resident is usually made for one or both of two reasons:

1. One is that the switch to worldwide taxation of UK income and profits is simply not permitted. There are many countries that offer low tax rates and can encourage entrepreneurs to move to those countries. The non-national tax reform provides only a four-year period in which full UK tax is not applicable, and it only applies to people moving to the UK (and generally does not apply to people already living here). And2. In many cases there may be a positive incentive to leave the UK now to avoid inheritance tax exposure of 40% which applies to assets worldwide. Non-state tax reform could result in an IHT 'tail' of up to 10 years for people leaving the UK in the future, which may be unacceptable to many wealthy, internationally mobile individuals.

“If the government wants to stop non-dom individuals leaving the UK, it will also need to take action on this point.”

Mauro De Santis Bo, Partner at GSB Wealth, said: “The proposed relaxation of non-dom rules appears aimed at preventing the loss of high net worth individuals who contribute significantly to the UK economy.

“By extending the temporary repatriation period to three years and slightly lowering the tax burden during this period, the government is sending a signal that the UK remains a welcoming place for wealth from around the world. While this may seem like it would help retain wealthy individuals who might otherwise move their money elsewhere, I believe this will only help the non-domes who are already thinking of staying and have been lobbying intensively over the past few months. The new rules are slightly more favorable to them.

“It is undeniable that the initial uncertainty and proposed strengthening of the non-dom system has already led some individuals to leave the UK or reconsider their long-term commitment to the country. Wealthy individuals value stability and clarity in tax policy, and many will have already moved their funds following previous announcements, or even relocated themselves, to jurisdictions with more predictable regimes.

“This easing can be seen as a positive step, but for those who have decided to leave, or have already left, it may be too late to reverse their decision and I doubt this easing will be enough to change their minds. The UK now faces the challenge of rebuilding trust between these communities and demonstrating that it can balance financial needs with a competitive, business-friendly environment. Timing is everything. The damage could have been mitigated if there had been a stronger, clearer commitment to absorbing the world's wealth more quickly.

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