“Every dog has its day… or century or two”: The end of the remittance basis of taxation etc PART ONE
Andy Wood • February 18, 2025
This is the first in 3-part series on "The End of the Remittance Basis of Taxation"
Background – The British Bulldog v French Bulldog
PART 2
At the dying end of the 18th century, a little man with a big ego was throwing his weight around in Europe. His name was Napoleon. You might have heard of him.
At the same time, William Pitt the Younger, at an impossibly young age of 24, was the UK’s prime minister. He wasn’t given a particularly easy ride as, at the same time, King George III was losing his marbles.
In 1799, young Pitt introduced for the first time an income tax in order to pay for his fight with the angry little Frenchman. It was at this same time that he also introduced a remittance basis of taxation for overseas civil servants who, in today’s terminology, might be referred to as non-doms. The idea was to provide them with relief from these new taxes in relation to their overseas property.
Little did young Pitt know that he was creating a political football and a fiscal tightrope for centuries to come. Something that would only be cast aside some 226 years later.
So, it was a surprise when Jeremy Hunt the Beiger announced in Spring Budget 2024 the abolition of the remittance basis of taxation and, more generally, the removal of domicile as a main determining factor for UK taxation.
It was perhaps less of a surprise when Chancellor Rachel Reeves, with a slightly less impressive CV (even the made up one) when compared to Pitt, flourished the pen to sign the non-dom demise.
So, has the UK’s big tax dog finally had its day?
A woof guide to domicile.
So what is domicile and, by negative extension, non-domicile?
Although, unusually, domicile has had an important impact on a person’s tax position in the UK it is not a pure tax construct. It is a concept of general law.
It is therefore important to note that the proposed abolition of the non-dom tax changes are merely changes to the tax consequences of such a status. It does not change the position from a general law perspective. For example, they will apply to things like the law of succession and will even continue to be relevant for some double tax treaties.
Dicey, in his tome Conflicts of Laws, provides the authoritative definition of domicile of origin:
'every person receives at birth a domicile of origin…A legitimate child born during the lifetime of his father has a domicile of origin in the country in which his father was domiciled at the time of his birth'
In sum, one inherits a domicile of origin (“DO”) at birth. To use archaic terminology, where one is ‘legitimate’, then you inherit your DO from your father. Where your mother and father are not married, then a DO is inherited from one’s mother.
A DO is rather sticky and tenacious. There must be strong evidence that a domicile of choice (“DC”) has been acquired elsewhere for it to be overtaken. Indeed, one does not completely shed a DO. Instead, think of the DO as the foundation of a building. It will remain as it is until someone takes the trouble to build something on top of it. A DC might be built on this foundation.
Again, Dicey provides us with the commentary:
‘every independent person can acquire a domicile of choice by the combination of residence and intention of permanent and indefinite residence, but not otherwise’
As such, in order to build a DC, it is necessary to have:
- intention to reside permanently / indefinitely in a place; and
- physical residence in that place.
Where this is the case, and can be backed up by evidence, the edifice will remain strong.
However, where an element is missing then the walls will come tumbling down and you will be left with the foundations. In other words, your domicile of origin.
But this is a double edged sword.
What if little ‘ol me tried to assert I was domiciled in Spain? I have a domicile of origin in the UK (or should that be the People’s Republic of Yorkshire?) In order to develop a domicile of choice in Spain I would need to both be resident in Spain, but also show, and evidence, my intention to reside there indefinitely.
Of course, if I came back, or even just hopped across the border to France, then I no longer reside there and would no longer have a DC in Spain. My DO in the UK would revert. And that simply wouldn’t Labra-doo.
In part 2 of our series, we look at the pre-6 April 2025 rules, covering income tax, CGT, IHT, and trust regulations.
Find out what’s changing, why it matters, and how it could impact your financial planning.
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April 6th, 2025 marks the beginning of a major shift in UK taxation. Labour’s new tax reforms have officially scrapped the long-standing non-domiciled (non-dom) tax status — a move that targets wealthy individuals who live in the UK but, under the new non dom regime, have been able to mitigate UK tax on their overseas income and gains. This change spells the end of a tax break that attracted many high-net-worth individuals (HNWIs) to the UK and is already causing ripples across the country’s elite financial circles. The message is clear: if you live here, you pay here. Let's break down what has changed. What Was the Non-Dom Tax Regime? The non-dom tax regime allowed individuals residing in the UK, who claimed their primary home (domicile) to be outside the UK, to avoid UK income and capital gains taxes by not bringing any foreign earnings or gains back into the UK. This system made the UK an attractive location for individuals with international earnings. We covered this in more detail here. What Has Changed? Since 2025-26 tax year, the government has implemented several significant reforms. These reforms include: 1. End of Non-Dom Status All UK tax residents will now owe UK income tax on all global income and gains, regardless of whether these were brought into the country or not. 2. Inheritance Tax (IHT) on Foreign Assets Non-doms could previously avoid UK Inheritance Tax on assets they held outside the UK; now individuals who have lived here for more than four years will be liable for IHT on all their global estate assets. 3. Temporary Reliefs To assist the transition, temporary measures include the following: Tax Year 2025-26 will see a 50% reduction on foreign income tax. Capital Gains Tax (CGT) laws allow us to rebase overseas assets based on their value as of April 2019 for CGT purposes. Temporarily, bringing money from abroad may not incur full tax charges upon entering the UK. Why Has the Government Made These Changes? According to Labour, eliminating non-dom status will provide many advantages: Enhance tax fairness Raise extra funds to support public services Close longstanding loopholes used by the wealthy Rising Tax Bills HNWIs with overseas assets and income will now face significantly increased tax obligations that may have an effect on personal finances, family planning and wealth transference. Making Decisions About Moving Abroad Some individuals are already leaving the UK in order to settle in countries with more advantageous tax regimes. Some common destinations for relocation include: United Arab Emirates (UAE) does not levy income or capital gains tax Switzerland provides fixed annual tax arrangements for its most wealthy citizens Italy - flat tax of EUR100,000.000 on foreign income for new residents Monaco does not levy personal income tax for residents Concerns Raised About Impact Within Industry Concerns are being expressed that this could lead to a decrease in: Investment into UK businesses Jobs funded by private wealth Donations to UK Charities What About Entrepreneurs? Many entrepreneurs utilise non-dom status to reduce tax on international business earnings, however, these changes could require: Establishing headquarters or structures outside the UK Reconsider ownership of intellectual property or company shares An investigation of how profits and dividends are managed is important to ensure long-term growth. What Should Be Done Now? If you or those you work with have been affected, taking immediate steps is key to their safety. Here are a few things you can do. 1. Consult With A Specialist Tax Advisor Every situation varies. Seek tailored guidance from someone familiar with both UK and international tax regulations. 2. Evaluate Your Financial Structures Evaluate how you hold assets - for instance through offshore companies or trusts. Any necessary changes must be implemented for optimal efficiency and compliance purposes. 3. Consider Relocating If the UK's new tax rules no longer suit, you might wish to explore living elsewhere where tax liabilities would be lower. Be sure to carefully consider all legal, financial, and family aspects prior to making any decisions. Summary The changes to the non-dom tax regime mark a profound transformation for those who rely on global income and wealth for tax payments, especially those living abroad. Although intended to increase fairness, these reforms also pose challenges to those accustomed to using it. Now is the time to review your plans, secure your assets, and seek professional guidance. How Can We Assist? At our offices in both the UK and UAE, we assist individuals, entrepreneurs and professional advisors in making well-informed decisions. If you have any queries about this article or need advice then get in touch.