Labour’s Non-Dom Policy & How It Impacts Foreigners Moving to the UK

As well as helping our clients to find luxury property solutions in areas like Hampstead, Mayfair and Knightsbridge, we’re keen to help expats get to grips with their new life in the UK. This includes highlighting any significant updates to the law – such as the recent change to the non-dom regime.

The new legislation was announced by Labour back in October 2024, which involved scrapping the remittance basis of tax and moving to a residence based system. The new rules came into force on the 6^th April 2025, and are due to have a far-reaching impact on foreigners moving to the UK.

This article explores what non-dom status was, how it used to work, and explains the major changes which came into force recently with the Finance Act 2025.

In addition, we strongly advise you to consult your wealth manager or tax advisor to help you navigate these challenges personally.

What Was Non-Dom Tax Status?  

‘Non-dom’ is a phrase which was used to describe a UK resident who had a permanent home – referred to as a domicile – which was located outside the UK for tax purposes. Being a non-dom only impacted the tax resident status of an individual, and had no bearing on matters of citizenship, resident status or nationality. 

In simple terms, the non-domiciled tax status meant that an individual only paid tax on money which they earnt in the UK. No UK tax was due on the money earnt in any other country – unless they moved that money into a UK bank account.  

The non-dom regime had played a significant part in the UK tax system for over 200 years, and as well as reducing taxation on income for the individuals taking advantage of it, it also shielded individuals from the impact of Inheritance Tax (IHT) on assets which were not located in the UK.   

What Were the Benefits of Non-Domiciled Status?

The non-dom status meant that individuals who were ‘domiciled’ outside the UK would claim the ‘remittance basis’ system of taxation. This meant that they were only taxed on their non-UK earnings when the money involved was remitted to the UK – which is to say, shifted into a UK bank account.    

This offered significant tax advantages to anyone with wealth in another country, allowing them to avoid the brunt of UK tax.

How Did Non-Dom Status Work?

Non-dom status hinged on the concept of ‘domicile’. This is a feature of English law which was based on identifying a jurisdiction, for tax purposes, which was the permanent, long-term home of an individual. If someone was domiciled outside the UK, then their exposure to UK tax was reduced.

The individual in question had the right to opt for paying tax on the ‘remittance’ basis. This meant that only UK earnings and assets were liable to income tax and capital gains tax (CGT) in the UK. The same applies to non-UK based assets which might otherwise be liable for inheritance tax (IHT).   

How Has Non-Domiciled Status Changed in 2025?

As of April 6^th 2025, the government has effectively ended non-domiciled tax status, which means significant changes for wealthy expats and foreigners moving to the UK.

Until now, if you were a non-UK domiciled individual (“non-dom”), you could use the remittance basis regime. This meant:

• You only paid UK tax on your UK income and gains.
• Your foreign income and gains (FIG) were only taxed if you brought them into the UK (i.e. you ‘remitted’ them).

This system is being scrapped. A new set of rules will apply, based upon a person’s actual residence in the UK – meaning no more taxation on the old, remittance basis for so-called non-domiciled individuals.

Below is a brief overview of some important, associated changes – though it is wise to consult the government website and legal professionals for further details as they emerge – and how the rules apply to you specifically.

1. Four Years’ Tax Exemption for New Residents

Under the new rules, if you’re moving to the UK and haven’t been tax resident here for at least 10 of the previous tax years, you get a four-year exemption from UK tax on foreign income and gains.

This means you will have no tax on foreign earnings, rental income, dividends, or capital gains for four years – and you can bring money into the UK freely without extra tax.

However, after those 4 years are up, you’ll have to pay the UK tax rate on worldwide income and gains, exactly like a UK resident. Previously, non-domiciled persons could use the remittance basis indefinitely to reduce this kind of tax liability.

2. Relief for Non-Doms Under the Temporary Repatriation Facility (TRF)

If you have previously been taxed as a non-dom on the remittance basis, the government has made provisions to lessen the impact of the new rules for you, which they have named the Temporary Repatriation Facility (TRF).

Individuals can designate untaxed foreign income and gains to the UK at a reduced rate for the tax years 2025-2026, 2026-2027 and 2027-2028 – provided that these gains were earnt prior to April 6^th 2025. Here’s how the charges are divided:

• Tax years 2025-2026 and 2026-2027 – the designated capital will face a 12% charge.
• Tax years 2027-2028 – the designated capital will face a 15% charge.

3. Fewer Protections for Offshore Trusts & Assets

The new rules make it harder to benefit from offshore trusts set up in your name before you became a domiciled person – especially through what are called ‘settlor-interested trusts’.

This was a common way to protect foreign income and gains from UK tax. Now, these protections will longer be available for non-domiciled (and deemed domiciled) settlors who do not qualify for the 4-year FIG exemption from the 6^th April 2025.

Money earned by offshore trusts before the 6^th April 2025 stays tax-free as long as it remains in the trust. UK residents won’t pay tax on this money unless they receive payments from the trust and don’t qualify for the special four-year tax protection.

If you live in the UK and get money from one of these trusts, the tax office will check if your payment is linked to the previously untaxed foreign money. If it is, and you don’t have the special protection, you’ll need to pay UK tax on it—regardless of which part of the trust the payment comes from.

4. Opportunity to ‘Rebase’ Assets for Capital Gains Tax Relief

To help people transition to the new system, the government is allowing people to ‘rebase’ the value of personally held, foreign assets.

If you use – or previously used – the remittance based system, you might be allowed to revalue your foreign assets at a more recent market price (instead of the original price for which you bought them). This means you will be liable to pay less tax if or when you sell these assets in the UK.

Eligible individuals can elect to rebase foreign assets to their market value as it was on the 6^th of April 2017.

5. Changes to Inheritance Tax (IHT) Under Labour’s Non-Dom Policy

The UK is due to introduce significant changes to inheritance tax (IHT) rules starting on April 6^th 2025, replacing the current domicile-based system with the new residence based approach.

Under these changes, non-UK assets will be subject to IHT if an individual has been UK resident for at least 10 out of the 20 tax years immediately preceding the tax year of the chargeable event (including death). Individuals in this position will also continue to have some liability for IHT for between 3-10 years after leaving the UK .

That said, new arrivals to the UK will benefit from a ten-year exemption period, provided they haven’t previously been a UK resident for ten consecutive years.

Need Help Understanding Labour’s Non-Dom Policy?

There are, of course, many more nuances to the new tax and FIG regime, with details still emerging about how the new legislation will affect past non-doms and their foreign assets.

If you’re moving to Mayfair, Hampstead or Battersea from overseas and need help sourcing a property – contact our team of specialists today, who can help you find the most prestigious areas of London to live in. They can guide you through the process, while referring you to tax advisors and legal professionals who can help you navigate the new, non-dom rules.

We can also help you get settled, from finding the best American schools in London to understanding what to see and do in the English Capital.

Disclaimer: This article is intended for informational purposes only and does not constitute legal advice.