General election – bad news for non-doms

Stephen Smith, Legal Director, CMS

All bad news

In the run up to the general election next Thursday, each of the main political parties has proposed changes to the taxation of UK resident non-domiciliaries (“non-doms”).

The statements made in published manifestos and by party leaders during interviews are summarised below.  These provide the best available indication as to what changes are likely to be in store.  Unfortunately, it is all bad news for non-doms.

Current rules

Non-doms currently pay tax on UK income and capital gains but can choose to be taxed on the remittance basis on their foreign income and gains, meaning that they only pay UK tax on foreign income and gains which are remitted to the UK.

Non-doms who have been resident in the UK for more than seven years are generally required to pay an annual charge in order to take advantage of the remittance basis. For the tax year 2012-13, of the 115,000 declared non-doms in the UK, only 46,700 took advantage of the remittance basis and only 5,100 of those paid the remittance charge.


Labour leader Ed Milliband described the current non-dom rules as “indefensible”, saying that they “make Britain an offshore tax haven”, and proposes to scrap these rules.  He rejected claims that this would lead to an exodus of wealthy businesspeople. “When we introduced tougher rules in 2008, people said [non-doms] would leave the country,” said Milliband. “That isn’t what has happened”.

Labour’s stated aim is to tax anyone using the UK as a ‘permanent home’ on their worldwide income and gains; in other words in the same way as a UK resident and domiciled individual.  Staying in the UK in excess of a set period, perhaps between two and four years, is likely to mean that the UK has become that person’s permanent home.  (The Conservatives claim that, as a result, all Labour are really proposing is a change in the period during which a person can be classed as a non-dom.)

These rules could come into effect from as early as April 2016, although non-doms who currently use the remittance basis could have a few years to adjust their tax affairs.


The Conservatives have pledged to increase the annual remittance basis charges which are currently £30,000, £60,000 or £90,000 for those who have been UK resident for broadly 7, 12 and 17 years respectively.  No indication has been given as to the amounts of any increased charges.

Chancellor George Osborne has also indicated that the Conservatives are considering abolishing the system whereby parents who are long-term UK residents can pass their non-dom status to their children.

Liberal Democrats

The Liberal Democrats have also pledged to increase the minimum annual charge for remittance basis taxpayers to £50,000 and the maximum annual charge to £150,000.

They have made it clear they oppose the fact that non-dom status can be inherited by the children of long-term UK resident parents.

Scottish National Party

The SNP prosposes to abolish the non-dom rules.

Inheritance tax

Currently, non-doms are subject to inheritance tax only on their assets which are situated in the UK (unless they are very long term UK residents) whereas UK domiciliaries are subject to the charge on all their assets.

If the new Government removes or restricts the favourable income and capital gains tax rules for non-doms, it may be tempted to remove the inheritance tax advantages currently enjoyed by non-doms.

There has been no indication in statements made by the major parties that wholesale changes to the inheritance tax system are proposed, although the UK Independence Party proposes to abolish inheritance tax entirely and the Green Party proposes to amend its structure.

The only way is up

While most of these statements are short on detail, it seems clear that whatever the outcome of the general election next week, the tax burden for non-doms is heading in one direction – up.

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