What should long term expats do about domicile changes in UK?

Stuart Stobie • April 29, 2024
A city skyline at night with a river in the foreground.

Background


UK Chancellor Jeremy Hunt announced significant changes to the UK's taxation regime in the Spring 2024 budget. 

Those changes can broadly be summarised as follows:


 

  •  the abolition of the remittance basis for income tax and capital gains tax for non-UK domiciled individuals; and
  •  possible changes to inheritance tax (IHT) based on residence, not domicile.

 


It is the second of these points that will likely to have a significant impact on long-term British expats and their future tax liabilities.


Key Tax Changes


Income and gains


From 6 April 2025, new UK residents will only be exempt from UK tax on "foreign income or gains" during their first four years of UK residence. 

After that, they will be taxed on their worldwide income and capital gains. 

Transitional arrangements are being made for existing UK residents who are not UK domiciled, but they will also be taxed on their worldwide income sooner than before.


Inheritance Tax (“IHT”)


Another significant change involves inheritance tax (IHT). Currently, IHT is based on domicile and is charged at 40% on the total value of the deceased's estate, after exemptions. 


However, the Chancellor indicated that the government is considering making IHT liability dependent on residence rather than domicile. 

This change could lead to UK residents of 10 years or more paying IHT on their worldwide estates. This shift in policy may have profound implications for long-term UK expats.


Potential Implications


Foreign income and gains


The proposed changes to the remittance basis for income tax and capital gains tax could have wide-ranging impacts on non-domiciled individuals.  A one-dimensional view is that, if non-domiciled status is abolished, then it will lead to increased tax revenues. Indeed, the stated policy intention behind these changes is to increase tax revenue by GBP2 billion.


However, this fails to take into account any behavioural shifts. The elephant in the room here is that many high-net-worth individuals, who are generally internationally mobile, might leave the UK or become non-UK tax residents to avoid increased taxation. It is therefore a high-wire act for the Government.


IHT


Regarding IHT changes, the shift from domicile-based to residence-based taxation may simplify the rules.

At the moment, an expat remains exposed to UK IHT on their worldwide assets whilst they remain domiciled in the UK. Even where they have been expats for a long period of time, this can be a problem because:


 

  • Domicile is sticky – it is difficult to acquire a domicile of choice elsewhere and can be precarious [LINK];
  • Clarity – HMRC will be reluctant to provide a view on this in many cases so one is planning with uncertainty

 


As such, linking IHT is residency, a more objective link, is helpful. If one has been outside the UK for, say, 10 years then it is easy to ascertain the position (depending on the precise nature of the final rules!)  I have hear it suggested that a potential Labour government could extend UK IHT to include anyone holding a British passport, complicating the process for expats seeking to reduce their UK IHT liability. However, I am not sure whether this has any real providence. Recommended Actions for British Expats


General


Given these uncertainties, long-term British expats should consider taking proactive steps to protect their assets and reduce their future tax liabilities.  Due to the shifting tax tectonic plates at play here, there is no definitive answer.

However, depending on their mindset and objectives, an expat might consider the following strategies:


#1 Action Strategy


#1a Obtain Opinion of Domicile


Before making significant financial decisions, expats should obtain a legal opinion confirming that they have shed their UK "domicile of origin" and acquired a new "domicile of choice" in their current country of residence. 

This, from a practical perspective, involves demonstrating a long-term commitment to residing in the new country and forming an intent to stay indefinitely.


#1b Transfer Wealth into Offshore Trusts


Expats who have obtained legal opinions confirming their new domicile might then wish to consider transfer as much wealth as possible into offshore trusts before 6 April 2025.  This approach is expected to be governed by the existing IHT regime based on domicile, providing a safeguard against future tax liabilities. 


One important consideration is that the Labour government has already announced plans [LINK] , contrary to the Government’s proposals, that they will make sure such a trust is within the scope of IHT. This provides a dilemma – do nothing and potentially suffer IHT on worldwide assets or incur costs which, in a worst case scenario, might be wasted.


#3 "Wait and See" Approach 


Given the uncertainty and potential changes (tax and potential governments!), it is understandable that expats might want to adopt a “wait and see” approach. We have sympathies with this approach.

However, it must be understood what is at stake.

As stated above:


 

  •  doing nothing will ensure no professionalfees are wasted – but potentially suffer mean that one is exposed to IHT on worldwide assets; or 
  •  potentially incur unnecessary costs which, in a worst case scenario, might be wasted on ineffective planning

 


Conclusion


These are difficult times for those internationally mobile people with a UK footprint – whether British expats or UK resident non-doms.

The times are, as they say, ‘a changin’. It might well be that your plans have to be ‘a changin’ too.


For more advice on these matters, then please get in touch.

BREAKING NEWS: UAE Offers Corporate Tax Penalty Relief – But You Must Act Fast to Qualify

By Amie Roberts • May 1, 2025
If you’ve missed your Corporate Tax registration deadline or already paid the AED 10,000 fine, there’s now a golden opportunity to waive or reclaim that penalty — but only if you act quickly. In a recent move to support businesses during the first year of the UAE’s Corporate Tax rollout, the Federal Tax Authority (FTA) has announced a limited-time grace period. The initiative allows eligible businesses to apply for a full penalty waiver if they file their Corporate Tax return early. This is a major relief for thousands of companies who have either: Missed their Corporate Tax registration deadline, or Registered late and were hit with the AED 10,000 fine Why is this happening? According to Gulf News, this initiative is part of a broader effort by the Ministry of Finance and the FTA to ease the transition into the new Corporate Tax system and promote long-term compliance. What You Need to Know: Deadline for the waiver: July 31, 2025 BUT: You must file your return well ahead of your official tax deadline to qualify. Don’t wait – gathering your financial records and preparing your tax return can take time. For most businesses operating on a calendar year basis (Jan–Dec), that means filing within the next couple of months. Who qualifies for the penalty waiver? If you’re asking: “Can I get a refund on my Corporate Tax late registration fine in the UAE?” “Is it possible to waive the AED 10,000 Corporate Tax penalty?” “How do I apply for the UAE Corporate Tax penalty relief?” Then the answer is – yes, you may be eligible. But there’s a catch: you must file your tax return early, ahead of your normal deadline. This is not automatic, and if you miss the window, the fine will not be waived or refunded. Why early filing matters: The FTA has made it clear: early compliance is the only route to relief. This means: Completing your Corporate Tax registration (if not already done) Preparing your financials for your first tax year Submitting your Corporate Tax return well before the deadline This one-time waiver won’t be repeated – so don’t leave it until the last minute. How Mosaic Chambers Group can help: At Mosaic Chambers Group, our FTA-certified tax advisors and legal consultants are ready to guide you through the entire process. Whether you need help: Understanding your eligibility Filing your Corporate Tax return early Claiming your AED 10,000 fine refund Or ensuring future tax compliance We’re here to take the stress out of Corporate Tax. Book a free consultation today and get expert support from our team. Click here to get in touch or below to book your call.

End of the Non-Dom Era: Labour’s Tax Reform Triggers Wealth Flight

April 15, 2025
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.
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