The Treasury is reconsidering parts of Labour’s plan to change the non-dom tax status because they are worried the reforms might not bring in as much money as expected.
This money was supposed to help pay for services like the NHS, but there are concerns that wealthy foreigners may simply leave the UK instead of paying more taxes, as explained by the BBC.
“Non-dom” refers to people living in the UK but whose permanent home, or “domicile,” for tax purposes is in another country. This allows them to avoid paying taxes on income they earn outside the UK.
In March 2024, Conservative Chancellor Jeremy Hunt announced the non-dom tax regime would be phased out, but he introduced some exceptions to encourage wealthy foreigners to stay in the UK.
According to BBC, Labour’s plan to scrap two of these exceptions was initially thought to raise £1 billion for services like hospitals and schools. However, Treasury officials are now unsure if it will raise that amount or anything at all.
Tax expert Nimesh Shah told the BBC that some non-doms have already started leaving the UK since the changes were announced.
He also mentioned that many more are planning to leave over the next year or so because moving takes time due to schooling, jobs, and housing.
Former Chancellor Nadhim Zahawi claimed that in July alone, 5,000 British people applied for residency in tax-friendly places like Monaco, according to BBC.
The Office for Budget Responsibility (OBR) had previously said the income from non-doms is hard to predict because people can opt in or out of the system each year.
Even small changes, like more people leaving the UK, could mean the plan won’t raise much money, as BBC reports.
While no final decisions have been made, the Treasury is considering easing or delaying some parts of the new rules. However, they insist any changes must raise money and that the non-dom status will still be removed, as BBC noted.
The Treasury spokesperson said they are committed to fixing unfair tax rules to raise money for rebuilding public services.
Non-dom tax status allows wealthy individuals to avoid paying UK tax on foreign income unless they bring that money into the UK.
According to the BBC, one famous non-dom is Akshata Murty, the wife of former Prime Minister Rishi Sunak. After it became public, she said she would begin paying UK tax on her foreign earnings.
Credit : BBC
https://www.bbc.com/news/articles/c04pe3653k7o