Jeremy Hunt acknowledged a blunder in imposing taxes on non-domiciled individuals
** dude, here's the lowdown on that Hunt situation and what it means for non-doms:**
Jeremy Hunt, ex-Chancellor, kinda messed up, according to Andrew Griffith, the Shadow Biz Sec. Hunt targeted non-domiciled (non-dom) residents as part of his revenue-raising efforts, abolishing their special tax status. This move generated £2.7bn, but Griffith claims it was a mistake to attack the global wealth creators. Rachel Reeves went a step further, removing the carve-out that made assets held in a foreign trust free from inheritance tax.
Griffith, a former City minister, expressed bewilderment at the current government's moves. He points to a research report from the Centre for Economics and Business Research that predicts the Treasury could face hefty losses if a quarter of non-doms leave the UK. However, Griffith believes that targeting foreign individuals based in the UK was not the right move.
In response to a question about Jeremy Hunt's decision to target wealthy foreign nationals, Griffith said it was simply a mistake. He added that what Rachel Reeves did was materially different, expanding it to include people's global assets, which Griffith believes is what's driving people to leave the country.
The Treasury is currently reviewing changes made to charge UK inheritance tax on global assets, according to the Financial Times. South Africa's richest self-made woman stated she might reconsider leaving the UK if Reeves dialed back her reforms.
Griffith suggested that conservative Party would work on firm policy proposals to support Reeves in reversing measures. He didn't pay attention to Reform UK's Britannia Card proposal, which would offer a one-off £250,000 payment to non-doms to qualify for tax exemptions. This plan raised doubts among wealth advisers and tax experts.
Griffith also mentioned that they're working on a modernized version of the investment visa that was suspended due to Russia's full-scale invasion of Ukraine. Former home secretary Priti Patel stated that the decision on Tier 1 investor visas, often referred to as 'golden visas', was made due to concerns about illicit finance and fraud.
The Labour government is reportedly considering introducing its own investor visa that encourages wealthy individuals to support growth areas listed in the government's industrial strategy, such as clean energy industries and life sciences.
Luring Non-Doms Back to the UK
Griffith, speaking at TheCityUK's conference, hinted that the Conservative Party would consider reversing Reeves' measures to some extent. However, he didn't show much interest in Reform UK's Britannia Card proposal.
Farage's Britannia Card idea, offering a one-off £250,000 payment to non-doms for tax exemptions, was met with skepticism from wealth advisers and tax experts like Dan Neidle. James Quarmby, a founding partner of Stephenson Harwood's private wealth team, also questioned the proposal, deeming it as "bonkers" policy.
Griffith mentioned that work is being done to look at a modernized version of the investment visa that was temporarily suspended due to Russia's invasion of Ukraine. He also hinted that the Labour government might consider introducing its own investor visa to encourage wealthy individuals to invest in growth sectors such as clean energy and life sciences.
What's the deal with the non-dom tax regime changes?
From 2025, the UK government is making significant changes to the non-dom tax regime, primarily abolishing the remittance basis, which allowed non-doms to avoid UK tax on foreign income and gains unless those funds were brought ("remitted") to the UK. Instead, UK residents will be taxed on their worldwide income and gains as they arise. This marks a fundamental shift from the previous system focused on domicile to one based on residency[1][2].
A new regime called the Qualifying New Resident (QNR) relief offers tax relief for individuals who become UK tax residents after at least ten consecutive years of non-residence. They can claim up to four years of full exemption from UK tax on foreign income and gains (including those in offshore trusts) under the new 4-year Foreign Income and Gains (FIG) regime. However, this relief is only available if certain conditions are met and does not apply to long-term UK residents or those returning without meeting the 10-year non-residence test[1][2][4].
The changes will significantly affect offshore trusts linked to UK residents, removing previous benefits of keeping gains offshore to avoid UK tax. This could lead to restructuring or relocation of trusts offshore, affecting the UK's role as a global wealth center[1][2]. The new regime may decrease the UK's appeal for some wealthy international individuals, potentially impacting foreign direct investment (FDI) and capital inflows associated with these individuals[1][2]. However, the QNR relief could attract high-net-worth individuals who can time their arrival to maximize the benefit, producing a potential but temporary influx in foreign wealth and investment[2][4].
The UK government aims to maintain international competitiveness by targeting only certain groups and offering limited relief through the QNR. However, the full economic impact will depend on how wealthy individuals and international investors respond to the new regime and whether the UK can balance the loss of previous non-dom advantages with other factors that make it an attractive place to live and invest[1][2][4].
- Jeremy Hunt's decision to abolish the special tax status of non-domiciled residents, as part of his revenue-raising efforts, has sparked debate among political figures and financial experts.
- Andrew Griffith, former City minister and Shadow Business Secretary, expressed bewilderment at the current government's moves, claiming that the Treasury could face hefty losses if a quarter of non-doms leave the UK due to the tax changes.
- In response to Rachel Reeves' expansion of inheritance tax to include global assets, Griffith suggested that the Conservative Party would work on firm policy proposals to support her in reversing measures, possibly introducing a modernized version of the investment visa.
- The Labour government is reportedly considering introducing its own investor visa that encourages wealthy individuals to invest in growth sectors such as clean energy industries and life sciences, as a means to attract foreign investment and combat the potential impact of the changed non-dom tax regime.
