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UK to ease tax rules for wealthy foreigners: what Rachel Reeves’ ‘more generous’ repatriation plan means

by admin January 25, 2025
January 25, 2025
UK to ease tax rules for wealthy foreigners: what Rachel Reeves’ ‘more generous’ repatriation plan means

The UK government plans to amend its non-domiciled (“non-dom”) tax regime in response to concerns over an exodus of wealthy individuals, Treasury officials have confirmed.

These changes aim to encourage non-doms to invest and spend more in the UK while addressing critiques of the longstanding tax rules.

What are UK non-dom tax rules?

The UK’s non-dom tax framework, established over 200 years ago, allows individuals living in the UK but domiciled elsewhere for tax purposes to avoid paying taxes on overseas income and capital gains for up to 15 years.

Despite its benefits for high-net-worth individuals, the system has drawn significant criticism for being inequitable.

In her October budget, Finance Minister Rachel Reeves announced that the regime would be abolished from April 2025.

At that point, long-term residents will face inheritance tax on global assets, including those in trusts.

The proposed tax amendment

Speaking at the World Economic Forum in Davos, Reeves outlined plans to make the temporary repatriation facility (TRF) under the Finance Bill more generous.

The TRF allows non-doms to transfer funds to the UK without incurring substantial taxes.

Reeves stated that the move responds to concerns raised by the non-dom community.

“We have been listening to the concerns that have been raised by the non-dom community,” Reeves told The Wall Street Journal.

“In the Finance Bill, we will be tabling an amendment which makes more generous the temporary repatriation facility, which enables non-doms to bring money into the UK without paying significant taxes.”

Reeves assured that the changes would not impact double-taxation treaties between the UK and other nations, such as India.

A Treasury spokesperson told CNBC that the modifications are designed to incentivize non-doms to bring their funds to the UK, thereby bolstering domestic investment and expenditure.

“While we do not expect these changes to impact the £33.8 billion of tax revenue that the OBR forecast to raise over five years, they reflect our continued engagement with stakeholders to make sure the reforms announced at Budget operate as intended,” the spokesperson added.

The amendment has sparked debate among tax professionals and analysts.

Government measures targeting the wealthy

The amendment follows broader government measures targeting the wealthy, including levies on private equity bosses, private schools, second homes, and private jets.

Critics argue these policies could deter investment and lead to further departures of high-net-worth individuals.

Recent data from New World Wealth and Henley & Partners shows that 10,800 millionaires left the UK in 2024, a 157% rise from 2023.

The government’s efforts to address these departures highlight the challenge of balancing tax reforms with maintaining the UK’s appeal to affluent residents.

The success of the revised TRF in retaining wealth within the UK remains uncertain, but it underscores the government’s attempt to strike a delicate balance between reform and economic competitiveness.

The post UK to ease tax rules for wealthy foreigners: what Rachel Reeves’ ‘more generous’ repatriation plan means appeared first on Invezz

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