The UK has been a popular destination for high-net-worth individuals for many reasons, from its stability and strong legal system to tax advantages and wealth management solutions.
The Government’s October 2024 Budget introduced several reforms to its non-domicile taxation, potentially significantly impacting foreign investors, entrepreneurs, and expatriates.
Among others, the measures will affect “individuals and employees who currently hold non-domicile status, and new arrivals into the UK who have non-UK assets or foreign income and gains.”
JamesEdition Market Data: Top Countries Eyeing UK Luxury Real Estate
In 2024, 52% of buyers contacting real estate agents through JamesEdition for United Kingdom listings were based within the country.
The second-largest group hailed from the United States (16%), followed by India (3%), bringing the total demand from English-speaking countries to over 70%.
Germany accounted for 2.5%, with Italy and Spain contributing 2% each.
Buyer inquiries from the United States surged by 175% in November 2024, following the presidential elections, making the United Kingdom the top destination for US-based users.
UK’s Non-Dom Regime: History and Key Changes
A non-domicile, or “non-dom,” refers to a UK resident whose permanent home—or domicile—for tax purposes is outside the United Kingdom. This term relates specifically to an individual’s tax status, distinct from their nationality, citizenship, or residency, though these factors can influence it.
At the moment, non-doms only pay UK tax on money they earn in the United Kingdom. If they make money in another country, they don’t have to pay tax to the UK Government – unless it’s paid into a UK bank account.
If HNWIs have a lower-tax country as their domicile, there’s an opportunity for meaningful (and completely legal) savings. For that reason, the United Kingdom’s non-dom taxation has historically attracted wealth to the UK. Indeed, London was once seen as a “global hub for the elite.”
In 2017, reforms brought in a “deemed domicile” rule. According to that, people who were UK residents for at least 15 of the past 20 years would be considered domiciled in the United Kingdom for tax purposes, subjecting their worldwide income to UK taxation.
The 2024 Budget went further, abolishing the “outdated” non-domiciled tax status entirely as of April 2025 and moving to a residence-based regime. The new system aims “to address unfairness in the tax system, so that everyone who is a long-term resident in the UK pays their taxes there.”
It’s designed to be “internationally competitive and focused on attracting the best talent and investment to the UK,” and will also increase revenue.
As part of the new regime, residence status will determine tax status, not domicile. For example, as of April 2025, a US citizen who has lived in the United Kingdom for the last eight years won’t be able to claim non-dom status. They will have to pay tax on their worldwide income and gains, like any other UK resident.
People who haven’t lived in the United Kingdom for the last 10 years will have a four-year tax holiday if they decide to move to the UK, when they can freely bring overseas money to the country without paying tax. For example, a British citizen who has lived abroad for the past 14 years and then moves back to the UK in May 2025 will be eligible.
After four years, they’ll pay tax on their global income and gains — the same as “normal” UK residents.
Non-domiciles already in the UK will be impacted by the reforms, but transitional rules will apply via the Temporary Repatriation Facility.
This will allow them to “remit overseas money to the United Kingdom at a 12% flat tax rate over a two-year window – 2025/26 and 2026/27 – and a 15% flat rate for the 2027/28 tax year.”
The change from a remittance basis of taxation (only paying UK tax on the income or gains you bring to the country) to a regime centering on tax residence years raises concerns regarding the United Kingdom’s appeal to high-net-worth individuals. Indeed, some are considering relocating to countries with more favorable tax regimes.
Actionable Insights
The new rules will increase tax revenues and place a higher burden on certain individuals, particularly foreign nationals with high incomes and substantial assets. Below are several key points.
1. Expansion of the tax base
With the elimination of tax benefits for non-domiciled residents and the move to a residence-based system, more foreign income and gains will be subject to taxation in the United Kingdom. The new rules also extend the scope of inheritance tax to include foreign assets/earnings, if the person is deemed a long-term UK resident.
2. Reduction of tax benefits
The extension of the period for foreign income relief to four years, coupled with financial limits to Overseas Workday Relief (lower of £300,000 or 30% of total employment income), means taxpayers with larger incomes will no longer be able to optimize their tax liabilities as effectively as before.
Additionally, foreign income relief for employees working exclusively abroad will no longer be available after April 2025.
3. Temporary Concessions, but with limitations
The Temporary Repatriation Facility allows individuals to pay a reduced tax rate on remitted foreign income and gains, but is only available for a limited time and comes with rates of 12–15% – higher than the previously existing remittance basis.
4. Increased administrative burden
The new system requires more meticulous management of tax obligations, potentially leading to additional legal and accounting costs.
5. Overall impact
According to official sources, abolishing the non-dom rules will raise +£4,170 million between 2026 and 2027, +£5,895 million between 2027 and 2028, +£2,545 million between 2028 and 2029, and +£95 million between 2029 and 2030.
Meanwhile, the BBC quoted Rachel Reeves, UK Chancellor of the Exchequer, saying the package of measures would raise £12.7 billion over the next five years.
These changes aim to reduce the tax benefits previously available to foreign residents in the UK. In turn, they increase the tax burden and make the country less attractive as a tax haven for wealthy foreign investors. This may prompt some HNWIs to move to territories with more appealing systems, like France or Monaco.
